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BPO industry poised for rebound

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BPO

By Arra B. Francia, Reporter

THE Philippine business process outsourcing (BPO) industry is headed toward a resurgence in 2019, as the rise in wages in the United States coupled by the weaker peso are encouraging multinational firms to move back to the country.

This is according to real estate consultancy firm Leechiu Property Consultants (LPC), which noted that companies who diversified away from the country are now realizing that local conditions are still better, even with the political risks.

“They got reminded of how difficult it is to do business in other places,” LPC Chief Executive Officer David Leechiu said in a year-end property outlook in Makati City yesterday, saying how companies went back to India, the US, Poland, Europe, Malaysia, and other markets in the past two years.

“They saw that it is still better to do business in the Philippines. The call center industry is going to keep getting more expensive…This will force many companies to come here despite all our issues.”

LPC said the BPO sector remained the largest demand driver for office spaces in 2018, taking up about 290,000 sq.m. out of the 1.16 million sq.m. in total office space demand in Metro Manila for the year.

State of the Philippine office market: 2018-2023

This however is 18% lower than the 355,000 sq.m.-take-up in 2017, and 40% lower than the 485,000-sq.m. seen in 2016.

“They’re still growing but at a significantly slower space. That’s very alarming,” Mr. Leechiu said, attributing the slowdown to the lack of office spaces accredited by the Philippine Economic Zone Authority (PEZA).

LPC noted that Century Properties Group, Inc.’s Century Diamond Tower — which is scheduled to be completed by the end of next year — will be the only office space with PEZA accreditation in Makati City in the next three years.

“(We recommend the government to) grant more PEZA zones. It’s so hard for them (the BPO sector) to expand when the geography’s so limited,” Mr. Leechiu said.

In addition to the lack of PEZA-accredited spaces, LPC also sees a deficit in office supply by 2021, as major business districts are now recording low vacancy rates.

The average vacancy rate in Metro Manila is currently at 6%. LPC projects vacancy to steady at 6% by the end of 2019, before falling to 5% in 2020 and to 2% by 2021. This is based on the assumption that demand stays flat at 942,000 sq.m. per year.

Lease rates for prime office spaces in Makati are expected to reach P1,600 per sq.m. in 2019 amid falling vacancy, while BGC’s rates are also seen to go as high as P1,500 per sq.m.

Outside Metro Manila, Clark Global City posted the highest office demand at 156,000 sq.m., followed by Cebu with 133,000 sq.m., Laguna with 46,000 sq.m., and Davao City with 28,000 sq.m.

“The next big property run is going to be in Clark, Cavite, Laguna, more than any other place,” Mr. Leechiu said.