Outsourcing to drive growth in real estate

By: Administrator  |   1/7/2009 12:50:41 AM

Despite the slowdown of major economies, the business process outsourcing (BPO) industry will continue to boost growth in the real estate sector, particularly the demand for office space, industry experts said Wednesday.

"Offshoring and outsourcing will continue to drive the demand in most real estate segments, particularly in offices," said Rick Santos, chair of real estate services and consulting firm CB Richard Ellis Philippines.

Multinational companies, said Santos, would continue to outsource operations to survive and thrive especially during these times when a global economic slowdown is happening.

"Even with the lingering global financial crisis and the recession in the US, the outsourcing and offshoring remains to be a major economic and property industry driver of the country," Santos said. "It will continue to provide cost-effective and high-value alternative to ailing US companies who need to survive this short-term weakness in their economy."

The BPO industry is one of the growing sectors in the Philippines. Industry experts expect revenues to increase by 43 percent and reach almost US$7 billion in 2008.

CBRE estimates that around 501,968 sq. meters of new office space is scheduled for completion in 2008 across Metro Manila to meet the demand from the BPO industry. The figure is higher than last year's monitored take up of 300,000 sq. meters.

Office space completions in Metro Manila for the first half of 2008, CBRE said, is around 93,500 sq. meters while completion for the second half is approximately 408,425 sq. m.

Santos said that the coming of Indian BPO companies in the Philippines and the BPO firms' expansion in the provinces and outside outsourcing hubs like Metro Manila and Cebu will also make the demand for office space strong.

BPO firms have been establishing their presence in the provinces, where rental rates and wages are lower than the rates in Manila. Outsourcing companies are also tapping talent pool from the provinces.

"Labor is the main reason for the expansion of BPOs outside Metro Manila," Santos said.

Stable rental rates

Rental rates, said CBRE general manager Trent Frankum, will stabilize across Metro Manila due to increased supply of comparable office spaces, third party developers with lower deal rates and emergence of alternative business districts.

"Some BPO companies will move out of the Grade A high-rise buildings into new IT buildings in alternative business districts due to cost," Frankum said adding that as  rents in the central business districts stabilize in the price range of  P850-950 per sq.m, BPOs will move out to new low cost and growth areas.

Frankum cited that aside from Makati and Ortigas, key growth areas in Metro Manila include the North Gate Cyberzone in the Alabang Business District, Bay City in Pasay City, Pioneer Center in Mandaluyong, the UP North Science and Technology Park in Quezon City, Eastwood City and Fort Bonifacio.

Source: http://www.abs-cbnnews.com/business/10/23/08/outsourcing-drive-growth-real-estate

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