Business outsourcing companies to drive Iloilo office sector’s growth — report

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Megaworld Corp. is the dominant office developer in Iloilo City. -- EMME ROSE S. SANTIAGUDO

BUSINESS process outsourcing firms are flocking to Iloilo City, driving the growth of the city’s office sector, according to Colliers International Philippines.

“Over the next three years, we see outsourcing firms such as call centers occupying much of new office space, especially in the Mandurriao area. We already see some companies offering a mix of call center and higher value outsourcing services such as legal transcription and health information management,” Kevin Jara, senior manager for tenant representation of Colliers, said in a statement on Wednesday.

Mr. Jara noted BPOs are expanding in Iloilo to take advantage of the city’s skilled labor force.

Mandurriao accounts for 80% of Iloilo City’s office stock, accounting for 87,800 square meters (sq.m.) out of the total 109,400 sq.m.

Megaworld is the dominant office developer, with 60,800 sq.m. of office space within its Iloilo Business Park. Major BPO firms such as iQor, Transcom, Startek, WNS, Reed Elsevier, and Nearsol have already set up shop in Iloilo Business Park.

“These companies have taken advantage of PEZA (Philippine Economic Zone Authority) proclaimed buildings within the business park, availing of tax incentives. Colliers believes that in the next three years, any PEZA-approved buildings in the Iloilo Business Park could easily achieve full occupancy status as there is pent-up demand for PEZA-proclaimed spaces across the city,” the real estate services firm said.

Last year, Megaworld completed the Two Techno Place Office, which has 10,500 sq.m. of office space. From this year until 2020, it targets to complete One Fintech Place, Two Fintech Place, IBP BPO 11 and IBP BPO 12, which has a total leasable space of 69,400 sq.m.

Ayala Land, Inc. accounts for 9% of the Mandurriao office stock through its Iloilo Ayala Technohub with 7,100 sq.m. of space. It is developing the Atria Park District BPO 1 and 2, which will have a total leasable space of 18,400 sq.m.

The SM Group completed the SM Strata Tower 1, which will have 23,400-square meter of new space, earlier this year. It is also developing the Strata Tower 2 with leasable space of 22,250-square meter.

Robinsons Land Corp.’s Robinsons Place Iloilo offers 2,000 sq.m. of office space.

“Overall, we see Iloilo’s leasable office supply increasing to 242,900 sq.m. by 2021 or an addition of about 44,500 sq.m. of office space per year from 2019 to 2021. All of the upcoming supply is likely to be in Mandurriao as developers cash in on the area’s viability as a key outsourcing destination in Western Visayas,” Colliers said.

While it sees sustained demand for office space the city, Colliers noted the lack of PEZA proclamation for upcoming office developments may raise vacancy.

“Colliers estimates an annual vacancy of 9% per year from 2019 to 2021, up from 5.0% in 2018. The vacancy should taper to about 7.8% in 2021 once the new office buildings secure their PEZA status. A couple of new office towers are due to secure their PEZA status in 2019 and 2020. In our opinion, the granting of PEZA status should further raise office space demand in the city over the next two to three years,” it said. — VMPG