By Ma. Elisa P. Osorio (The Philippine Star) Updated August 24, 2009 12:00 AM
MANILA, Philippines - The country’s property sector is expected to post a slight growth this year despite the slowdown of most economies worldwide, international real estate firm CB Richard Ellis said.
“We are optimistic about the prospects of the country. There is a resurgence of expansion as revised capital expenditures of US firms come in,” CBRE chairman Rick Santos told reporters in an interview over the weekend.
According to Santos, the end of the second quarter and the start of the third quarter has been strong for the property sector. He said that the multinational firms continue to come in the country.
Likewise, the strong election spending next year is expected to spur economic activity, Santos said. “Businessmen are confident that President Arroyo will finish her term,” he noted.
The resolution of the US crisis, or at least a confirmation that it has already bottomed out, will set the direction for global corporations in the US to resume their activities and move forward with cost cutting strategies which will inevitably include the outsourcing and offshoring of their operations.
“The need for cost savings in the US accelerates growth for us. Every time we hear bad news in the US it will be good for us,” Santos said.
For the last three years, the property sector has been growing driven by the unprecedented demand generated by the business process outsourcing (BPO) companies.
Last year, the demand for office space went down to 225,000 square meters after peaking at 330,000 square meters in 2007.
Earlier, CBRE said that based on the recorded office take up in 2008, there was an oversupply of newly completed office buildings that are mostly built for BPO companies.
Also, in the beginning of 2008, CBRE expected 700,000 square meters of new office space will be built. By June last year, he said they cut this projection in half as some companies shelved or slowed down their projects.
Santos explained that even if the Philippines is a cheaper alternative in terms of operating costs, the capital crunch in the United States still delayed moves to outsource.
“Outsourcing and offshoring is a cost saving strategy for most global companies based in the US, but moving back-office operations to countries like the Philippines still requires capital expenditure,” Santos explained.
“The financial unraveling in the US has forced most companies to delay expansions or seek more cost efficient locations, at least in the near term,” he added.
Likewise, the lower than expected economic performance of the country has adversely affected the local property development.