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News Real Estate Outsource businesses revive real estate trade
| Outsource businesses revive real estate trade |
| Sunday, 17 June 2007 13:29 | ||||||
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Today, Manila’s business district of Makati is bustling round the clock as an army of workers from call centers and other agencies service their clients from all over the world. Both the government and the business sector expect more investment in the coming years, especially in the business process outsourcing industry. BPO involves the contracting of a task to a third-party provider. Services include call centers, financial management, software writing, medical and legal transcription of files and even animation. Socioeconomic Planning Secretary Romulo Neri says the Philippines expects such BPO functions to bring in $3 billion in revenues this year, with annual revenues of $10 billion in five years. “That is why the real estate industry has gone up significantly in the past two years,” he said. Industry leaders have placed the Philippines just behind India as the ideal place for BPO investment, thanks to the country’s highly educated, western-oriented, English-speaking population. The BPO industry was still in its infancy in the Philippines when the financial crisis hit, causing economic growth to come to a halt. Office buildings that were started in the boom period of the early-’90s were completed just after the crisis hit. As a result, many of these shiny, new structures were left with a shortage of tenants as corporations cut back. Mitch Locsin, executive director of the Business Process Association of the Philippines, the local BPO industry group, recalls how gloomy Makati was in those days. “The buildings were empty with office space priced at P300 [$6.50] per square meter.” In 2000, BPO industries, including call centers, took off and have kept on growing, he says. “If you are looking at a class-A office space in Makati, there is nothing left. It is all fully booked,” he said. Locsin estimates that there are 230,000 people involved in the industry now and numbers are growing. The government’s Board of Investments expects there will be more than 920,000 Filipinos working in BPO centers by 2010 as businesses expand and new investors come in. Joey Radovan, local vice president of multinational property broker CB Richard Ellis, says Makati “class-A” office rentals are now at P950 per sq. m. The shortage of space in Makati has prompted BPO investors to set up in other business centers, not only in Manila and its suburbs but also in distant parts of the country such as the central island of Cebu and the former US airbase at Clark, north of Manila. Even sleepy cities far from the public eye, such as Dumaguete and Iloilo in the central Philippines, have seen the establishment of BPO centers, government records show. “Most of the BPOs that come into the Philippines will set up in Makati and Manila for a headquarters and eventually set up in the provinces for expansion,” Locsin predicted. Radovan says his company estimates that at the end of 2006, about 1.5 million sq. m. of office space was devoted to BPO centers. He believes that this figure could grow by as much as 40 to 50 percent annually. Radovan says the boom in BPO centers could lead to more sustainable demand than was the case in previous periods of office property expansion. Call centers and other BPOs need more space than traditional offices such as banks. “For traditional offices, 5,000 sq. m. would be a big requirement. But call centers average 15,000 sq. m.,” with some seeking as much as 30,000 sq. m., Radovan says. He says that previous building booms were fueled by speculative demand, but now the boom is fueled by real demand with firms asking for office space even before it is built. The industry has also had multiplier effects as scores of restaurants, convenience stores and coffee shops have been set up, many of them operating 24 hours a day, to service workers. But transforming a building into a BPO center is not a simple matter of changing the sign on the door. Radovan says air conditioning and the power capacity of traditional office buildings must be increased to cope with the huge electronic demands and 24-hour operations of BPO centers. Even the floors must be reinforced to deal with the increased density of workers. With all the added costs, many developers are finding it more economical to construct a new building rather than convert an existing office building, Radovan says. Industry leaders say the main constraint on further expansion is not lack of space but the supply of trained workers. “Right now, we are the destination of choice because of the quality of service,” Locsin said. “Expansion just depends on the quality of the supply side, the people of the Philippines,” he added. AF
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