BPO growth to sustain amid US protectionism

CEBU, Philippines - Demand for office space by the business process outsourcing (BPO) industry is expected to continue to grow amid worries over the protectionist policy of US President Donald Trump, Pinnacle Real Estate Consulting Services said.

In its market insight for the first quarter of 2017, Pinnacle said: "Ultimately, business decision to outsource service may be more efficient as compared to outsourcing manufacturing that may face additional tax backlash from the US Federal Government."

"The consensus is that when US companies outsource the service component, Philippines remains to be on top of their list," the firm said.

Pinnacle's market commentary comes at a time when the BPO sector in Cebu, currently the world's seventh most competitive, is on track on increasing its revenues and employment by 2020.

At the recently held Transformation Summit in Cebu City attended by players in the IT-BPO industry, the Cebu Economic and Business Unit (CEBU) announced its goal to hit 200,000 workers employed in the industry in Cebu City by 2019 to 2020.

It also aims to a monthly revenue of P20 billion by that time.

The number of IT-BPO firms operating in Cebu is also seen to grow to 606 from the current 329.

The number has since grown from only four companies operating way back in 2000, when BPO employment only stood at 1,200.

The total gross floor area occupied by registered IT-BPO companies in Cebu City reached 927,513 square meters as of end 2016.

The industry employed a total of 130,260 workers as of 2016 with P3.8 billion in salaries per month.

Cebu is one of the Philippines' growing central business districts (CBDs) and is host to various BPO companies with its low rental rates, consistently growing economy and large pool of talent.

Cebu City now ranks 7th in the 2016 Tholons' Top 100 Outsourcing Destinations report, a point higher from Top 8 in 2015.

Cebu's real estate sector is benefiting from the investors' positive sentiment, as local players implement their massive capital expenditure plans to cover new launches and ongoing developments in the city.

The Cebu office market follows the national trend where the BPO industry heavily drives the market.

At present, there are more than 120,000 employees in the Cebu BPO industry or approximately 10 percent of the total BPO employees in the country.

The Philippine BPO industry grew by an annual average of 20 percent in the past decade.

In the next five years, industry experts are forecasting a growth range between 12 percent to 18 percent. World-wise, the projected BPO growth for the coming years is a steady six percent.

By the end of 2016, close to 900,000 square meters of Grade A office spaces were expected to comprise the office market in Metro Cebu. This is approximately 50 percent growth in the past four years, or an average annual growth of 12 percent.

"Four years before that, from 2009-2013, the average growth is 15 percent. While the growth is slightly slower, it reflects the maturing market and the Philippine office market in general," Pinnacle had said. (FREEMAN)