Demand for BPO space seen rising

DEMAND for business process outsourcing (BPO) office space in Metro Manila will rise this year with prices returning to pre-crisis levels seen two years ago, according to an international property consultant.

David Leechiu, Philippine country head of Jones Lang LaSalle Leechiu, said demand for BPO space may hit 400,000 square meters, up from 293,000 square meters last year.

He said a worst-case scenario would still entail a demand of up to 300,000 square meters.

Metro Manila supply this year would reach about 722,265 square meters, of which 449,996 represented an overhang from last year.

Leechiu said rates in premium Metro Manila locations have declined because of the availability of less expensive spaces. For instance, rates in Makati City now are between 25 percent and 46 percent lower than in 2008.

BPO office space is now priced at about P300,000 per square meter, Leechiu said.

The executive said prices have bottomed out, with rates expected to go up toward the end of this year.

Since most of the “cheaper, but quality” locations in Metro Manila have been occupied, he said BPO players would have no choice but to purchase more expensive space, such as up to 160,000 square meters of premium space along Ayala Avenue.

On Thursday, the Business Processing Association of the Philippines (BPAP) Commission on Information and Communications Technology and the Department of Trade and Industry announced this year’s Top 10 Next Wave Cities for Outsourcing.

Topping the list was Davao, followed by Santa Rosa, Bacolod, Iloilo, Metro Cavite (which includes Bacoor, Dasmariñas and Imus), Lipa, Cagayan de Oro, Malolos, Baguio and Dumaguete.

The cities were chosen based on availability of talent (comprising 40 percent of the total score), infrastructure (30 percent), cost (10 percent) and business environment (20 percent).

Metro Clark has moved up to become an “established IT-BPO location,” joining Metro Manila and Metro Cebu.

“These next wave cities will increase the talent pool and stem salary and rental inflation in ‘first wave’ locations,” Oscar Sañez, BPAP president and chief executive officer, said.

The share of Metro Manila-based BPO activities have decreased to 78 percent last year from 82 percent previously, which Sañez said indicates that the provincial locations are growing. –BEN ARNOLD O.DE VERA Reporter, Manila TImes