A Real Estate Overview from CB Richard Ellis
By Paul Catiang

Based on a presentation by Joey Radovan, Executive Director of the Global Corporate Services and the BPO-Call Center Solutions Group, presented to the American Chamber of Commerce.

Over the past few years, optimism for real estate has steadily risen, specifically in the various business districts in the area, owing to the continued demand from the BPO industry for new and expanding call centers and IT firms. The Makati Central Business District alone reflects this increased demand: from a vacancy rate of 37 percent in 2001, the demand has reduced this to a more comfortable 4.3 percent in the first quarter of 2006. Most expanding BPOs and call centers are in need of contiguous space, a supply that has suddenly become limited, as most currently available space has been reduced to partial floors and units.

This in turn has resulted in a demand for build-to-suit sites, the latest example of which is the 14,440 square-meter Convergys facility on Ayala Avenue, built in the last quarter of 2005. Otherwise, no new supply has become available.

Take-up rates have yet to drop, however, as the take-up and lease rates have grown to an average of PhP 610 per square meter in Prime and Grade-A properties, suggesting an increased confidence and willingness to invest in quality office space. It’s still a modest sum when compared to the office leasing rates in other Asian business districts, with the Makati CBD ranking next to last at US$ 11 per square meter, but optimism remains high as the cumulative office take-up is projected to go as high as 1.5 million square meters by the year 2010.

The BPO industry has boosted real estate sales ever since the outsourcing boom a few years ago, and as the upward trends in call centers and outsourcing continue, so will the demand for real estate. Currently, there are almost 140 call centers in Metro Manila, 43 of which are in Makati. Expansion into the provinces has been the object of much speculation, and with such improved office market conditions, developers will be encouraged to break ground on new projects. Available space is projected to grow from around 27,000 square meters in the second quarter of 2006 to up to 185,000 square meters from 2008 to 2009.

A crunch is to be expected, however, as CB Richard Ellis projects low vacancy levels in all markets in the near and medium terms, with rental rates rising as supply grows short. Provincial expansion, on the other hand, will ease the pressure on the Central Business Districts.

CB Richard Ellis is currently engaged in site-acquisition work on behalf of several BPOs and Call centers in Metro Manila and all over the Philippines.