LANDLORDS should feel secure at least in the next few years, property analysts said, as the robust business process outsourcing (BPO) industry keeps the realty sector and the whole economy afloat.
Claro Cordero Jr., head of research and consultancy at global property services firm Jones Lang Lasalle, projected that offshoring and outsourcing firms are expected to fully absorb the huge amount of newly opened office space in the market in just over three years.
Cordero noted that in Metro Manila alone, around 1.8 million square meters of new office space is expected to enter the market in 2016 and 2017, while more than 106,000 residential condominium units are scheduled for completion over the next five years.
“Despite a difficult external environment, the local economy managed to grow due to strong domestic demand led by the growth of public construction and household consumption,” Cordero said. “Likewise, the services sector continues to show strong growth, led by the robust performance of the offshoring & outsourcing sector.”
He said this had positive impact on the local property sector, as gross take-up of office space reached new highs, with O&O companies expanding not only in Metro Manila, but also in far-flung urban centers like Cebu in the Visayan region and Davao in Mindanao.
Cordero suggested that the offshoring and outsourcing foreign companies in the Philippines could even cover for the setbacks brought about by external factors like the possible displacement of Filipino workers in the troubled Middle East.
Cordero said despite a slower full-year Gross Domestic Product growth of 5.8 percent in 2015, the Philippine economy was still one of the fastest in Asia.
“The potential slowdown in the residential property market may be due to the possible slowdown in the growth of remittances, caused by the potential displacement of the overseas Filipinos due to the weakening economies in oil-rich countries,” Cordero said.
“This slowdown, however, is likely if the slowdown in the growth of remittances will persist in the next few quarters.”
On the supply side, Cordero said the entry of sizeable commercial and residential spaces, specifically in the mid-segment, is expected to clip rent increases.
But then Cordero stressed that the overall growth outlook for the Philippine property sector remains promising, on the back of continued expansion of offshoring and outsourcing firms.
“The employment generated by this growth should mitigate the softening of growth in remittances, while the increase in income levels is expected to support retail consumption and buoy the demand for residential condominium developments going forward,” Cordero explained.
Similarly, Michael McCullough, managing director of KMC Mag Group, the Philippine associate of global property advisor Savills, said the office sector, particularly the landlords, would be the happiest this year, as the sector sustains the momentum it gained last year, driven by the outsourcing industry.
McCullough said a record-breaking take-up of Premium and Grade A office spaces in Metro Manila was seen in the third quarter of 2015, reaching 231,412 square meters.
“Metro Manila’s office market shows no signs of slowing down,” he noted. “As in the previous years, this demand is mainly driven by the ferocious take-up of the outsourcing industry and this is expected to continue well into 2016.”
McCullough said the landlord’s market would remain in 2016, given the unwavering vigor of the BPO sector.
Similarly, global commercial property firm Cushman and Wakefield described Manila’s realty market in a report as “still in the fast lane,” driven by the robust BPO sector, on the back of low inflation and sustained policy accommodation.
United States-based Colliers International had projected that BPOs in the Philippines would generate revenues of $25 billion and 1.3 million jobs this year.
In 2015, the BPO sector recorded close to $22 billion in revenues and 1.1 million employees, the firm said.
The firm’s executive director for office services, Jie Espinosa said two-thirds of Colliers International’s clients for office spaces in 2015 were from the BPO sector.
“The BPO sector will continue to propel the Philippines’ economy as one of Asia’s strongest performers; at the same time, accelerated implementation of public-private partnership projects and spending related to the May 2016 presidential election will lift growth,” Cushman and Wakefield concluded.