THE business process outsourcing (BPO) industry is expected to bounce back from the slowdown it experienced this year, as country risk worries recede and the tax reform program moves closer to implementation, boosting investor sentiment, according to property advisers Leechiu Property Consultants (LPC).
The expansion of BPO firms is thought to have stalled due to anti-Western sentiments expressed by the government, approval bottlenecks at the Philippine Economic Zone Authority (PEZA), and uncertainty over the success of tax reform.
At the end of November, BPO firms occupied 40% of office space in Metro Manila or 292,288 square meters, against the 65% share it held in 2016.
“The BPO industry will have a resurgence, and they will come back and expand in a very big way in 2018 because many of these issues will go away,” LPC President David Leechiu told reporters in a briefing in Makati on Tuesday.
Mr. Leechiu said the government has since reaffirmed its positive relationship with the United States during US President Donald J. Trump’s visit to the Philippines for the Association of Southeast Asian Nations Summit in November.
He noted that the tax reform program has also “come to be very friendly” to the BPO industry. The Department of Finance, which drafted the tax reform legislation, said in July that BPO companies within special economic zone (SEZs) will continue to be exempted from value-added tax, while those outside SEZs will retain their zero-rated status.
PEZA accreditation has further accelerated, with eight buildings covering a gross leasable area of 241,431.55 square meters in Metro Manila accredited by PEZA in November and December.
Meanwhile, the growth of online gaming firms compensated for the slowdown in the BPO industry this year, as LPC noted a 306% year-on-year increase in office space take-up from the industry in 2017 to 230,102 sq.m., from just 56,700 sq.m. last year.
Online gaming accounted for 32% of the 728,305 sq.m. of office space taken up at the end of November. Some 67% of these are located in the so-called Bay Area on the shores of Manila Bay, with the rest divided across the Bonifacio district of Taguig, Makati, and Alabang in Muntinlupa City.
“The velocity of the online gaming industry has been phenomenal. After the Bay, they will keep looking for new geographies to go to and that’s why we think that Alabang will be the next big hotspot for online gaming,” Mr. Leechiu said.
Asked about the projected take-up from online gaming firms in 2018, Mr. Leechiu said the sector can occupy around 280,000 sq.m., up over 21% from this year.
Expansion plans of online gaming firms however may be hampered as no space is available around Manila Bay until the end of 2018, where these companies prefer to locate. Alternatives are Alabang and the Pasig-Ortigas area.
“There’s very little real estate now in the Bay. They have to wait for some time. Because their priority is to expand in the Bay. And the pipeline in Alabang is not big enough, so they are looking for more space,” Mr. Leechiu said. — Arra B. Francia
