Cebu Office Market Selected As Best Destination For BPO Firms?

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DEMAND from business process outsourcing (BPO) firms will encourage robust growth in Cebu’s office property market, according to a report released Tuesday, by Colliers International Philippines, the latest in a series of analysts to highlight the positive prospects for real estate development in the Philippines’ second city.

In its report, Colliers pointed out that Cebu is now the largest outsourcing destination outside of Metro Manila.

“Cebu remains a preferred outsourcing destination because of the presence of adequate infrastructure, redundant internet connection, ample number of skilled college graduates, and a high level of urbanization driven by the development of several township and public infrastructure projects,” Colliers said.

Colliers noted that the Cebu office stock jumped by 14 percent in the first nine months of the year to around 875,000 square meters from 770,000 square meters in the same period last year.

This is a result of developers anticipating a spike in demand for office space from business process outsourcing (BPO) firms, Colliers said.

With the new office stock entering the market, vacancy rates in the period rose to 9.9 percent from the 4.6 percent in the same period last year.

The real estate services firm said that vacancies would continue to rise in the next 12 months, with the completion of new buildings.

From 2017 to 2019, an additional 300,000 square meters of office space is expected to go online, according to Colliers.

This will be located in upcoming office projects such as SM City Cebu Tower, Philam Life Center Cebu, Central Bloc BPO Towers 1 and 2, GT Time Square, and Cebu Exchange.

“The additional office space that will go online in 2017 is projected to be absorbed in the next 6-12 months as current locators expand operations while new companies arrive to establish footprint in the city,” the report said.

Colliers noted that large Metro Manila-based BPOs are establishing operations in Cebu as back-up offices.

“Colliers sees Cebu comprising 15 percent to 20 percent of the country’s BPO market as its outsourcing workforce is projected to rise between 5 percent and 10 percent annually over the next five years,” the report said.

At present, Metro Manila still accounts for the bulk or 75 percent of the outsourcing activities in the country, while Cebu only comprises of a tenth of the sector, as it employs about 130,000 workers.

The report cited data from global outsourcing research firm Tholons, which ranked Cebu as the seventh best outsourcing destination in the world.

This is driven by the quality of workforce and tertiary education; relatively cheaper business cost; infrastructure network; and quality of life.

The growth of Cebu’s BPO sector is further supported by the improving quality of infrastructure in the province, according to Colliers.

“Aside from the Mactan-Cebu international airport expansion, other crucial infrastructure projects due to be completed over the next three to five years are theBus Rapid Transit system and Cebu-Cordova bridge,” the report said.

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Furthermore, the real estate services firm said the growth of the Cebu BPO sector will be supported by the more than 25,000 college graduates it produces every year.

This young talent pool is also seen to cater to the higher value knowledge process outsourcing (KPO) sector.

“Colliers believes that Cebu is still the most practical choice for KPO firms looking for viable locations outside of Metro Manila given its diverse talent pool,” the report concluded.

Consensus view

The views expressed by Colliers echoed those offered earlier by a number of other real estate analysts, including real estate services firm CBRE Philippines, Pinnacle real estate services and consulting, and online property site Lamudi Philippines.

“The increase in office building projects is an indication of confidence for developers in Cebu’s economy,” CBRE said in a report earlier this year.

“The property market in Cebu is supported by the province’s sound economic status and the cheap skilled labor and property rents are also seen to bolster investments in the area, resulting in higher demand for office properties,” CBRE said.

“Further expansion of outsourcing and top local firms are anticipated to occupy the remaining available office stock,” it added.

Pinnacle is also bullish on the Cebu market, opening a new office in the city just last month.

Based on our latest market insight report, Metro Cebu, led by Cebu City, is the undisputed secondary market of the Philippines,” the company said in a statement.

Pinnacle explained that costs of living and prices in Cebu are comparable to Metro Manila, and that Cebu is a cultural and education center for the Visayas and Mindanao.

“The Cebu market is practically developed, and some would even say bursting at the seams,” Pinnacle added. “We don’t want to ‘miss the action,’ and would like to set up a regional platform that could serve our existing and future clients in Visayas and Mindanao.

Likewise, online property services firm Lamudi Philippines also opened a Cebu office this year.

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“It is very important to reach out to the Cebu and Davao market because they, next to Manila, are drivers of the Filipino economy and of the Pinoy real estate industry in particular. Without the offering of the brokers of Cebu and Davao, Lamudi would not be able to offer every Filipino their dream house all across the country. The Cebu and Davao market are already very important and their importance is only expected to grow further,” Lamudi said.

In March, Lamudi picked Cebu city as the top livable city in their Asian portfolio, describing it as an “economic powerhouse.”


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