BPOs drive office property market
The Philippine office segment has a lot more room to grow if seen from the experience of business process outsourcing (BPO) powerhouse, India.
According to property consultancy firm CBRE, the country’s office market has yet to be in the same level of development as that of in India.
Rick Santos, chairman of CBRE Philippines, said the Philippines is a decade late in becoming a formidable force in the nonvoice offshore outsourcing, a business which India developed early on.
“We are where India was in the office sector about 10 years ago. We are 10 years behind India in terms of where we actually are in terms of trajectory,” said Santos in a presentation to members of the Asia Pacific Real Estate Association (APREA) in the Philippines.
Santos noted that while Manila and Cebu are among the top outsourcing destinations in the world, the list of the top destinations is dominated by India, with six of seven being Indian cities.
With 6 million square feet of office space expected to be leased out for the year, the Philippines continues to have a strong presence in the global BPO industry, according to Santos. “(This) is three times that of Singapore, and 30 percent greater than that of Japan,” he added. “Not only do we have some of the best workers, (we also have) the most skill. It’s also extremely cost-effective,” he said.
Santos noted the prevailing rent in the country of $26 per square foot per annum makes the Philippines one of the cheapest destinations to be in for a global company.
Rents in Hong Kong can go as up as $280, and that rate, Santos said,” drives the cost of everything.”
The BPO industry is seen to grow its revenues to $26 billion by 2016, which would be bigger than the projected $25 billion remittances from overseas Filipinos.
“The BPO sector is growing faster than remittances,” said Santos.
Santos said just like in India, the property sector in the Philippines is poised to bloom further because of the BPO sector.
Santos said the growth of the BPO segment should “kickstart” the growth of other brick and mortar business as well.
“Based on what we see in India, it’s not just the BPO (that will benefit from the property boom), it will also kickstart the front office. You will see an exponential growth in a matter of years,” he added.
Santos said that among the industries that could take the lead from the BPO growth are insurance, medical, logistics/manufacturing, environmental consultancy, food and beverage, banking and finances and electronics, among others.
By: Albert Castro, Malaya, April 3, 2014