DOLE sees resurgence of BPOs
The Labor department is optimistic of the business process outsourcing’s (BPO) growth prospects amid a looming global recession due to the COVID-19 pandemic. In a statement, Labor secretary Silvestre Bello lll noted that this optimism followed a meeting with IT-BPO industry leaders wherein they noted the sector keeps providing work opportunities amid the pandemic. Sec. Bello added that the pandemic will “force” Western economies to offshore more jobs. The Labor department said the additional jobs will likely go to Metro Manila, Cebu, and Clark. IBPAP has more than 300 member firms. At present, the industry employs more than 1.3 million individuals.
Colliers sees a slowdown in office space absorption this year due to the COVID-19 pandemic. Office space take up in 2020 is likely to drop by at least 50% as major occupants, including outsourcing firms, take a wait-and-see stance. The Labor department’s statement on the resurgence of the outsourcing sector should partly help in stoking office space demand in Metro Manila and other key cities outside the capital region. In Metro Manila alone, Colliers is projecting office vacancy to rise from 4.3% in 2019 to around 5.5%-7% in 2020. We see this resulting in a correction of average lease rates in Metro Manila.
12 new ecozones approved
A total of twelve economic zones worth PHP6.4 billion (USD128 million) were recently proclaimed by the Duterte administration. These consisted of nine information technology (IT) centers, two manufacturing ecozones and one IT Park spread across Davao, Batangas, Bacolod, Tarlac, General Santos, and key cities in Metro Manila. The newly proclaimed ecozones are expected to generate economic and employment opportunities. Since the start of the Duterte administration, the government has approved a total of 73 new ecozones.
The proclamation of new IT centers, manufacturing ecozones and IT parks will likely provide additional office and industrial supply within and outside Metro Manila. Colliers is optimistic that the proclamation of more PEZA space will provide more options to outsourcing companies planning to occupy space in key areas outside the capital region. This is a positive news for incentive-seeking tenants that have been affected by the pandemic and lockdown. In our opinion, the government should expedite the approval economic zones outside of Metro Manila to entice more outsourcing companies to locate in the countryside and generate more employment opportunities. Aside from outsourcing, the manufacturing sector is also likely to benefit from the approval of new economic zones
2020 dollar remittances seen to contract for first time in almost 2 decades
The Bangko Sentral ng Pilipinas (BSP) or central bank is now forecasting remittances sent by Overseas Filipino Workers (OFW) to contract by 5 percent in 2020, lower than its initial forecast of 3%. The expected decline in remittances will likely be the biggest since the 18.3% contraction in 1999. However, the central bank is projecting OFW remittances to pick up and grow by 4 percent in 2021.
Colliers sees the government-projected drop in OFW remittances affecting residential and retail demand in the Philippines. Anecdotal evidence point to OFW remittances partly driving the demand for affordable (PHP1.7 to PHP3.2 million) and mid-income (PHP3.2 million to PHP6 million) condominium projects. Some analysts are also expecting remittances to drop between USD3 billion to USD6 billion which could dampen the demand horizontal or house and lot residential projects. We believe that this is likely to wear down consumer confidence and purchasing power across the country. In Metro Manila, Colliers sees the slowdown in retail spending resulting in higher vacancy among malls. We now estimate metro-wide retail vacancy to rise 12% in 2020 from 9.8% in 2019.