Metro Manila (CNN Philippines) — The property boom has shifted: “Office is the new residential,” real estate consultant CBRE Philippines, Inc. said.
Business process outsourcing (BPO) is leading the way, and the industry is fast expanding outside the major central business districts (CBD).
Premium office spaces are seeing record sales, and the value of the properties are rising significantly by the year, CBRE Chairman Rick Santos said in a press conference on Thursday.
He cited Ayala Land, Inc.’s (ALI) first office project in Bonifacio Global City (BGC) in Taguig. The High Street South development sold 95% of its units in the first tower just a year after its launch. It also sold 93% of its units in the second tower within the same time frame.
ALI’s Park Triangle Plaza development in Makati also set record sales, with 82% of all units sold within the first quarter, he added.
Today, the selling price for office spaces average P200,000 per square meter, jumping nearly a fifth from 2010 levels.
Despite the high costs, vacancy rates have been low. As of the first quarter, only 3% of units in Makati and 2.7% of units in BGC were vacant, CBRE data showed. Morgan McGilvray, CBRE director, said a 90% occupancy rate is typically considered healthy.
Office spaces are being snapped up, mostly by multinational companies,often from the BPO and manufacturing industries, Santos said.
Companies often lease office spaces for an average of five years — much longer than the one- to two-year leases in residential spaces.
This is promising for property developers, he explained, as they receive a recurring income for the long-term.
Looking for the next CBD
According to CBRE, the building spree isn’t just limited to traditional CBDs like Makati and Taguig.
Businesses are renting out office spaces in Quezon City, Pasay, Muntinlupa and the bay area of Manila.
Outside the capital, it said development is expanding to Sta. Rosa in Laguna and Clark in Pampanga — the latter boosted by its nearby airport and expressway.
In the Visayas, Bacolod and Iloilo are catching up to Cebu. Cagayan de Oro and Zamboanga, meanwhile, are up-and-coming areas of Mindanao, after Davao.
Santos said this spread should speed up further once Rodrigo Duterte assumes the presidency in July. Duterte ran on a platform of decentralization, fighting for the development of provinces and the decongestion of major city centers.
“[The expansion] is based somewhat on cheaper rents, but it’s also based upon the need for additional supply, additional labor, etc. Everyone’s looking for that next new district, and people are looking to expand the dots on the map,” he said.
The strength of the BPO industry is propping up the property boom. And the industry is shaping real estate like no other has done before.
McGilvray said townships were being built around BPO companies. “If it’s a BPO office tower, then you get the supporting retail where the agents can go have lunch, shop after work, etc.
“Then you get the residential areas so they can live closer to work. Then, finally, you get the hotels so the visiting managers or clients can have somewhere close to stay when they come visit the Philippines.”
An array of products and services are also catering to the fast-growing BPO segment, McGilvray said. Fast food restaurants, convenience stores, even gyms are beginning to offer 24-hour operations to attract BPO agents, whatever their shift. McGilvray dubbed it a BPO “ecosystem.”
CBRE was optimistic the momentum of the BPO industry would not taper off just yet.
BPO investors typically consider India, Malaysia, China, Mexico and Poland as alternative destinations, McGilvray said. But the Philippines still edges them out because of its prevalent use of English, cheap operating costs and “five-star customer orientation.”
With the country still the top destination for BPOs, CBRE said the local property market would likely go up and up.