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Accelerated PEZA Approval Key to Sustaining BPO Growth – Colliers

Thursday, December 6, 2018 - Colliers International Philippines encourages the government to expedite the approval of Philippine Economic Zone Authority (PEZA) applications to sustain the outsourcing sector’s growth. After a sluggish 2017, BPO firms have ramped up office space take up in 2018 and Colliers believes that the robust demand will be sustained by an ample supply of PEZA-proclaimed IT parks and buildings.

Outsourcing companies’ office space absorption accelerated in the first three quarters of 2018. The BPO firms including call centres and KPOs which provide higher-value services accounted for 42% of the 1.14 million sq m of transactions recorded from January to September 2018. Bulk of these companies are the same firms that held off expansion plans in 2017 due to safety and security issues, Trump’s anti-outsourcing rhetoric, and concerns on the availability of PEZA-proclaimed office buildings. But the aggressive approval of PEZA applications towards the end of 2017 resulted in a strong take up of office space from outsourcing firms. Colliers, however, has observed delays in PEZA proclamations in the first three quarters of the year which might impede the expansion of the sector in 2019. 

The current administration has so far approved 36 out of the 78 PEZA IT Center and Park applications. This represents an approval rate of 46%. In 2016, a total of 4 PEZA applications were approved. In 2017, 26 applications were approved with 11 proclamations released in 4Q2017 alone. In the first nine months of 2018, however, only six applications were approved. A single application has yet to be approved in 4Q2018.


Of the 36 buildings and IT parks granted PEZA status, 21 are in Metro Manila while the remaining 15 are in areas outside of the country’s capital, such as Cebu, Bataan, Bulacan, and Laguna.



The Manila office market is on track to achieving record-high supply and net take up in 2018. While Colliers saw a diversified group of occupants for the first nine months of the year, the largest share of transactions is attributed to outsourcing firms which have started to occupy additional space after holding off expansion plans in 2017. Over the past nine months, both BPO and KPO companies accounted for an estimated 42% of total transactions. Colliers expects the outsourcing sector to cover between 40% and 50% of the projected net take up this year.



Over the next 12 months, Colliers is projecting an estimated 1 million sq m of new office supply in Metro Manila. At present, only an estimated 41% of the space due to be completed in 2019 has been granted PEZA accreditation. Colliers believes that hitting the estimated net take up next year will primarily hinge on the availability of PEZA-proclaimed buildings as outsourcing firms almost exclusively locate in these towers. A number of BPO firms have taken a wait-and-see stance as they await the planned enactment of Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO-2) which purges tax incentives provided to PEZA locators. In our opinion, this will be exacerbated by the lack of PEZA-approved office spaces.



Colliers believes that a major reason why office demand from outsourcing firms picked up in 2018 is the accelerated PEZA proclamation of office spaces in 2017 which are now about 70% occupied. In fact, among the PEZA-proclaimed office towers in 2017 that recorded strong take up from outsourcing companies are those buildings inside the IT Parks such as Megaworld’s McKinley Hill, Filinvest’s Northgate Cyberzone, SM’s MOA Complex,  Robinsons Land’s Bridgetowne, and Ayala Land’s Vertis North. Thera are also stand-alone PEZA-registered buildings such as Capella IT Center and Ayala Land’s South Park that secured strong occupancy. Colliers encourages the government to expedite the approval of PEZA applications. We believe that a couple of applications can still be approved before the end of the year, which should contribute to a stronger pre-leasing of office space due to be completed in 2019 and 2020.



“We recorded a stronger office space absorption from BPO companies from January to September 2018. The granting of PEZA accreditation to more office buildings and IT parks should support the Philippine BPO sector’s growth trajectory,” said Colliers International Philippines director for office services Dom Fredrick Andaya. In Metro Manila alone, an estimated 640,000 sq m of office space has yet to be granted PEZA approval. This already represents nearly 80% of Colliers’ projected annual net take up in 2019 and presents tremendous opportunities for both developers and occupiers.



“We also encourage developers with pending applications to start targeting traditional and non-BPO firms that have been expanding across Metro Manila. The country’s economic managers are expecting a GDP growth of 6% to 6.5% this year and 7% to 8% from 2019 to 2022 and a strong macroeconomic backdrop should support the expansion of these businesses. This should eventually compel firms to occupy larger office space,” added Andaya.



BPO tenants have been looking for PEZA-proclaimed spaces in areas outside Metro Manila to continuously enjoy tax and non-tax incentives. Among the more viable alternative sites are Cebu, Bacolod, Iloilo, Clark, and Davao. These locations offer a combined 1.4 million sq m of PEZA-proclaimed space, about a tenth of which has yet to be occupied.



“Colliers also recommends a more accelerated approval of PEZA applications in the provinces to disperse BPO activities outside of Metro Manila and bolster employment opportunities in the countryside,” Andaya stressed. Among the provincial sites with pending PEZA applications are Bataan, Benguet, Cavite, Cebu, Davao del Sur, Iloilo, Laguna, and Negros Occidental. Five of the eight locations are in Tholons’ list of Top 100 Global Outsourcing hubs.


Pending PEZA Applications by Location as of 3Q2018






GLA (sq m)



Metro Manila






























Davao del Sur


















Misamis Oriental






Negros Occidental


















Source: Philippine Economic Zone Authority

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Joey Bondoc

Associate Director



Prior to joining Colliers in March 2016, Joey worked as a Research Manager for a research and consutancy firm where he handled business, political, and macroeconomic analysis. He took part in a number of consultancy projects with multilateral agencies and provided research support and policy recommendations to key government officials and top executives of MNCs in the Philippines.

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