PHILIPPINE REAL ESTATE BULLISH THROUGH 2016: BPO SECTOR TO SUSTAIN MOMENTUM

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“This bright prospect in the BPO sector, along with the strong performance of other real estate sectors, will see the Philippines through and beyond 2016.”

The growth of Philippine real estate sector remains positive through 2016, playing a big role in maintaining economic stability despite impending leadership change in government, according to leading real estate consultancy and service provider CBRE Philippines.
With the GDP rebounding from 5.6% in the first quarter to 6.4% in the second quarter, the outlook for investment flow into the country continues to be on an uptrend, affirmed as well by rosy growth forecasts by credit rating agencies and financial institutions such as the IMF (International Monetary Fund), ADB (Asian Development Bank), and S&P (Standard & Poor’s). Hinging on this optimism, real estate players are forging ahead with aggressive developments in all sectors—office, retail, residential, and industrial—across, within and outside the main city centers of the country.
“We are very positive on the way things are going for the real estate market. As we’ve noted before, the transformation of areas outside the major central business districts are continuously creating more investment opportunities. From Clark up north to Davao down south, the playing field is becoming more exciting, especially for the BPO sector which will sustain the momentum and drive for the coming years,” stated Rick Santos, founder, chairman and CEO of CBRE Philippines.
Private and public entities are also working hand in hand to improve the business landscape of the Philippines. These developments or PPP (public-private partnership) projects, along with the strong macroeconomic fundamentals of the country and its young demographic dividend, basically fulfill the demands of BPOs. These are the key factors that have encouraged companies from before and will still sustain for what is yet to come.
“There is no letdown seen in the growth of BPOs in the country. BPO companies come here for the cost and grow quickly because of the people,” added Santos.
An important factor in the continued strength of BPOs are office rental rates in the Philippines, which remain to be the lowest and best value in Asia— at 29 USD per square feet per annum. With BPO interest remaining high, demand for office space is also seen to be on an uptrend.
A total of 124.55 square meters or 1,340.65 square feet of office space has been occupied in the first nine months of 2014—the highest transaction in the last six years. This bullish take-up is seen to track supply as more spaces are developed, according to CBRE. Aggregate vacancy dropped to 2.45% from 3.30% in the first quarter of the year. Upcoming office supply will offset this drop with over 400,000 square meters of new space within the year.
In terms of location, the traditional Makati Central Business District remains highly attractive to global firms, followed by the emerging business hub of Bonifacio Global City. Outsourcing growth areas in the Philippines identified by global outsourcing advisory firm Tholons—Sta. Rosa City, Bacolod City, Davao City, Iloilo City, and Cebu City—as well as PEZA zone areas are likewise going to contribute to the supply.
The highly skilled labor pool has likewise piqued the interest of foreign locators into expanding their operations to the country. According to the 2014 A.T. Kearney Global Services Location Index, the Philippines ranks 7th among 51 countries as prime BPO location. The study also highlighted the country’s labor force as one of the “deepest” or that of large, untapped value and skill. With traditional strengths in call centers, the industry is expanding into higher value-added voice services, as well as into IT and business processes in the medical or health care, legal, financial, insurance, and other specialized fields.
“BPO full-time equivalent (FTE) employees are expected to reach 1.3 million by 2016. This, as well as the upcoming ASEAN integration, will be favorable to the strengthening of the country’s position as a top BPO destination,” explained Santos.
Other real estate sectors such as retail, hospitality, and industrial are also experiencing bullish growth. For the former, middle-income earners and OFW families are seen to fuel growth, with developers and global retailers becoming more keen on setting up outlets in the country. At least 170,000 square meters of new retail space was introduced in the first quarter of the year, and more than 100,000 square meters of new space will be completed before 2014 closes.
The upbeat tourism of the country, with international tourism revenues at PhP 109.8 billion in the first half of 2014, has pulled the demand for more hotels and retail establishments in tourist spots and CBDs of the Philippines.
Similarly, the strengthening of the global manufacturing sector, coupled with stable lease rates, are boosting industrial operations in the country, with players looking into areas outside the usual CBDs, such as in Clark and Cebu. Japanese locators are particularly showing interest in expanding their operations in the country.
“This bright prospect in the BPO sector, along with the strong performance of other real estate sectors, will see the Philippines through and beyond 2016,” concluded Santos.

Read more: http://www.cbre.com.ph/philippine-real-estate-bullish-2016-bpo-sector-sustain-momentum/

 

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