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Lehman to affect Cebu

Monday, September 22, 2008 [ ]

CEBU will not be spared from the effects of the collapse of the US investment bank Lehman Brothers as more foreign investors will be doubly wary of pursuing expansion projects.

However, while the investment outlook shifts to a “more conservative and stable” attitude, Cebu will still continue to draw in investors because of its infrastructure that can sustain industries like the business process outsourcing (BPO).

This was the observation made by Colliers International, a multinational property services management company.

Colliers International Philippines develops regular databases that cover all sectors of the Philippine real estate market to identify long-term trends for the benefit of its developer clients.

In a recent press conference, Colliers International Philippines director for investment sales Ieyo de Guzman said that the Lehman Brothers’ bankruptcy will not immediately affect business process outsourcing (BPO) companies in the country, but it may prompt them to “contract or downsize” expansion plans while they focus on maintaining their operations, instead.

Still, several foreigners would want to come in and invest in the BPO industry.

“Lately, though, they would look up at Manila, check their rates and say ‘Forget Manila; we want to go to Cebu.’ This has been the recent trend,” de Guzman said.

She said the province’s main attractions are its labor supply, various universities, cheap operation cost, and abundant supply of support amenities for lifestyle and relaxation.

Additional space

Cebu has an estimated 180,000 square meters of office accommodation in 2007. This year, Colliers projected an additional supply of 160,000 square meters.

“The demand and supply of office space in Cebu is balanced. After completion of spaces, there are immediate take-ups. With the projected additional supply, roughly 40 to 50 percent are already (taken up),” de Guzman said.

The fast take-up is due to competitive rent.

In Manila, de Guzman said, the monthly rent is between P800 and P1,100 per square meter for grade A office space while prime areas are set above P1,100 per square meter per month.

Collier’s Cebu Market Property Overview last year noted that the office lease rate in Cebu City is at an average of P313 square meter per month.

“The lease rates in Cebu have made a plateau level, which is a good thing because it won’t scare BPOs. (But) if Cebu’s rates will catch up with Manila, potential investors will look at emerging competitive sites,” de Guzman said.

But these other sites have yet to be developed into an investor-friendly hub, equipped with “capital-intensive” telecommunication infrastructure as well as colleges and universities.

While a BPO company may request for exclusivity in the area to be able to have exclusive recruitment rights of graduates in the area, Colliers International general manager for Cebu Rodulfo Lafradez said it would take the presence of at least three BPOs for the local government unit and private entities to recoup from their BPO-targeted investments.

“Manila and Cebu are the only ones that can sustain the BPO industry. Cebu is the melting pot of the Visayas and Mindanao,” Lafradez said. (NRC)


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