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News Real Estate Outsourcing comes to rescue of Philippine property market
News Real Estate Outsourcing comes to rescue of Philippine property market
| Outsourcing comes to rescue of Philippine property market |
| Sunday, 17 June 2007 15:26 | ||||||
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Today, Manila’s business district of Makati is bustling round the clock as an army of workers from call centres and other agencies service their clients from all over the world. PO involves the contracting of a task to a third-party provider. Services include call centres, financial management, software writing, medical and legal transcription of files and even animation. Socioeconomic Planning Secretary Romulo Neri said the Philippines expects such BPO functions to bring in $3bn in revenues this year, with annual revenues of 10bn dollars 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-1990s 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, recalled how gloomy Makati was in those days. “The buildings were empty with office space priced at 300 pesos ($6.5) per square metre.” In 2000 BPO industries, including call centres, took off and have kept on growing, he said. “If you are looking at a class A office space in Makati, there is nothing left. It is all fully booked,” Locsin 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 centres by 2010 as existing 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 950 pesos per square metre. The shortage of space in Makati has prompted BPO investors to set up in other business centres, not only in Manila and its suburbs but even 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 centres, 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,” predicts Locsin. Radovan said his company estimates that at the end of 2006, about 1.5mn square metres of office space was devoted to BPO centres. He believes that this figure could grow by as much as 40 to 50% annually. Radovan said the boom in BPO centres could lead to more sustainable demand than was the case in previous periods of office property expansion. Call centres and other BPOs need more space than traditional offices such as banks. “For traditional offices, 5,000 square metres would be a big requirement. But call centres average 15,000 square metres,” with some seeking as much as 30,000 square metres, he said. He added that previous building booms were fuelled by speculative demand but now the boom is fuelled 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 an existing building into a BPO centre is not a simple matter of changing the sign on the door. Radovan said 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 centres. 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 said. 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,” said Locsin. “Expansion just depends on the quality on the supply side, the people of the Philippines,” he added. - AFP
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The 1997 Asian financial crisis left the Philippine property market reeling but business process outsourcing came to the rescue, breathing new life into old office buildings and sparking a building boom in cities throughout the country.
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