Real estate industry rides on boom in BPO sector

Vacancy rates on the decline

from Philippine Daily Inquirer

By Abigail L. Ho

The real estate sector continues to be one of the biggest beneficiaries of the boom in the business process outsourcing sector, as vacancy rates drop and the need to construct more office, and even residential, spaces increases.

In an interview with the Inquirer, David Young, managing director of real estate services provider Colliers International in the Philippines, said the BPO sector’s aim to add another 500,000 to its employee base over the next five years translated to the need to build close to 3 million square meters of office space.

“This industry, on its own, can fill up all office space in Ortigas. Real estate developers have a lot to thank this industry for, as it has spurred not just commercial development but residential development as well. BPO employees are either getting their own or leasing condo units,” he said.

He said the surge in the number of BPO employees, many of whom had to work outside their hometowns, had given rise to the establishment of condominium buildings with studio and one-bedroom units that are well suited to these individuals.

Mall developers have also cashed in on the BPO trend, he said, by constructing buildings with more floors and leasing the top stories to BPO companies.

Developers of office spaces reaped the most benefit from the surge in BPO activities, as opportunities opened for them to move into suburban areas and the province, away from the already crowded Makati and Ortigas business districts, he said.

“Makati and Ortigas are not really suited for BPO operations. Also, the vacancy rate in Makati is down to just 4 percent and in Ortigas to only 6 percent, with no more room to grow. The movement is toward suburban areas like Eastwood and the (University of the Philippines-Ayala Land TechnoHub), as well as to the Fort (in Taguig),” he said.

Rates have also started to pick up. He related that office space in Makati would cost around P750 per square meter for prime buildings such as 6750, RCBC and Ayala Tower One. The rate is P100 per square meter cheaper in Ortigas at P650 for buildings such as Wynsum and Orient Square. In Alabang, Eastwood, and UP, lease rates range from P400 to P500 a square meter.

As vacancies go down and rates go up, Gregory Kittelson, chairman of real estate brokerage firm KMC MAG Group, advised BPO firms, particularly start-ups and small and medium operators, to try the serviced offices approach.

Managing Director and Business Consultant of KMC MAG GROUP

Chairman of KMC MAG GROUP

“Developers are building large offices to be leased to large companies, but some companies are also looking for small spaces, especially when they’re starting out,” he said in a separate interview. “There’s a massive need for serviced offices that can serve as incubation spaces for start-ups or as temporary offices for expanding small and medium BPO firms. These serviced offices can cater to operations with 5-100 seats.”

He said KMC MAG Group last year assisted more than 100 companies in setting up shop here using the serviced offices approach. Around 50-60 percent of these companies were from the BPO sector.

“There are not enough temporary office spaces now. All we have are big offices. This is an opportunity for developers as well,” he said.

KMC MAG GROUP Commercial Real Estate & Property Broker

KMC MAG GROUP Commercial Real Estate & Property Broker

KMC MAG Group is the fastest growing commercial and residential real estate brokerage company in the Philippines.  Founded and managed by two Americans and a Philippine corporate lawyer, KMC provides brokerage services for commercial office space, serviced office, seat rentals, and residential properties.

KMC also operates its own serviced offices, incubation and seat leasing facilities on Ayala Ave in Makati and Fort Bonifacio

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Commerce Flows into Subic, Philippines

By: Eden Lorren Pabalan

Subic Bay, Philippines is bordered on the east by Zambales mountains and the South China Sea on the west. A former US Naval base, Subic is now a freeport zone and a gateway for the transportation of goods. And, while it’s topography is more of a jungle paradise, technology, infrastructure, and industry have changed the landscape and the standard of living in the community. Real estate and BPO companies doing business in the Philippines are rising fast in the area and investors are now looking at Subic as a top BPO destination in the country.

The newly completed SCTEx (Subic Clark Tarlac Expressway) a P36 billion peso expressway is a leading avenue through Olongapo, Tarlac and bridges the three cities of Tarlac, Subic, and Clark. Access from the Metro Manila area through the superhighway is convenient, safe and predictable.

Investments in office space and residential infrastructure are growing in Subic. Subic Bay Gateway Park is a commercial hub  home to a number of Korean and Taiwanese companies doing business in the Philippines. It offers 300 hectares of prime industrial land.

Ayala Land Inc., the Philippine’s biggest real estate developer has signed a 50-year lease with the government to develop a 7.5 hectare  commercial hub along Rizal Highway, within the Subic Bay Freeport and are in the steps of final completion for Anvaya Cove, a luxury resort area. An estimated P3 billion pesos are on the line for this investment venture. The proposed plan for the vicinity is to establish a shopping mall, hotel, and a Business Process Outsourcing building.

PLDT Corporation is also eyeing Subic as a BPO hotspot in the Philippines. The company has already inked a 17 hectare development project with the Subic Bay Metropolitan Authority, an  ICT hub that will bring the freeport to the frontlines of ICT infrastructure development in the country. Other call center companies are already open for business in the area, such as US-based Sutherland Call Center and Teletech.

According to Outsourcing Consultant Gregory Kittelson of Kittelson and Carpo Consulting, a Makati-based firm, “We are now seeing more interest from foreign investors in Subic.  Every year,  more and more of our clients are setting up operations in Subic and getting involved in outsourcing, shipping, and the importation and exportation of goods and services in the area.”

The growing BPO business in Central Luzon is continually creating job opportunities for Filipinos. Subic will soon be known not only as a beach and diving paradise, but also as a busy and prosperous economic zone in the Philippines.

Global BPO: Philippines vs. Malaysia

By: Kathleen Yu

Malaysia and the Philippines are two of the largest outsourcing destinations in Southeast Asia, both countries competing to achieve higher market shares in the global Business Process Outsourcing “BPO” industry.

Hailed as the “2nd top Business Process Outsourcing (BPO) Destination in the Asia Pacific” by global market intelligence provider IDC, the Philippine BPO sector has boasted an annual growth rate of 46% since 2006. Three key Philippine cities were recently awarded slots on the “Top Ten Asian cities of the future” by UK-based periodical Financial Times, putting Quezon City at 7th, Cebu at 8th, and Davao at 10th place.

Convergys Philippines is the largest BPO company in the country, employing over 22,000 professionals in the local outsourcing industry. Philippine BPO revenues were up by 19% in 2009, totaling to $7.2 billion. The Philippines is considered the third largest BPO destination in the world, dominating 15% of global markets.

According to BPO Consultant Gregory Kittelson of Makati-based firm Kittelson and Carpo Consulting, “With low operational costs and a large number of government-issued tax incentives, the Philippines is an ideal investment destination for foreign multinationals and other start-up companies.  Foreign BPOs prefer setting up operations in the Philippines because the Philippine workforce is exceptionally skilled, and boasts a large number of English-speaking professionals. Filipinos are also known for their hospitality and friendly manner, which has earned the country an enviable reputation as one of the prime outsourcing destinations in the world.”

Located south of the Philippines, Malaysia is another prime outsourcing location in the Southeast Asian region. The country is home to a number of international BPO companies, like Scicom (MSC) Bhd, SnT Global Sdn Bhd, and Vsource Asia Bhd.Malaysia offers unique advantages in government support, human capital, infrastructure, and domain expertise, which makes it an ideal destination for start-up BPOs.

Contact centers and BPO companies in Malaysia are growing in number, mainly because of the Malaysian economy’s resiliency in facing the global economic crisis. The inflation rate in Malaysia is 2.4%, lower than most Southeast Asian countries.

Bolstered by a change in political leadership, Philippine BPO is expected to register a 30-40% profit increase for the first quarter of 2010. The Malaysian economy, on the other hand, will continue to feel the effects of the 2009 Global Economic Recession, which has already caused a 2% slump in the country’s GDP for the previous year alone. Although both countries are ideal outsourcing destinations, the stability of the Philippine economy puts it at a sharp advantage over less secure Malaysian markets. Whether similar trends will prevail in the future remains to be seen.

Global BPO: Philippines vs. India

By: Kathleen Yu

Business Process Outsourcing (BPO) is one of the fastest growing industries in the world today. As emerging leaders in the global BPO market, both India and the Philippines are considered prime outsourcing destinations for multinational companies all over the world. India dominates with 37% of the global offshoring market, Canada at 27% and the Philippines in third at 15%. However, the Philippines, which boasted a 40-50% industry growth in the last three years, is now on the fast track to overtaking India as a global BPO provider.

The Indian BPO industry averages an annual revenue of $11 billion dollars, about 1% of the country’s total GDP. The government estimates that at its current growth rate, the outsourcing industry could reach $50 billion by 2012. However, there is still much to be desired in linking the country’s BPO industry to its local education system and skilled English speaking workers are not always available. This increases company spending on in-house training for employees and led to the skills shortage currently affecting India’s BPO industry. Only about 700,000 professionals are employed in the country’s outsourcing sector.

In sharp contrast, the Philippines boasts one of the largest English speaking workforces in the world today. Most of the country’s professionals are fluent in English, the lingua franca of the global outsourcing industry. The country also has an average literacy rate of 93%, one of the largest in the world. Filipinos have neutral  American accents, giving them the advantage where verbal communication is concerned.  The advantage has led to a total average revenue of $7.5 billion for the BPO industry in 2009 alone. Profits are still expected to soar; experts estimate revenues of up to $10-12 billion by 2010. Manila, Philippines was recently named a top BPO location in Southeast Asia is second only to Bangalore, India. Over 900,000 professionals are currently employed in the local BPO industry and the number is expected to increase in the coming years.

According to Business Consultant Gregory Kittelson of Kittelson and Carpo Consulting, “The Philippine BPO industry is growing by as much as 46% annually and may soon overtake India as the industry leader. In fact, we have started to see an influx of BPOs and call centers from India registering businesses in the Philippines and setting up operations here.  The opposite is not the case.”

BPOs’ new requirement: Managerial talent

“We need management talent for us to continue to grow,” Danilo L. Reyes, Sitel Philippines president, said yesterday in a forum at the Ateneo Professional Schools in Makati. “There is a big need as far as management training is concerned … Some of the next wave cities are not growing as fast as they should because of the lack of management training,” Mr. Reyes said.

About 10,000 of the nearly 400,000 employed in the BPO industry are managers, Mr. Reyes said.

If the BPO sector meets growth targets amid the crisis, partnership between the industry and the academe will be more vital to ensure that top-level positions are filled, he said.

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Business Process Outsourcing

Gov’t anti-piracy battle focuses on BPOs

MAKATI CITY, Philippines–The thriving business process outsourcing (BPO) industry is the latest target of the Pilipinas Anti-Piracy Team (PAPT).

The PAPT is composed of elements from the National Bureau of Investigation (NBI), Philippine National Police (PNP), the Optical Media Board (OMB) and several other organizations related to intellectual property rights (IPR) and copyright protection.

The expanded campaign uses the tagline “Don’t Wait Until It’s Too Late” to warn companies and individuals of the perils of copyright infringement.

In a press conference, OMB chairman Edu Manzano said computer and software sales increased as BPOs expand their business. However, Manzano said the group will keep a watchful eye on BPO firms to make sure they adhere to IPR laws.

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BPAP sizes up China as an outsourcing market

MANILA, Philippines–Is China really worth looking as a business process outsourcing (BPO) market? Could be but not quite yet, according to the head of a local industry group.

The Philippine BPO industry has largely catered to US customers and most of the major players here have been spun out from American companies.

Oscar Sanez, head of the Business Process Association of the Philippines (BPAP), believes the industry remains “Western-centric.”

“There is a lot more opportunity coming from these existing markets,” Sanez said during an e-Services briefing last week.

The BPAP chief, however, does not completely discount China as a market for outsourced services. China itself is looking to become an outsourcing destination, investing in infrastructure necessary for BPO operations.

“From our understanding, the BPO market in China is already [there] but it addresses largely the domestic market,” Sanez said. “But there could be room for support services that require English capability especially as more companies there become global.”

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Gov’t fears 60,000 IT job losses

Intel confirms Philippine plant closure. The government is giving counseling and retraining to “about 60,000 workers that could be affected nationwide” in the electronics industry as factories close down or cut workforces amid a deepening global recession, the secretary of labor said Thursday.

The labor department is “getting daily notices now not only of retrenchments but also of reduction of work shifts, reduction of working hours and compression of the workweek,” Secretary Marianito Roque said.

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US firm opens first BPO branch in Makati

Colorado-based business process outsourcing (BPO) firm StarTek inaugurated on Monday its Makati facility, the first outside North America, executives said.

Larry Jones, StarTek president and CEO, told reporters that the Philippines remains a leading and competitive BPO destination and it is possible that StarTek would further expand operations in the country in the near future.

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EU trade mission eyes BPO firms

MANILA, Philippines–Team Europe is rounding up business process outsourcing (BPO) companies for a trade mission planned for second half of the year.

Launched last week, Team Europe is a task force whose goal is to promote the Philippines as a BPO destination. It is spearheaded by the European and British chambers of commerce in the country.

Last year, the European BPO market overtook the US in terms of overall contract value, according to Stephanie Weber, business development manager for the European IT Service Center (EITSC), who is also heading Team Europe.

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