Smaller cities like Iloilo now benefitting from BPO industry expansion

MANILA, Philippines - Now more than ever, opportunities in the real estate office market have never been more attractive even in the key cities outside of Metro Manila like Iloilo, Lipa, Bacolod and Davao.

With revenues of close to $9 billion in 2010 or 26 percent more than 2009, Business Process Outsourcing (BPO) firms have been driving the growth of the office market throughout the country. Until recently, call centers and related firms who require an estimated 300,000 sqm. of additional office space a year had focused operations in Metro Manila and the country’s second largest city, Cebu City. In a search for even more call agents and knowledge workers, BPO firms are now seeking to hire employees in cities outside the two metropolitan centers.

Cities benefitting from BPO presence have been those where local government, academe and real estate developers have collaborated to provide these firms the manpower, facilities and infrastructure they need, according to Phillip Anonuevo, associate director of Jones Lang LaSalle Leechiu (JLLL), a global real estate services firm. He disclosed that JLLL has transacted 80 percent of all the sites outside Metro Manila occupied by BPOs today.

Among the firm’s most recent transactions involved 2,500 sqm. at the Iloilo Technohub in the Mandurriao district. As the tenant representative of Hinduja Global Solutions Ltd., JLLL serves as the company’s strategic adviser offering the company various appropriate options and managing lease negotiations with the goal of maximizing workplace flexibility and productivity. Hinduja is one of India’s biggest BPO players offering client servicing to firms in the West in the insurance, telecom and consumer electronics sectors.

According to Lylah Fronda, JLLL senior manager, Hinduja narrowed down its choice of location to Iloilo City because of three factors: the presence of 17,000 graduates a year who have a natural proficiency to speak English, the opening of the Ayala Land-developed Iloilo Technohub and the recent completion of the 164-megawatt, coal-fired plant Global Business Power Corp. The new power plant offers Iloilo users among the most competitive power rates in the region.

Property giant Ayala Land envisions the Iloilo – AyalaLand Technohub as a three-building complex with support facilities and amenities sought out by BPO firms. The first building in this BPO complex incorporates retail at the ground floor. It is also close to the Smallville Business and Leisure Park and the Boardwalk Leisure Center, which accommodate restaurants and entertainment facilities favored by call center agents.

Anonuevo notes: “All these developments were accomplished with the encouragement of a pro-active local government focused on availing opportunities for pump priming the local economy.”

He observes that a number of critical factors are usually considered by its BPO clients in selecting office space. Key among these are a location that is accredited by the Philippine Export Zone Authority and where business processes are streamlined to allow IT locators to avail of incentives. “ In addition, the location needs to be easily accessible to potential employees and must provide room for the firm’s growth,” he notes. “Locations with food and convenience outlets for the benefit of employees who work through the night when many other stores are closed, are added bonuses.” In addition, all BPO work facilities require back-up power and a cable backbone for multiple data and telecommunication services.

Anonuevo observes that a number of global factors have driven firms operating in multiple locations in various countries to focus on maximizing workplace productivity. In its first Global Corporate Real Estate Survey participated in by 500 executives from global companies managing the real estate needs of their firms, JLLL notes that real estate “typically accounts for 7-12 percent of a business’ total operating cost.” Following the economic uncertainty triggered by the financial crisis of 2008, many global companies are now closely scrutinizing expenses related to corporate real estate.

Anonuevo explains that companies now have a desire “to make the money they spend on corporate real estate work harder and smarter for them.” They have set tougher performance targets and have established relations with service providers like JLLL that can help them make more informed decisions.

In addition to Hinduja, JLLL has likewise represented other leading BPO companies in closing real estate transactions in Baguio, Cebu, Lipa City, and other sites in Laguna and Pampanga. Anonuevo clarifies: “Our experience allows us to provide clients with solid real estate information in key cities throughout the country.”