OUTSOURCING industry demand for offices eligible for incentives is expected to top 400,00 square meters (sq.m.) this year and will be buoyant until 2020 as the supply of such projects begins to be depleted by a ban on new economic zones in Metro Manila, Santos Knight Frank said.

“PEZA (Philippine Economic Zone Authority) demand is still strong this year. It’s just been overshadowed by POGOs (Philippine Offshore Gaming Operators) because POGOs have taken up so much space, but we are still going to see BPO (Business Process Outsourcing companies) take-up, most of which is PEZA, probably over 400,000 square meters, and that can last through 2020, as well,” Morgan McGilvray, senior director for occupier services and commercial agency of Santos Knight Frank, said at a briefing last week in Makati City.

Administrative Order 18 took effect on June 22, freezing the processing of applications for the proclamation of economic zones in the capital region. There were 153 information technology (IT) centers and 10 IT parks that were affected by the AO. Of these, 22 were endorsed to the Office of the President and 131 approved by PEZA board but did not reach the OP.

“BPOs help create an ecosystem of growth, and that is especially magnified in provinces where the industry spurs not only real estate expansion but also economic development,” Rick M. Santos, chairman and chief executive officer of Santos Knight Frank, said.

Mr. McGilvray noted that as the capital exhausts its supply of PEZA-accredited buildings, many locators will shift their efforts to other cities.

“As we run out of PEZA-accredited space in Metro Manila… there will probably be less demand in Metro Manila,” he said with the industry possibly trying out different deal structures if they aren’t willing to relocate.

“Some of them will look at markets outside of Metro manila. They’ll look at Cebu, they’ll look at the provinces as potential next destinations for their offices,” he said.

“For those companies that just need to be in Metro manila for whatever reason, and don’t want to be in the provinces just yet, they might set up separate entities that are not PEZA-accredited so that they can lease in Metro Manila,” he added.

Santos Knight Frank noted that around 25% of the industry’s employees are based outside of Metro Manila, mainly in Baguio, Clark, Naga City, Iloilo, Cebu, Bacolod, Puerto Princesa, and Davao City, with their direct hires projected to grow to 500,000 by 2022. Overall, the industry employs 1.3 million directly and 4.1 million indirectly.

The cities that these locators are considering are Iloilo, Bacolod, Clark, Cagayan de Oro, and Davao City. It projects that at least 360,000 sq.m. of new office supply will be added in these areas. — Vincent Mariel P. Galang