Despite ban on new ecozones, BPO take-up seen to drive office demand in Metro Manila

MANILA, Philippines — Business process outsourcing (BPO) office space take-up is expected to reach over 400,000 square meters (sqm) annually for this year and next despite a ban on new economic zones in Metro Manila, real estate consultancy Santos Knight Frank (SKF) said.

As Philippine Economic Zone Authority (PEZA) – accredited space becomes limited after next year, SKF said there may be slight decline for demand for office space in Metro Manila.

Morgan McGilvray, senior director for occupier services and commercial agency at SKF, said BPO office space take-up is expected to remain strong even with the implementation of Administrative Order 18 which imposed a moratorium on processing of applications for new economic zones in Metro Manila to encourage development in the countryside.

“PEZA demand has still been strong this year. It’s just been overshadowed by POGO (Philippine offshore gaming operator) sometimes because the POGO is taking up so much space. But we are still going to see PEZA take-up or BPO take-up as a whole, most of which is PEZA, probably over 400,000 sqm which is quite good. And that can last through 2020 as well,” he said.

He said after 2020, there may be some impact on demand for office space by BPO firms in Metro Manila as supply of PEZA-accredited space becomes tight.

“There would probably be less demand in Metro Manila because there aren’t as many PEZA-accredited buildings. So, some of the same companies here will continue to lease, it just won’t be PEZA,” he said.

In the past, he said BPO office space take-up would reach 300,000 sqm up to 700,000 sqm in a year.

There are 22 applications for ecozone developments in Metro Manila awaiting presidential proclamation not covered by the ban. Once approved, these would provide additional office supply.

Earlier, the Information Technology and Business Process Association of the Philippine called on government to hasten proclamation of pending ecozone applications in Metro Manila with the Office of the President, as the remaining PEZA – accredited office space would not be enough for the forecasted 450,000-sqm annual demand for new space of the  sector.

McGilvray said some BPO companies could go out and consider setting up locations in provinces after the PEZA-accredited spaces run out in Manila.

“I don’t know yet if it will be one-to-one where the companies will lease exactly as much space outside of Metro Manila as they were planning to in Metro Manila. We don’t know yet. The good news is the provinces are now developing these high quality BPO buildings that tenants want to be in and that wasn’t always true in the provinces,” he said.

Outside Metro Manila, he said many clients are interested to set up locations in so-called Next Wave Cities such as Ilolo, Clark, Bacolod, Cagayan de Oro and Davao.

SKF estimates at least 360,000 sqm of new office supply in these five cities which would provide choices for BPO companies looking at regional expansion.

With property giants like Megaworld Corp., Robinson’s Land Corp. and Ayala Land Inc. building office developments in the Next Wave Cities, McGilvray said there are more opportunities for firms in Metro Manila to go out to provinces.

“So, that is encouraging in the sense if we have to move demand to provinces, that’s fine. At least, we are going to have continued take-up for the Philippines,” he said.

“BPOs help create an ecosystem of growth, and that is especially magnified in the provinces where the industry spurs not only real estate expansion, but also economic development. Encouraging decentralization will accelerate urban development in the region and uplift more households into the middle class,” SKF chairman and chief executive officer Rick Santos said.