THE rise of international companies going captive, or setting up global in-house centers instead of outsourcing their operations, is driving third-party business process outsourcing (BPO) firms to look for locations in the provinces, according to a property analyst.
In a recent interview, KMC Savills Inc. associate director Gerold Fernando told The Manila Times that demand for office space in provincial areas was mainly coming from third-party outsourcing firms.
“I think it’s more about the demand from third-party outsourcers,” Fernando said. “It’s getting difficult for them to compete with a lot of in-house companies or these captive companies,” he said.
This trend of international companies going captive was noticeable in the Metro Manila office market in 2016 and is seen to continue this year, he said.
In a media briefing last December, KMC Savills said the captive trend was beginning to emerge in the Bay Area, with international companies such as Visa and Royal Caribbean leasing out their own offices spaces to operate in instead of opting for a third-party outsourcing company.
“A lot of these companies will be going in-house and will be doing it on their own, which is good for the overall economy and for employment,” Fernando said, noting that such a trend was creating employment opportunities.
“As opposed to working for a third party, you will be employed directly by international companies,” he explained.
In addition, this creates competition for talent between third-party outsourcers and captive companies, which is prompting third-party outsourcers to search for talent outside of Metro Manila, he said.
“So they’re chasing labor outside. That’s why we have these third-wave cities,” Fernando said.
KMC Savills managing director Michael McCullough said the rise of the captive trend meant opportunities to property developers.
“That’s really beneficial for developers because third parties are still cost-conscious that they happen to choose lower-quality BPO buildings, maybe in the outskirts or the fringes,” McCullough said. “These captives, they’re going to want higher-quality office space, location. They’re willing to pay a premium.”
The trend among international companies going in-house is mainly driven by maturity in the market, according to Fernando.
“These companies, the captive ones, they’ve been here before, but they were being sourced out to different third-party vendors, so, maturity in the sense that they’re doing it on their own now, moving away from third-party outsourcers. They’re doing it on their own, they’re setting up their own offices,” he added.