By Issa Quirante
WITH the availability of office spaces in Metro Manila nearing a saturation point and with office-space rental continuing its upward trend, research firm CBRE Philippines is touting Clark in Pampanga to be the next emerging business-process outsourcing (BPO) hub in the country.
According to Rick Santos, CBRE Philippines CEO, chairman and founder, “Foreign appetite for investment in the Philippines continues to be vibrant as more foreign firms are eager to have their slice of the cake.”
“We have a lot of momentum in the market now. Not only are we seeing over 6 million square feet a year of takeup, we’re also seeing a lot of opportunities in terms of marketing the Philippines across all sectors in the run-up to the Apec [Asia-Pacific Economic Cooperation] that the country is hosting. Also, we see the devaluation of the Chinese renminbi as a big win for the Philippine BPO sector. Obviously, the weaker peso definitely helps the growth of call centers, shared services and KPO [knowledge-process outsourcing].”
All these positive developments complement the continued success of the country’s real-estate market that the firm is seeing. And coming on the radar screen is Clark.
“Clark is a gold mine for investors. We see a vote of confidence on Clark as an option out of Manila as it, together with Cebu, comes on the radar screen. And with congestion on Edsa, we see a rise in new central business districts (CBDs). The rapid urbanization, overseas Filipino remittances and the growing BPO sector are the main drivers for the Philippine real-estate sector,” Santos added.
Developer-driven CBDs in Clark, Cebu, Davao and Iloilo are also creating new demand for better location and appropriated zoned office districts as BPO companies, such as Convergys, Accenture and Teletech, continue to reach out to provincial areas.
Morgan McGilvray, director for Corporate Real Estate at CBRE Philippines, noted that as BPO companies locate in Metro Manila and Cebu—these companies also have multiple offices in both Metro Manila and Cebu, usually in the business park, but we are actually seeing some different locators up in areas like Clark.
“Startek, Tata, Australian companies such as AusPhil Solutions, Clark Digital Valley—these are names that aren’t as familiar in Metro Manila but these guys have been located and doing quite well for years now [in Clark]. That’s why we’re encouraged by Clark and the fact that there is a BPO industry up there,” McGilvray said.
“Historically, if companies were looking to go outside of Metro Manila and to the provinces and to Cebu, they were sometimes limited in terms of the quality of the buildings that they could move into and sometimes they are apprehensive about doing so. We’re now seeing developers, like Megaworld and Ayala, who are putting up new BPO-style buildings of the highest quality to reassure tenants that they can move out to the provinces and get the kind of building quality that they need to feel confident with starting or start operations there. That’s the new development in the market that we’re encouraged by because it should drive demand out to the provinces, outside of Metro Manila,” he added.
Development pipeline for Cebu and Clark
There is an expected 1.3 million direct employment by BPOs in 2016, which will lead to about $25 million of revenues from the BPO sector.
According to CBRE, there are about 500,000 full-time employees in the BPO in the National Capital Region. Their study suggests that there is even more absorptive capacity in the provinces.
So as Metro Manila continues to grow, there will also be growth in the provinces and plenty of bandwidth to do so. In fact, full-time employment in—the Central Luzon/Northern Luzon hub—which includes Metro Clark and Metro Subic—is seen at 38,882, with an absorptive capacity of 133,000 and a theoretical capacity of 461,529.
In terms of gross leasable area (in square meters), Metro Manila is still the biggest office market in the Philippines by far with about 3 million sq m of Grade A and prime estate. Cebu is a little shy of a million sq m and Clark is on its way with about half a million sq m.
Clark, because it is a bit smaller, commands about P400 to P500 per sq m, so the bandwidth is not that wide because there aren’t as many buildings to diversify the rent. But as we look at Cebu, companies are now seeing some cost-efficient buildings that can be at P300 per sq m.
“We’re actually seeing the development of prime-quality buildings in Cebu for the first time and that will actually push rent or companies who want to be in the nicest buildings in Cebu. So we might see rent in the P800 per sq m range,” McGilvray said. The office lease rates in Clark still post a lower rate with P456.74 per sq m.