BPO demand to lead In office space shortage

Malaya by Irma Isip, 03-27-2014

Property services firm KMC MAG Group sees a shortfall in available office space this year due to strong demand by the information technology­business process outsourcing (IT­BPO) sector.

KMC MAG said the employment generated by the IT­BPO sector will push annual take up of office space to 400,000 square meters but the additional office space that would be available this year is only 320,000 sqm or a shortfall of some 80,000 sqm.

The Group said this shortage is expected to translate to an increase in rentals, with the growth driving cur­ rent rental prices to pre­financial crisis levels.

The growth in the IT­BPO sector will also remain to be a major influence in the serviced office market, with at least three new serviced office centers opening to keep up with the demand for space.

"We expect more IT­BPO companies to come in and invest in the country, due to its young, educated, English­speaking labor force, affordable labor costs, and taxation benefits for investors," said Michael McCullough, managing director of KMC MAG Group.

"The consistent growth in the IT­BPO industry has driven demand to the extent that developers are confident in building without pre­committed tenants."

"Premium and Grade A office market to keep up its current pace and increase rental by 7% in 2014, as the BPO industry stays highly active. With an uncertain global economic recovery, firms will continue cutting their balance sheets that will result in an increase of headcount in outsourcing destinations, leading to strong demand in Metro Manila," KMC MAG Group said in its outlook.

In Metro Manila, the three top business districts con­ tinue to experience activity in both residential and office sectors. Makati and Bonifacio Global City continue to attract multinational corporations, IT­BPO companies, and entrepreneurs, as well as the high­end and luxury residential sector, with Bonifacio Global City having the highest take­up in 2013.

"In Makati, vacancy rate in the office sector is temporarily high, but the demand created by shortage in prime office space can absorb the vacancy," shares McCullough. "Meanwhile, in Bonifacio Global City, the vacancy rate is expected to lower due to the strong demand, despite the continued expansion in its inventory."

Ortigas is shaping up to be a potential BPO hub, given its accessibility to labor from nearby areas such as Pasig, Quezon City, San Juan, Taguig, and Marikina.

"Ortigas has the lowest vacancy rate among all of the business districts; however, we expect this to change because of the new supply," says McCullough. "Among the business districts in Metro Manila, Ortigas also has the lowest average rate for Grade A office space, which can make it an attractive location for IT­BPO companies looking to invest in the Philippines."