Provincial cities next markets for BPO

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Baguio City, Davao City, and Dumaguete City are among the cities considered the “next 10 cities” for the Business Process Outsourcing (BPO) sector, driven by the current administration’s thrust for regional growth, according to a report by real estate consultancy firm Pinnacle.

In a report by Pinnacle Real Estate Consulting Services, Inc. on Monday, it noted that the robust demand for office space from the BPO industry is changing the landscape of a number of cities.

With large amount of office space becoming available in Metro Manila in the coming years, BPO companies may look for other locations in the future in order to move away from competition for resources and skilled workers, the report explained.

“Over one million square meters of office are projected to open in the next two years in major business districts in Metro Manila, breaching the seven million square meter-mark,” Pinnacle said.

The report noted that the development happening in provincial areas is “typically positioned as counter-balance to decongest mono-centric development.”

Aside from the booming BPO market in Metro Manila, Pinnacle noted that the BPO sector is also “heavily” driving the demand for office spaces in Cebu.

“There is a total of approximately 700,000 square meters of Grade A office spaces [Cebu]. Average rents are slightly higher than Php 500 per sqm per month, which is substantially lower than the Makati and BGC business districts. Vacancy of office space is likewise a low 5 percent, keeping the rents stable,” Pinnacle said.
Other than Cebu, the report named other provincial markets that it dubbed the “Next 10 Cities” that will attract BPO companies.

Baguio City, Davao City, Dumaguete City, Iloilo City, Lipa City, Metro Bulacan (Baliuag, Calumpit, Malolos City, Marilao and Meycauayan City), Metro Cavite (Bacoor City, Dasmariñas City and Imus City), Metro Laguna (Calamba City, Los Baños and Sta. Rosa City), Metro Naga (Naga City and Pili), and Metro Rizal (Antipolo City, Cainta and Taytay) were identified as future hotspots for BPOs.

The factors attracting BPO companies to these markets are healthy demographics and relatively developed infrastructure in these cities, Pinnacle said.

In a separate report by CBRE Philippines, it noted that BPO companies look for locations outside of the Metro where they can tap into the labor pool.

According to the real estate advisor, Metro Manila would be the priority location for these outsourcing companies, however more than 70 percent of BPO jobs today area based in Metro Manila, meaning about 62 percent of the Metro Manila talent pool has already been absorbed.

“These companies are locating outside Metro Manila where there is more untapped labor and where they have less competition and limited poaching,” CBRE said

Pinnacle noted that expected attention on provincial markets is also influenced by the current administration’s thrust for regional development.

“President Duterte is committed to disperse spending and development in the provinces,” the report said.
Apart from office spaces, Pinnacle noted that the next ten cities these markets would also probably see developments in other real estate sectors such as residential, commercial-retail and hotel.

“With the push of President Duterte to disperse spending and growth, development of these “Next 10 Markets” is likely to happen sooner,” the report concluded.

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