Why There is a High Demand for Serviced Offices

The market for a serviced office in Makati and other commercial business districts in Metro Manila continues to grow. At present, there are at least 32 serviced office centers in the metropolis, with sixteen of them located in Makati. These centers offer companies fully furnished offices on a plug-and-play basis with a range of premium quality support facilities and services. But what lies behind the continuing high demand for a Makati serviced office? Here are some of the factors that are fueling the market for serviced offices.

The Booming Business Process Outsourcing (BPO) Sector. 
The Philippines continues to make its mark as a global BPO hub as eight of the country’s cities are now among the top 100 global outsourcing hubs, according to a 2015 report from Tholons International. The most recent entry is Metro Clark, whose ranking rose to 98 from 102 the previous year. Metro Manila, meanwhile, maintained its ranking as the second leading BPO hub, just behind Bangalore, India. Other Philippine cities that made the top 100 included Bacolod, Cebu, Davao, Metro Laguna (Santa Rosa), Iloilo, and Baguio.

The growth of the BPO sector is fueled by the availability of a young workforce that is fluent in English and highly skilled. The IT and Business Process Association of the Philippines (IBPAP) has estimated that in 2016, the number of full-time employees in the industry would grow to 1.3 million from 1.03 million in 2014. Meanwhile, revenues are expected to grow to $25 billion from $18.4 billion in 2014.

Expansion is seen along all the segments of the BPO industry, including global in-house, call centers, gaming, mobile applications development and health care. Future growth opportunities are seen to come from the voice and non-voice BPO sectors, particularly from industries such as media, healthcare, banking and telecommunications. 

The Country’s Positive Economic Outlook.
Although 2016 is seen to be a challenging year for the Philippines, with the upcoming national elections in May, the country’s strong economic fundamentals put it in a good position to continue its past gains. As of the third quarter of 2015, the country’s Gross Domestic Product grew by 6% from the same period in 2014, driven by increasing fixed investment, burgeoning public spending and strong private consumption.

According to data from the National Statistical Coordination Board, public spending skyrocketed by 17.4%, the highest gain recorded since the first quarter of 2012, while private consumption grew by 6.3%, the fastest growth since the third quarter of 2012. In addition, fixed investment growth rose by 9.3% during the same period. Combined with its other fundamentals such as its advantageous demographics of a fast growing youthful population and a steady influx of overseas workers’ remittances, the country’s economic growth is seen to be able to resist global challenges such as the slowdown of China and the other large economies. In fact, the World Bank has retained its forecast for the Philippines’ economic growth at 6.4 percent.

In the short-to-medium term, the country’s economy is seen to benefit from the increased spending brought about by the May elections, the fast-tracked implementation of private-public partnership infrastructure projects and the continued consumption of a young population, many of whom have surplus consumable income as a result of higher salaries from business process outsourcing employment.

Although the Philippines still faces challenges in the long-term of an economic structure that is heavy on consumption but light on investment, its structure also makes it less vulnerable to external shocks in the global economy. However, this will have to be addressed if its economic growth is to be made sustainable and more inclusive. 

Serviced Offices Offer More Competitive Rates. 
As a result of burgeoning demand, mainly from the business processing outsourcing industry, the country’s office market is expected to continue to its tremendous growth well into 2016 and beyond. In fact, Metro Manila saw the largest take-up in its recorded history as pre-leasing reached 231,412 square meters. However, prime office space in Metro Manila’s central business districts is still unable to meet demand, as there remains a lack of supply. The situation is seen to ease in 2016 with a significant influx of new spaces, which will put downward pressure on rents. However, supply of new office spaces is anticipated to peak by 2017, which, coupled with the continued demand from the BPO industry, would once again increase rental costs.

At present, however, the office space market is expected to continue being a landlord’s market, with the high demand for grade A office space driving up average rentals. And with the Philippines anticipated to reach the top spot as a destination for business process outsourcing in 2016, the fierce demand for office space is seen to continue and even accelerate.

On the other hand, average rents for serviced offices continue to be affordable with low average rates of $371 as of 2014. Thus, the country remains one of the few destinations to offer high-quality office spaces that provide outstanding value for money. Coupled with the ready availability of a young, highly-skilled and English-speaking labor force and it is clear why the Philippines is one of the premiere markets for serviced offices in the world. 

Although a traditional office setup is still the best choice for big corporations who are planning to establish a long-term presence in the country, for smaller companies with more limited capital and those whose business plan does not exceed eighteen months, the serviced office option is ultimately the more affordable option. Keep in mind that the costs of setting up an office can easily build up and require you to have a high amount of startup capital to meet your initial expenses. On the other hand, while the initial startup costs with a serviced office in Makati can be more expensive, over the average eighteen months of occupancy, you can ultimately save more money since you have fewer overhead and capital expenses as well as liabilities. Thus, for companies who want to start up operations quickly, a Makati serviced office is the best option.