Metro Manila may be home to the financial capital of the Philippines but business process outsourcing (BPO) companies prefer to be located elsewhere, according to KMC Savills. Firms in this sector are moving out of the National Capital Region (NCR) to places like Cebu, Clark and Iloilo.
This is a trend that actually began in 2021 when secondary cities started to become more attractive due to cheaper rents and robust labor pools. Even with rental rates in Metro Manila declining, it still hasn’t been enough to keep BPO companies from moving elsewhere.
KMC Savills highlighted the fact that Iloilo has an office vacancy rate of five percent, much lower than Metro Manila’s 20 percent vacancy rate. The story is similar in Cebu, Clark and Davao which all boast Grade A office space, scalable city infrastructure and a secure environment that appeals to BPO companies.
Looking ahead, the Information Technology and Business Process Association of the Philippines noted 54 percent of BPO sector growth is expected to come outside NCR with KMC Savills citing this as another reason it was bearish on the Metro Manila office market.
While the preferred location may be shifting, it doesn’t appear demand from BPO companies will slow down any time soon. The Outsourcing Performance Report from Outsource Accelerator found the Philippines recorded the fifth-highest number of outsourcing inquiries globally in 2022.
Increased BPO demand is expected to be the key driver for the Philippine office sector this year as more global businesses turn to the country for their outsourcing needs.
“We expect more leasing activity this year as a result of greater outsourcing requirements from developed economies, the availability of quality office space and companies adjusting their work setups. While we will continue to see some downsizing of footprints for Philippine headquarter companies, we still expect to see an overall net positive take up in 2023 driven mainly by the BPO sector,” Morgan McGilvray, Senior Director for Occupier Services at Santos Knight Frank, noted.