Outsourcing sector drives Philippines’ property market

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Christine Ong

Channel News Asia.com

29 January 2013

http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/1250930/1/.html

MANILA: Demand for office space in the Philippines is fuelling the growth of its property market and the outsourcing sector is the key driver of demand.

Round-the-clock construction of new office buildings can be seen all across the Philippines.

At McKinley Hill Cyberpark, multinational firms and business process outsourcing companies have been snapping up office space in its 15 hectare compound.

Jericho Go, first vice president at Megaworld Corporation, said: “We are meeting the demand. Fortunately, we are seeing that demand is really, and will still be going up so that is a reasonable challenge for us to speed up the work and make those offices come on line sooner rather than later, which is a good problem to have.”

Demand for commercial office space, particularly from the business process outsourcing companies, remain the driving force behind the country’s robust real property market.

And despite the rental rate increase in 2012, the Philippines remains one of the most cost-effective office destinations in Asia.

Joey Radovan, vice chairman at CBRE Philippines, said: “Compared to places like for example Singapore and Hong Kong where their annual cost is at about $200 per square foot per annum and we’re only on the low 20′s, that tells you that we are really very cost competitive.”

Strong pre-leasing commitments from the outsourcing sector account for 80 to 90 per cent of total office space, taking up at least 4.5 million square feet annually.

And this is expected to rise, with the West still facing an uncertain economic climate.

Rick Santos, chairman of CBRE Philippines, said: “As the US is in their financial dilemmas and the Eurozone is having some financial difficulties, we see those US multi-nationals, European multi-nationals continue to set up in the Philippines, their back office here not only for our labour arbitrage element but also as a life boat to keep their businesses going.”

The Philippines aims to generate US$25 billion in revenue from the business process outsourcing sector by 2016.

And with such growth, property developers are now collaborating with the outsourcing sector to address the surging demand for office space.

Orion Support Incorporated (OSI)

Dear Rick,

Following up from my initial request to you for support in finding a new office location for our company, Orion Support Incorporated.   Well, we moved in to the LTA Building on Perea Street, fifty meters or so from Paseo de Roxas this weekend, only a 4 minute walk to AmCham and under excellent terms.

While I think you assigned both Morgan Mcgilvray and Sherdil Rana to support our original request; as you know, Morgan was very tied up with his wife giving birth during the period we identified this location and negotiated with the landlord, Mr. Mike Arroyo. Yes, the former First Gentleman. But in my short interaction with Morgan, I can see that he is a solid, young professional.

With regards to Sherdil, I want to tell you that with 35+ years of interviewing hundreds and hundreds of individuals, I was impressed with his professionalism, focused support and “can-do” attitude  from the point of identifying our potential office space, and through the negotiation stages prior to the signing of our 6 year contract.  I was impressed with his considered opinions, insightfulness with regards to Philippine business culture and his sage advice related to our strategy in the negotiation process.  Sherdil was able to negotiate a rental rate per square meter about 150 – 200 pesos less than the going rate in this area, and with only a 7% increase after 24 months. Add to that, he secured for us three parking slots at no additional cost, two months security deposit versus the standard three, and two months advance rent to be applied to the front end of our contract versus the back end as is the case in most rental contracts. And, he got the landlord to repaint the entire office with three coats of mildew resistant paint at their expense.   But best of all, we were given a 6 year lease, with only having to give two months notice and forfeit only our two month security deposit to move out anytime with no additional penalty!

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