More fun (and cheaper) to outsource in the Philippines, says Savills affiliate

by Darwin G. Alojemar, InterAksyon.com, 10-25-2013

MANILA - It's more fun to outsource business operations in the Philippines, according to the local affiliate of London-listed real estate services firm Savills.

In a briefing today, KMC MAG Group managing director Michael McCullough said Metro Manila is the "cheapest" place to set up a company anywhere in the world. McCullough said setting up a company in the Philippines would cost $45,464 a year, including $12,500 for a software developer, $10,800 for a graphic designer and $9,984 for office space. In contrast, setting up shop in Thailand is 1.5 times the cost in the Philippines, and in Indonesia, twice the cost. McCullough said the most expensive places for relocating business operation are London, San Francisco, Mumbai, Paris, New York, Moscow, Shanghai, Tokyo, Singapore, Hong Kong and Sydney.

The prime office rate in Metro Manila stood at $28 per square meter. Compare this with Hanoi's $49.1, Taipei's $66, Seoul's $89.1, Singapore's $113.2 and Hong Kong's $199.3. Given this, McCullough sees a lot of business process outsourcing (BPO) and knowledge process outsourcing (KPOs) firms setting up shop in the Philippines. "We are also seeing financial and insurance companies to come here and grow rapidly," he said. 

A growing economy coupled with an affordable and highly-skilled labor pool and a stable political environment would attract more international firms to set up BPO or KPO operations in the Philippines, McCullough said. He said 2013 has been a year of opportunities for the real estate sector due to the consistently strong economic growth in the first half of the year.

"The factors behind such growth are the active construction industry and the business process outsourcing sector, as well as the high rate of overseas Filipino workers' remittances. Credit rating achievements have increased investment interests in the Philippines and a stable political climate under the Aquino administration has also contributed to growth," McCullough said.

Low interest rates likewise offer good debt financing opportunities for real estate sector, he said. "We've seen continuously low vacancy rates, as there is a strong take up within central business districts (CBDs). Makati continues to attract more institutional investors due to relatively high yields at eight to 10 percent and there has been an additional supply of 340,000 square meters of space introduced this year, mainly in Bonifacio Global City," McCullough said.

The middle class' higher purchasing power also has sustained the demand for subdivisions, townhouses and condominiums, he said. Melo Porciuncula, head of capital markets and investments at KMC MAG Group, said the Philippine market is now prime for investment across all segments from development to acquisition. "The office market offers institutional investors the opportunities to increase cash flow and diversify portfolio. The residential and commercial spaces, meanwhile, offer retail investors alternatives for medium- to longer-term investing," Porciuncula added.