BPO companies now prefer provinces over Metro Manila

KMC Savills, a property services firm, said business process outsourcing (BPO) companies in the Philippines are increasingly opting to locate their offices in the provinces rather than in Metro Manila.

According to Frederick Rara, KMC Savills' research and consultancy senior manager, the decline in the vacancy rate of office spaces in Cebu, Clark, and Iloilo is a result of BPO companies moving out of the National Capital Region (NCR). Iloilo alone has a vacancy rate of only 5%, which is significantly lower than Metro Manila's vacancy rate of around 20%.

Rara also noted that KMC Savills does not expect occupancy rates to return above 85% until 2025, even with the recovery of net absorption in Metro Manila office spaces. This is due to the increasing number of BPO companies choosing to locate in the provinces.

He added that while rental rates in Metro Manila office spaces are dropping to preserve occupancies, rental rates in the provinces are moving towards PHP500 to PHP600 per square meter (sqm), which is nearing the rates of office space in Ortigas and Alabang.

The Information Technology and Business Process Association of the Philippines (IBPAP) has previously stated that the industry is aiming for 54% of its growth to be sourced outside NCR.

The ITBPO sector is targeting USD59 billion in revenues and plans to employ 2.5 million Filipinos by 2028. Rara also pointed out that the industry will overtake overseas Filipinos' remittances in this decade and will continue to be the growth driver of the country's property sector and the whole economy.

KMC Savills' report for the fourth quarter of 2022 also highlighted that the Makati central business district (CBD) and Ortigas Center are still at risk if office demand from the BPO sector loses steam in favor of provincial markets, although the top submarkets may possibly avert a prolonged office oversupply. Overall, KMC Savills is bullish on the provincial markets and believes that BPO companies will continue to choose these areas for their offices in the coming years.