Growth in the O&O Industry Driving Demand in the Office Sector

Locations outside the CBD area eyed by expanding service providers


The steady growth of the offshoring and outsourcing industry will continue to drive demand in the office sector with property developers eyeing locations outside the Metro Manila Central Business Districts for expansion, said CB Richard Ellis Philippines Vice Chairman Joey Radovan at Shared Services Week Asia 2008 in Singapore. Radovan, as head of the Global Corporate Services group, promoted the Philippines as an offshoring location to an audience that included Shell, Diageo, CITI Bank, Hewlett Packard and Rolls Royce.

The O&O industry in the Philippines expanded 50% annually from US$1.47 billion in 2004 to US$7 billion in 2007. In response to sustained demand for office space in the industry, 34 projects with a total floor area of 731,871 square meters are to be completed in 2008. At the end of 2007, call centers and other O&O companies occupied 1,080,000 square meters of space, a substantial increase from 750,000 square meters in 2006.

According to Radovan, investment in non-voice back office services is expected to increase, compensating for slower growth in the contact center sector.

“We see foreign investors investing in Bonifacio Global City, Makati CBD, UP North Science and Technology Park, and Alabang,” said Radovan.

Provincial urban centers are also becoming more attractive for O&O services providers that are considering expansion.

“BPO companies that have been in the country for three to four years are looking at the provinces to leverage the large labor pools in these areas and to leverage the benefits of lower rates for office space and operating costs, and 23 of the 34 projects scheduled for completion by the end of 2008 are located outside the Makati and Ortigas CBDs,” said Radovan.

The emergence of alternate business districts has increased supply of comparable office space, giving O&O companies the choice of moving from Grade A high-rise buildings to new IT buildings with lower lease rates. “We expect O&O services providers to increasingly move to low-cost growth areas as rents in the Makati CBD stabilize in a range of P850 to P950 per square meter,” said Radovan.

For 2008, the outlook for Bacolod, Cebu, Davao, Pampanga, and Naga is promising. O&O investors have been active in these markets this year. Radovan projects that in 2009 and 2010, tier two and three locations such as Laoag, Tacloban, Tagbilaran, Tuguegarao, Kalibo, Legaspi, Roxas, Butuan, Puerto Princesa, Dipolog, Cotabato, and General Santos City further south will benefit from expansion of the O&O industry.

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About CB Richard Ellis
CB Richard Ellis Group, Inc. (NYSE:CBG), a FORTUNE 500 company headquartered in Los Angeles, is the world's largest commercial real estate services firm (in terms of 2006 revenue). The Company serves real estate owners, investors and occupiers through more than 350 offices (including affiliate and partner offices) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; investment management; appraisal and valuation; and research and consulting. Please visit our Web site at www.cbre.com.ph.

Mapfre Insular Ortigas Exceeds Sales Target

Mapfre Insular announced that its Ortigas branch achieved 103 percent of its sales target as of August 2008.

The announcement was made as Mapfre Insular recognized outstanding sales performance in its Ortigas and Quezon City branches as part of its annual La Visita del Presidente program recently.

Each year, Mapfre Insular president and CEO Enrique Clemente III visits the company’s 11 branches in Luzon, Visayas, and Mindanao. The branch visit initiative is undertaken in fulfillment of the company’s mission of promoting professional development and acknowledging its agents as indispensable partners in attaining success.

During the Ortigas and Quezon City visits, plans to merge the two branches were announced. Operations for the two branches will be consolidated at the Ortigas branch next year. Clemente noted that as of August 31, the Ortigas branch has exceeded its sales target, achieving 103% of its production goal and exhibiting a 19 percent increase over last year. The merged Quezon City-Ortigas branch will have a combined annual premium target of more than P150 million.

“2008 has been a relatively good year for the company and we hope to end the year with premium production of over P1.4 billion. Our estimated year-end bottom line will be about 17 percent better than last year,” Clemente said.

“The very good and stable performance of the company is a result of the quality business our people bring in. The success of the company lies in its people--its employees and agents.”

Mapfre Insular currently ranks 3rd in terms of paid up capital and net income, and 5th in terms of premiums earned as of August 4 this year among non-life insurance companies operating in the Philippines according to the Philippine Insurance Commission.

Peso’s gain is OFW’s bane

BY LEO J. SANTIAGO JR. and JULIE JAVELLANA-SANTOS

MANILA—IN A remittance slip, there was an additional US$50 that Cesar Dimasupil’s daughter Arlene sent from London. But he remained stoic.

“That [money] would just even things out,” Dimasupil says of the dilemma that most families of overseas Filipino workers are facing under a stronger peso and a record-low inflation rate.

Dimasupil, like most Filipinos brought up in a male-as-strong society, says he doesn’t know if he should celebrate for getting the added money from something he said he shouldn’t have asked from his daughter in the first place.

“But what can I do? They say the strong peso could lead to lower prices. That hasn’t happened in the past months,” Dimasupil said.

The Dimasupil family shares the conundrum of a Philippine economy that a recent World Bank report said has been growing, in part because of the cash sent by nearly eight million Filipinos temporarily or permanently working or living abroad.In a report released by the WB last month, it noted that the stronger peso helped inflation rates to fall to 4.3 percent by end-2006 and to 2.6 percent by February this year.

Food and oil prices remained “relatively” stable, the WB said. Pummeled in recent years by political shocks to the economy and macro-economic anxieties, the peso appreciated by nearly eight percent against the US dollar in 2006, and strengthened further in early this year.It’s a cause celebre for most businesses, especially importers who can pay less from products they’re bringing in from abroad.

But for an economy that the WB said is relying on consumption, the celebration isn’t felt yet by OFW families here whose remittance receipt is boosting consumption.According to economist Fernando Aldaba, herein lies the risks of an economy relying much on remittances since many OFWs could also hedge on a possible uptick of the dollar.

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