BPO, IT firms to fuel demand for more office space in RP

Prospects for the Philippine property sector remain bullish as business process outsourcing (BPO) and information technology companies lead a robust demand for office space not only in Metro Manila but also in other key cities in the country, according to global property consultant CB Richard Ellis Philippines Inc.

CBRE Philippines vice-chairman Joey Radovan said office space vacancies continue to shrink in the Makati central business district (CBD) while rental levels now enjoy double-digit increases with some hitting pre-1997 Asian financial crisis levels.

Radovan said Makati vacancy levels for prime/grade A office space went down to 1.59 percent in the fourth quarter of 2006 from the previous quarter’s 2.5 percent. Rental rates for premium office space increased by 17.2 percent to P844 per square meter from P720 per sqm.

Year-on-year, average prime/grade A Makati CBD rental rates rose 35 percent from P550 per sqm. to P744 per sqm.

Radovan noted that some prime office buildings are leasing office space at or above P1,000 per sqm.

"Tenants continue to queue to sign at that level. Leasing rates are almost back to pre-crisis levels but are not expected to go higher given alternative office buildings in emerging districts," he said.

Radovan said there is no new office supply ready for occupancy in the Makati CBD in the next 12 months and expects chunks of office space to come on line in the third quarter of the year.

Prime/grade A office supply in Makati CBD remained at 883,703 sqm. as of the fourth quarter of 2006.

Radovan said demand for office space is still coming from BPO firms and call centers.

He said developers are now taking advantage of the lull in new supply with projects being launched in alternative locations such as Bonifacio Global City, Manila Bay Area, and Filinvest Alabang. Radovan said the call center industry has grown by 100 percent in the last three years and is expected to rise by 40 to 50 percent more this year.

The size of a call center is referred to in terms of "seats" instead of "agents" as phone operators work in three shifts to adjust to the different time zones of the countries where the calls originate.

The Board of Investments had forecast call center revenues to increase by 37 percent this year to almost P1 billion from last year.

In recent years, the Philippines has become the offshore destination of choice for call center outsourcing. Many leading multinationals have used the Philippines as a global center for customer service because of the workers’ English proficiency, culture compatibility, skilled agents, and cheap but good labor.

Call centers are used for varied purposes, such as for sales, marketing, customer service, telemarketing, technical support, or other specialized activity. Some value-added services include customer segmentation, database warehouse strategies and creative marketing programs. But the industry is developing more ways by which it can serve its customers with the help of the different technologies available in the market.