Office space demand seen to outpace supply this year

The world’s largest real estate advisory services firm CB Richard Ellis (CBRE) expects office space demand in the Philippines to outpace supply this year, mainly due to new and expanding call centers and business process outsourcing (BPO) firms.

The demand-supply gap is projected to be felt starting the third quarter of this year and is expected to be addressed towards the end of 2006, CBRE Philippines officials said yesterday. This has already resulted in increased office space rental rates as well as real estate prices.

As of the first quarter of 2005, there were around 40,000 call center seats, a number that is seen to grow by 50 to 70 percent towards the end of the year.

CBRE said the office property outlook is bullish, with a projected increase in the number of build-to-suit options (such as malls being converted into office spaces) and an additional 80,000 square meters of office space being planned for development in 2006-2007.

"A lot of developers are banking on the BPO market," CBRE Phils. director for global services Joey Rodovan said.

Last year, majority of the world’s top call centers have set up their operations in the Philippines to handle the Fortune 500 clients. In 2004, the local call center industry generated revenues of around $800 million, of which about 87 percent came from US clients.

CBRE Phils. associate director Trent Frankum noted that BPOs are the next growth center, as he referred to a Meta Group study which cited the Philippines as Asia’s bright spot for outsourcing. According to the same study, the Philippines’ strengths are in finance, accounting, human resource and administration.

According to CBRE, as the proliferation of BPO companies, call centers, and multinational corporations‚ back office functions surges forward, complementary forces are ensuring that the demands of these organizations are met.

CBRE Phils. president and managing director Ric Santos said demands such as qualified labor, first-class infrastructure, multiple sites, security perceptions, and fiscal incentives are proactively being addressed by English proficiency and call center courses, new investments in the power and telecommunications sectors, increase in both creative and traditional office developments, site visits by members of government including the President herself, and tax breaks and other enhancements.

He said industry experts’ forecast of 100- percent annual growth in call center seats over the next two to three years is far from speculation as this is supported by these fundamental signs.

Santos pointed out that such strong growth translates into job creation, increased occupancy in hotels, multilateral investment and cooperation, retention of skilled labor, improved foreign perception of the country, diffusion of investment, and welfare to all parts of the country, as well as other benefits.

CBRE emphasized that the Philippines is strategically positioned to enjoy a prosperous new few years as the thrust of BPOs, call centers, and MNCs continues its march from the city high rises to the provincial spreads.

It is expected that there will be slower growth of call centers in Metro Manila as the industry moves towards the provinces such as in Clark, in Baguio, and in Visayas and Mindanao. "Similar to India, call centers and BPOs are moving from the central business districts in Manila outwards," Santos said.