Friday, April 18, 2008 [ manilatimes.net ]
By Chino S. Leyco, Reporter
Short-term weakness blamed on US woes
DEMAND for business process outsourcing (BPO) office space is seen to ease this year due to the US economic slowdown, CB Richard Ellis (CBRE) Philippines, Inc. said Thursday.
In a briefing, Joey Radovan, CBRE Global Corporate Services head, said demand for BPO office space is unlikely to top last year’s performance of about 300,000 square meters, adding the office sector is assuming a cautious posture as the US economy lingers in a “psychological recession.”
“The challenge is to weigh the pros and cons of new capital expenditure to off-shore their back-office operations or to right-size to be able to ride through the economic slowdown,” Radovan said.
He said third-party outsourcing providers will have to convince prospective clients that out-sourcing is the way to go in surviving the economic slowdown, adding developers are working hard to catch actual demand that will still come out of the US.
If office space take-up slows this year, the demand profile of BPO companies could shift immediately and as early as the first quarter of next year, the CBRE executive said.
“The name of the game is being in the market as early as possible and being able to provide the space at the most competitive rental rate,” he said.
Radovan said there is unlikely to be a property slump in the Philippines as developers have already learned their lessons in 1997.
“They do not build anymore on pure speculation. They build on actual demand. If the additional demand does not come, then they shift gears and hold back any planned construction,” he added.
In the Philippines, the BPO industry as well as the marked increase of tourist arrivals has fueled the growth of the real estate sector over the last three years. Likewise, continued growth in overseas Filipinos worker deployment and the increase in their remittances, which hit an all time high of $14.4 billion last year, have propped up the property sector.
The US is widely feared to be in a recession as a result of a credit crunch and dwindling consumer confidence stemming from defaults in the US sub prime housing market and huge write-downs by big-name lenders that invested in instruments based on these soured loans.
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