Office rent seen falling 15% to 20% amid crisis

Published by rudy Date posted on February 20, 2009

THE rent in buildings devoted to business process outsourcing will drop by 15 to 20 percent this year because of too much space for lease and the economic crisis, an analyst said yesterday.

Some 1.9 million square meters of BPO office space are expected to come on stream from now up to 2010, but only 27 percent of that has been committed for lease, according to Benedict Miranda, director for capital markets of Jones Lang LaSalle Leechiu.

“Supply is increasing but demand is declining because BPO firms are losing clients. All these things will lead to lower rental rates,” Miranda told reporters at the sidelines of the 3rd Philippine Housing Finance Forum.

He said many developers started putting up office space to take advantage of the boom in the call center business, but that sector had lost many clients—mostly from the United States—because of the crisis resulting from the mortgage meltdown.

The BPO sector could not take up all the space now available, Miranda said.

The rental rates in Makati hit a high of P1,200 a square meter a month at the height of the outsourcing boom, but they have now gone down to P700 to P800 a square meter.

As a result, developers had stopped building office space devoted to outsourcing, Miranda said.

“There is a pause in the expansion of BPO buildings,” Miranda said.

He said demand for office space would only start rising again in the second half of the year as companies in the West moved outsourcing to the Philippines and elsewhere to get cheaper labor.

But demand for condominiums would remain weak, he said, noting that some 125,000 residential condominium units would come on stream in the next four years to add to the glut.

“It will take some time for the residential sector to recover,” Miranda said.

But he was confident demand for hotel rooms and other properties aimed at the tourism sector would remain strong because of the government’s campaign to promote the Philippines as a top tourist destination. Jenniffer B. Austria, Manila Standard Today

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