The sustained growth of the local outsourcing and offshoring industry is seen to fuel the continued strong demand in office space over the next two decades, according to property consultancy firm CBRE Philippines.

Rick M. Santos, CEO, chair and founder of CBRE Philippines, said the outlook for the office property sector remained “extremely positive” over the next 10 to 20 years, with lease demand (composed of renewals, new space leasing and preleasing) seen to grow to at least 850,000 square meters (sq m) by 2018. Current demand was estimated at about 600,000 sq m.

Of the 850,000 sq m, about 80 percent is expected to be taken up by business process outsourcing (BPO) companies from the United States, Europe and Australia as the country remained a favored investment destination. Driving this interest in the country as an investment destination would be its economic growth story, young demographics, skilled and English proficient labor pool, and competitive lease rates.

“The Philippine BPO sector will continue to thrive in the coming years. The country provides a conducive environment for foreign investors—an excellent pool and low cost of skilled labor, outstanding customer service, a quality destination, and one of the cheapest rental rates and highest yields in Asia,” Santos said.

“The Philippines is becoming the lifeboat for many US and European companies that need to outsource in order for their businesses to survive and actually preserve jobs back in the US and Europe,” he said.

Apart from new entrants in the local BPO space, existing companies that are beefing up their back office operations here are also boosting demand for office space. A number of outsourcing companies are also focusing more on precommitting space in anticipation of their programmed increase in the number of employees in the coming years, Santos added.

Santos said employment in the BPO industry was expected to continue its uptrend from about 1.3 million next year to 2.23 million by 2025, and 3.3 million by 2035.

Jan Paul Custodio, a senior director at CBRE Philippines, meanwhile pointed out that the revenue growth in the BPO industry was also expected to sustain a strong double digit growth of about 15 percent beyond 2016, surpassing the growth rate of OFW remittances.

Last year, BPO revenue grew by 18.7 percent while OFW remittances rose by only 6 percent.

The Philippines offers alternative locations or the so-called next wave cities for BPO companies. These include Clark, Cavite, Iloilo, Bacolod, Cebu, Davao, Cagayan de Oro, Laguna and Baguio.

As seen on

“Manila’s office market is witnessing a rapid expansion at the moment… a result of the strongly performing occupier market which is driven by the IT business process outsourcing (IT-BPO) industry,” the property consultancy firm said in its Asian Cities Report: Manila Office 2H 2015 dated Oct. 8.

KMC MAG said the IT-BPO sector, which took up 430,000 square meters (sq.m.) in 2014, is expected to occupy 400,000 sq.m. this year “with no signs of slowing down.” The industry employed 1.03 million Filipinos last year and the IT and Business Process Association of the Philippines said on Oct. 5 that it is “confident of hitting” the 1.2 million employee target for 2015.

This prompted KMC MAG to maintain its “bullish outlook” on Manila’s office sector, with rents and capital values projected to grow by 5-7% over the next 12 months.

“5-7% is comparing rather well to other markets. I believe only Tokyo and Jakarta are posting similar growth rates while majority of other cities are between 1-2%, so it’s among the fastest,” Antton Nordberg, Research and Consultancy Manager at KMC MAG, said in an e-mail interview yesterday.

KMC MAG said other submarkets are “gaining traction,” especially BGC, which will supply half of the 2 million sq.m. new office space in the market until 2018.

“A lion’s share of the supply pipeline will arise in BGC. In terms of growth expectations, I’m more conservative for BGC than for overall in Manila because of the supply pressure,” Mr. Nordberg said.

He noted a 3-5% increase in BGC’s rents and capital values for the next 12 months.

The remainder of the new office space will be “widely scattered” among Metro Manila’s main business districts, as a result of the “increasing pressure on real estate to facilitate all the businesses which the traditional CBDs cannot handle anymore.”

Because the outsourcing industry is “price sensitive,” tenants are willing to move to secondary business districts with cheaper occupancy costs such as Quezon City and the Manila Bay area,” KMC MAG said.

Makati will be able to provide additional stock through the redevelopment of the Ayala Triangle and the City Gate complex, but this will likely be available after 2018, “forcing companies looking for prime space to revert to BGC.”

“Despite the strong demand, the large pipeline is expected to maintain a downward pressure on rental growth and slightly increase vacancies, especially in 2016,” KMC MAG said.

Next year’s office supply is expected to peak, with 630,000 sq.m. to be added to the market.

As seen on Business World

MANILA — Leaders of the Philippine outsourcing industry said Monday they expect a big increase in business as the result of a new, highly detailed medical diagnosis coding system adopted by the US for insurance claims.

The Philippines is the world’s leader in international call center services. Its information technology and outsourced services industry is expected to employ 1.3 million people by 2016, when annual earnings are seen to reach $25 billion. The industry has been growing 15-18 percent yearly, earning $18.9 billion last year.

Dan Reyes, chairman of the IT & Business Process Association of the Philippines, said the new US coding system will open up more processing jobs and the Philippines stands to gain because of its large pool of graduates in medical-related fields.

Earnings have jumped 30 percent a year for the Philippine sector providing medical billing and other services to US companies, making it the fastest growing of outsourced services, said Jose Mari Mercado, the association’s president and CEO. It is followed by information technology, finance and accounting, and contact center operations.

Under the new system, the roughly 14,000 codes used by US health providers to represent diagnoses have been expanded to about 68,000 codes to capture more details of a patient’s chart.

The codes, for example, can now distinguish between whether a goose or a parrot nipped a patient.

The US government said the changes should help health officials better track quality of care, spot early warning signs of a brewing outbreak or look for illness or injury trends.

Mercado said the industry is coming up with a new roadmap from 2017 to 2022 that will consolidate plans for different sectors such as health care, animation, contact centers, finance and accounting, and game development.

The likelihood of maintaining or surpassing current growth rates “is very, very strong,” he added.

The new roadmap will identify opportunities and what needs to be done to address challenges including the lack of infrastructure, the loss of Filipino workers for better-paying jobs abroad, and adjusting to new business models that require more automation and robots, the industry leaders said. (AP)

As seen on Sun Star

The Philippine Economic Briefing at the Philippine International Convention Center on Wednesday (September 30) focused on economic developments and human capital investments.

Officials from the central bank and socioeconomic planning agencies presented key gains in these areas. They pointed out that the country’s economy grew by 6.2 percent on average in the last five years.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said that this makes the Philippines the fastest-growing country in the Association of Southeast Asian Nations-5 (ASEAN-5) — outpacing Indonesia, Malaysia, Singapore, and Thailand.

Tetangco added that growth was achieved despite low inflation in the past five years — at 3.7 percent on average. The governor stressed the need to sustain this growth, as the global economy is expected to remain weak amid volatile financial markets.

Tetangco said that strong macroeconomic fundamentals are not enough, and that sustaining growth requires institutionalizing governance, raising human capacity, and developing infrastructure.

Meanwhile, Socioeconomic Planning Secretary Arsenio Balisacan admitted that the country will grow at around 6% in 2015. This is a downward revision from the 7- to 8-percent goal the government set for this year.

Despite these, the secretary said that there are bright spots. Public investment in social services such as education, health care, cash transfers averaged 12 percent in the last five years, compared to 7 percent in the previous administration.

Overseas Filipino worker remittances, the business process outsourcing industry, and tourism receipts continue to prop up the economy. Key reforms in sin tax, competition, and foreign shipping and foreign banking also boosted the country’s competitiveness, pushing it 5 notches up to 47th out of 140 economies in this year’s World Economic Forum’s Global Competitiveness Index.

Balisacan and private sector representatives also discussed the so-called “youth bulge” in the Philippine economy. This means the economy has more workers than it can employ — mostly young people of employable age, with an average age of 23.

The Philippines is seen to experience the youth bulge from 2015 to 2050. Balisacan said that such a window helped spur the growth of East Asian economies from 1965 to 1985. So, maximizing the Philippines’ growth possibility during this period is crucial.

The panel raised several key reform areas to maximizing the youth bulge. These include matching youth skills with jobs; raising human capital investments in health and education; and policies for reducing dropout rates in high school.

The panel said that the youth should be encouraged to use the Internet to come up with creative business models, like that of Uber and Airbnb. They also recommend investing in workers’ productivity, which could then raise incomes.

As written by CNN Philippines’ Miro Capili