Provincial Areas Attract More BPO Organizations Over Metro Manila

Philippines: The recent trend among business process outsourcing (BPO) firms indicates a growing preference for provincial regions over Metro Manila as future office locations, reports KMC Savills, a leading property services company.

During a recent discussion held in Taguig City, Frederick Rara, KMC Savills' Research, and Consultancy Senior Manager, noted a significant shift in BPO operations moving away from the National Capital Region (NCR). This trend is particularly evident through reduced office space in Cebu, Clark, and Iloilo regions.

Iloilo reports a mere 5 percent office space vacancy rate, starkly contrasting with Metro Manila's considerably higher rate of 20 percent.

"Provincial markets present significant potential for growth, in contrast to the somewhat muted prospects in Metro Manila," stated Rara.

Even with some improvement in net absorption of office spaces in Metro Manila, KMC Savills anticipates that the occupancy rate will likely be at most 85 percent before 2025.

"The possibility of successfully managing the surplus of office spaces may be observed in prime submarkets. However, there could be looming risks in areas such as Makati's central business district (CBD) and Ortigas Center, especially if the BPO sector shifts its focus towards the provinces," stated KMC Savills in their Q4 2022 report.

Despite the drop in Metro Manila office rentals to maintain occupancy, Rara noted that provincial rental rates are increasing from PHP500 to PHP600 per square meter (sqm), closely aligning with rates in Ortigas and Alabang. Over the past ten years, prices in these provincial areas have more than doubled.

Earlier, the Information Technology and Business Process Association of the Philippines (IBPAP) projected that 54 percent of the industry's growth would come from regions outside NCR.

The IT-BPO sector is targeting revenues of USD59 billion and aims to employ 2.5 million Filipinos by 2028.

Rara concluded that the industry is set to surpass remittances from Filipinos abroad within this decade. It will continue to be a primary catalyst for growth in the property sector and the nation's economy.