THE country’s business-process outsourcing (BPO) industry continues to maintain a high level of competitiveness as more firm providers widen their portfolio of nonvoice services and capitalize on opportunities that are present in new growth areas outside Metro Manila, according to Santos Knight Frank (SKF), a major commercial real-estate service provider in the Philippines.
“The Philippines’s demographics are the ‘secret sauce’ of the BPO industry’s growth. Owing to a highly educated and English-speaking work force spread across the country, it continues to be one of the most competitive BPO investment destinations globally. The average cost per employee in alternative destinations such as China and Mexico is fact twice as expensive as the Philippines,” Rick Santos, chairman and chief executive officer of SKF told the media in a recent press briefing in Makati City.
Earlier, Teleperformance Philippines Managing Director Travis Coates stressed that the country must maintain its proficiency in English to remain a major player in the industry. “As long as the demand for English language continues to be there, we will continue to provide it. There is no reason for the country not to be competitive in the English market,” Coates said.
Teleperformance currently employs 40,000 people in business sites in Metro Manila, Antipolo, Baguio, Bacolod, Cebu, Cagayan de Oro and Davao. The Philippines has the biggest operations in Southeast Asia.
In 2017 Santos said the IT-BPO sector was the biggest tenant occupying 3.8 million square meter (sq m), or 80 percent of total prime office spaces in Metro Manila. During the same year, the sector’s revenue was seen to have reached $24.5 billion with 1.25 million full-time employees across the country.
In the midst of the entry of automation and artificial intelligence (AI), Santos said the IT-BPO sector will remain healthy in the next three to five years as evidenced by transactions. Moreover, he said IT-BPO companies will continue to grow within and outside of Metro Manila and provincial expansions in the next two to three years as developers will build more office parks to bring new supply to the potential labor force in the provinces.
Joey Radovan, vice chairman and head of occupier services and commercial agency, SKF pointed out that BPOs, shared services and off shoring has the Philippines in their radar screens. “A testament to this optimism is the recent deal Santos Knight Frank brokered between JP Morgan Chase & Co. and Megaworld for a long-term lease of 70,000 sq m of office space in Bonifacio Global City. It is by far the largest single office lease transaction in Philippine real-estate history in terms of value and size.”
Santos said the Philippines has raised the bar in BPO services as the industry has also seen the growth of services such as animation, data analytics, legal research and analysis, game development and accounting, among others.
In the next three to five years, SKF said there will be expansions that will happen in the 80-kilometer corridor from Metro Manila going to north of Pampanga as new infrastructure projects connect the Bulacan and Pampanga cities, making these places accessible to the BPO leadership based in Metro Manila. The popular hubs outside of Metro Manila, such as Cebu, Clark, Davao, Bacolod and Iloilo, will continue to enjoy BPO expansions.
In the remaining months of the year, an additional 1.47 million sq m of prime office spaces are expected in Metro Manila, representing 30 percent of the current stock. The business-process outsourcing industry continues to drive demand along with new entrants from the Chinese online gaming sector, resulting to an overall decline in vacancy rate from 4.9 percent in the first quarter to 4.5 percent in the second quarter of the year.
On the retail sector front, SKF expects an additional 500,000 sq m of space this year after local consumer spending rose by 5.6 percent during the first quarter of 2018. With greater consumption activities, SKF said the industrial real-estate sector has subsequently seen rising demand for storage and warehouse facilities.
Meanwhile, global proper consultant and SKF partner Knight Frank remained bullish in the growth of the Philippines’s commercial real-estate sector as the country’s economy is set to expand by 6.7 percent this year.
Alistair Elliott, senior partner and group chairman of the London-based Knight Frank, said the country’s property sector offers a lot of potential as SKF brokered the largest lease deal in the Bonifacio Global City. “This speaks a lot about the level of confidence in the country’s real-estate market and Santos Knight Frank’s leadership position in the commercial office leasing sector,” he said.