Recently, Malaya Business News cited Colliers, Inc. report in an article entitled “BPO’s moving back to MM” which claims that many business process outsourcing and offshoring companies still preferred sites within Metro Manila as compared to provincial sites. What drives this phenomenon and how can the provincial sites catch up with Metro Manila’s current record?

Two of the main reasons attributed for having large portion of BPO operations to Metro Manila are the adequacy of infrastructure and manpower. “About 70 to 80 percent of requirement go back to Metro Manila” as according to Jie Espinosa, Colliers Philippine director for office services. In addition, they cited that there is continuous supply of office buildings with some 400,000 sq.m. of new supply each in 2014 and 2015 which fuels these outsourcing companies. For the year, “Colliers expects at least 560,000 square meters of new office space to be delivered in Metro Manila.” 

Since Colliers Inc. has already identified the two key factors that BPO companies value in choosing the location for their business, what provincial sites can do to catch up with Metro Manila is to establish additional office buildings to meet demand of BPOs. Number of available infrastructure matters for these businesses and as much as possible they need locations which are strategic. To promote provincial sites as BPO sites, infrastructures must be improved, wherein BPOs would find it strategic as Metro Manila. Aside from this, the amount of labor force in the area would also matter for them. They only hire people/employees for their business operations so it means that they would also outsource people near the vicinity/area of their operation. However, provinces should develop competitive workers which would meet the demand of these businesses. The accessibility to employees, technology as well as commercial establishments is the additional factor these companies would consider before signing leasing contracts for their businesses. As much as they wanted to create profits, they would also want to find the best venue where they can have a more efficient transaction. Therefore focusing on the two considered “backbone” of the operation of these companies, infrastructure and human skills are the important matters of consideration for suppliers of office spaces in the country.

Source: http://www.malaya.com.ph/index.php/special-features/property/37920-bpos-moving-back-to-mm

Group Members:

Barlam, Syrell
Manalili, Rafael
Miguel, Josh
Perdido, Rhenz
 

From Rappler.com

As the BPO industry in the Philippines continues to grow, the demand for office buildings is also on the rise.

According to the latest Metro Manila Marketview Report prepared by real estate advisory firm CB Richard Ellis Philippines (CBRE), the demand for office space will continue to increase until 2017. The influx of foreign companies in need of commercial establishments such as BPO firms has contributed to the growth of demand.

The report also says that Metro Manila offers reasonably priced locations for companies seeking cost efficiency. Thus, BPO firms are inclined to set up their operations in the Philippines.

Makati Central Business District, for example, has continued to attract multinational corporations because of its accessibility and proximity to other commercial institutions. The vacancy rate in the business city went down to 4.27% in the second quarter of 2013 from 5.07% in the previous quarter.

This kind of trend is obviously good for the economy, particularly for real estate.

The situation at present gives real estate companies the chance to concentrate on commercial aspect of their business. There is a need for them to focus on developing office buildings because of certain reasons.

First, commercial real estate can provide them a cushion or a shield just in case the residential market goes down. They will definitely have a difficult time in mitigating the effects of a possible failure if they don’t improve the development of their office leasing business, which is an alternative source of income.

Second, commercial real estate in terms of office buildings has a lot of potential. If they don’t take advantage of it as early as now, other competitors will reap the benefits that they could get.

Therefore, real estate companies should put more effort in developing their office space sector. It will be beneficial for them if they further improve in this aspect.

Reference:

http://www.rappler.com/business/35737-global-bpo-firms-set-up-offices-in-metro

Group Members:

Barlam, Syrell
Manalili, Rafael
Miguel, Josh
Perdido, Rhenz

 
      Recently the "Business Insight" reported that Eton Properties Incorporated (Inc.) announced that they would be focusing on the development of more property-development plans particularly on Business Processing Outsourcing (BPO) offices and hotels in its succeeding five years in the business to cater the increasing demand for retail, leisure and outsourcing market. Mr.Danilo Antonio, the chief operating officer of Eton reported high occupancy and lease rates in office buildings. They will not compromise their residential-development business but they will all together sustain these properties while at the same time boosting its revenue stream and reinforcing its position in the industry.

      Actually, Eton Properties Inc. was not the only firm that plans to focus on catering more of the non-residential products due to the increasing number of BPO in the Philippines who have great potential of becoming part of the real-estate consumers in the country. For instance, the House of Investments, Inc. who is prominent for catering high-end to affordable residential houses also expresses its desire to construct BPO's and other property developments in the next few years. Moreover, Hewlett-Packard, which is one of the oldest and leading companies that pioneered in harnessing the power of technology for business, is planning to partner up with BPO companies through Outsourcing Joint Ventures who needed help in addressing clients needs in terms of manpower requirements, infrastructure and other things. This especially caters for BPO companies and other multinational companies planning to expand in the country or put up satellite branches in offshore locations.

      Today, Eton group as one of the key players in the Real Estate Industry has been also part of the great providers of offices for BPO in urban areas such as in Quezon City. They have CentrisCyberpod One, occupied by Wipro Technologies, Genpact Services, Unisys Philippines etc.  Also, CentrisCyberpod Two has been fully leased to US-based Hewlett-Packard and has a scheduled 6th BPO office building for completion by the year-end which would become the CentriesCyberpod Three. The increased in rental income from these BPO offices has pulled up the firm's revenue in the first quarter of the year to P137.9 million.

      Given that this property group has already been expanding BPO office as part of the business ever since and is actually earning comparatively large enough as compared with its other competitors due to the increase rental income, the question for Eton now is would it give advantage for Eton group to still focus and to expand offices meant for BPO companies despite the tight competition for non-residential properties supply? What could be the edge of Eton group having its properties located in Quezon City from the other local real estate firms? 

      Gartner Datarequest defines BPO or Business Process Outsourcing  as "the delegation of one or more IT-intensive business processes to an external provider that, in turn, owns, administrates and manages the selected process based on a defined and measurable performance metrics” (Malaya Business Insights, 2013). Call centers and information agencies that are now sprouting in the metro belongs to the BPO industry. Eton has a valid reason to focus on meeting the demand of this market because in the latest annual ranking of the top 100 global outsourcing destinations of Tholons, Manila and Cebu achieved the 3rd and 8th spots accordingly. Some reasons mentioned by Tholons why Philippines is included in the list are: "region's maturing outsourcing brand, improving macroeconomic environment, and expanding domestic markets". (Malaya Business Insights, 2013).Indeed, there is a growing number of BPO companies here in the Philippines. All of which would not happen that easily without the improvement of property developers and their openness and accommodation for BPO’s. Therefore, Eton is just one of the many developers who lay hands to BPO companies by offering space for lease as area for their business processes but at the same time the group benefit from them by giving additional income to Eton group.

      There are many real estate developers who are indulging themselves to the improvement and construction of more of BPO offices; does Eton have the edge to compete against many other firms in the industry? In the case of Eton, they began their development of BPO's.    In this light, I would like to apply the 5 factors enumerated by MeloPorciuncula, head of the Business Operations and Capital Markets of KMC MAG Group real estate services firm with the audience of the 6th Money Summit and Wealth Expo at SMX Convention Center in Pasay City last July 13, 2013 to answer the crucial concern that Eton group has to consider in its decision of expanding BPO offices. First, location when choosing where to build an office building or a non-residential space for rent is important as the increase for people also indicates increase in space as Porciuncula said.  Second, the ownership structure of the developer matters. There must be an estate and succession planning for assurance. Also, the firm must have the capacity to maintain the property since these BPO companies open their businesses to a huge number of employees. The size of the spaces also matters, from 40 square meter and above up to 150 sq. meter is the most in demand size for the BPO firms. Another element involves cash flow, usually the maintainance of the rent and longer tenancy are considerations for these BPOs. Lastly, the exit plan or the alternative plan entails good strategies in any situation the developer might face with their clients. As she mentioned, "You really do not lose money in commercial real estate but there are times that it is not prosperous."(Corpuz, 2013).

            For the case of Eton, they are actually already met some of the standards/factors mentioned by Porciuncula as tips to be considered by a real estate developer offering BPO offices. Eton has began developing Quezon City with its Eton CyberpodCentris facilities. It competes with UP-Ayala Technohub, AranetaCenterCyberpark, Eastwood City, which are all strategic locations for the BPO industry. These places are accessible to potential employees of these BPO and there are also improvement in the services being offered in these areas such as utility services, transportation etc. Though there are still room for improvements for these areas in Metro Manila. Eton is already established in the business and it can be assumed that their company structure and ownership is alreaady stable. Lucio Tan as a long-time businessman has already gained a lot of experience on how to deal with many types of situations/challenges as a real-estate developer. The essential matter for them is whether they have the capacity to increase/expand in this sector as of the moment in preparation for the next five years. Based on the Eton’s annual report of 2012, from P722 million pesos of net income last 2011, Eton’s net income has gone down to P44 million. However they possess more assets in their records by 2012 as compared to 2011. Another rental income for 2012 reached to estimated amount of more than P400 million. The net income decrease could be associated with the large cost expenses and tax by 2012. However there are no recorded threats yet with regards the company’s financial status since they have large real property investments at present. With increase rental income and the completion of the Cyberpod Three this year, there is a great potential for their revenue to increase largely which would suffice the cost for expanding their business especially targeting the BPO industry.



Sources:

Malaya Business Insights.Eton Focusing on BPO market. 2013. http://www.malaya.com.ph/index.php/business/business-news/36492-eton-focusing-on-bpo-market. (accessed July 24, 2013).

Corpuz, Lynda. 5 Factors to consider when investing in office condos.Eton’s 2012 Annual Report. 2013. http://www.eton.com.ph/pdf/annualreport/2012.pdf. (accessed July  23, 2013).



Group Members:


Syrell Barlam
Rafael Manalili
Josh Miguel
Rhenz Perdido 
 

An article by Rappler.com

A few months ago, the SM group of Henry Sy announced the merger of its subsidiary companies connected to real estate, namely SM Prime Holdings, Inc., SM Investment Corporation, SM Land, Inc., and SM Development Corporation.[1] The said merger is set to dislodge Ayala Land Inc. as the country’s largest real estate developer in terms of market capitalization.

According to Rappler.com, SM Prime will become the surviving entity with a combined market capitalization of Php 591 billion based on May 30 closing prices. Ayala Land Inc. has Php 461.4 billion in its portfolio at present.

SM has decided to merge its units because of scale and synergies. The officials of the group want to create a property behemoth that would cater to the different needs of its customers. Through this merger, they hope to combine residential, hotel, office, and shopping mall businesses into one vehicle and make the experience of their customers more enjoyable. Furthermore, SM wants to attract more investors who want a stable company and a good return on investment.

In connection to this, the merging of mall and property units of SM group gives several advantages for the owners and shareholders of these companies. By consolidating 4 of SMIC's property firms (SM Prime, SM Development Corp., SM Highlands Prime and SM Land), the consolidated "SM Prime" will gain the upper-hand not only in the real estate industry in the Philippines but also in the real estate industry in Southeast Asia. Once the consolidation is complete, it will dislodge Ayala Land, Inc. (the biggest listed property firm so far at present that has P409.56 B market capitalization) with an estimated P591B current market capitalization. Marketing their products will become easier because they have the figures to show to their customers that the company is stable and reliable. Second, it would allow the SM group to create their intended "integrated real estate company that will undertake larger scale projects with the participation of all its business units." In fact, SM is planning to create more Mall of Asia-like projects that utilize the capabilities of all its subsidiaries.[2]

Also, just like Ayala Land Inc. and other real estate firms are known for, it would give SM group their desired "template for growth" under the SM Prime that is engaged in mixed-use and integrated establishments for its future developments. Aside from these, they would also have a simpler, bigger and united corporate structure under SM Prime. These would result to attracting more investors with a bigger asset and a venue to facilitate bigger market capitalization which can be invested in the company. These would eventually result to the efficiency of the businesses under SM group with the increase cooperation among the different units of the company.

However, difficulties of consolidating its different units are inevitable in the process. The merging would cost them some transaction cost especially in arranging all the legal documents, meeting and convincing their shareholders, acquiring and transferring of shares etc. There could also be higher risks faced by the company in the future with bigger structure and larger-scale investments.

[1] Rappler, “SM group creates property behemoth,” Rappler.com,  last modified June 1, 2013, http://www.rappler.com/business/industries/175-real-estate/30334-major-property-merger-sy-group-sm-prime-smdc-highlands

[2] Aya Lowe, “More Mall of Asia-like projects for merged SM units,” Rappler.com, last modified July 12, 2013, http://www.rappler.com/business/33425-more-mall-of-asia-like-projects-for-merged-sm-units

Group members:

Syrell Barlam
Rafael Manalili
Josh Miguel
Rhenz Perdido

 

News article from Mb.com.ph by James A. Loyola

Vista Land is the Philippine’s leading homebuilder and presently ranks among the top listed property firms in the country in terms of total assets, earnings, and market capitalization. Vista land is also well known for its plans of further expansion into new areas in the country and is known to have the most extensive geographical reach among all property developers in the Philippines. This wide geographical scope of Vista Land is an advantage towards its major competitor such as Ayala Land and Rockwell since Vista Land is able to develop not only the industrialized places like Metro Manila but also other remote places.

Vista Land’s P5-B Residential Projects along “Tourism Highway” Sites which includes Vigan, Ilocos Sur; Tagbilaran, Bohol, and Puerto Princesa, Palawan has positive effects not only to Vista land but also to these three tourist spots. Through this project, Vista Land will not only provide jobs for the local residents of these places during the construction of the residential units but can also attract more tourists who will serve as the market for the short-term rentals. These tourists will also be a big help for the local businesses in these places.

Furthermore, Vista land has a market share of 22 percent of the 80,000 units of reservation sales in 2011. Given this, it can be assumed that this P5-B residential project will have a positive effect in the real estate industry. Moreover, this project is a good step for Vista Land to achieve their projected 20 percent increase in their revenue and earnings in 2012.


Authors:
Sacbibit, Mary Grace
Altuna, Gilleane
Villacorta, Charles

 

News article from Bworldonline.com by Franz Jonathan G. de la Fuente

The Bases Conversion and Development Authority (BCDA) is a development corporation that engages in public-private partnership to push forward public infrastructure as well as major real estate developments. BCDA is one the prime movers of national development in the Philippines, creating economic opportunities through its establishment of integrated developments, dynamic business centers and vibrant communities. Currently, BCDA has invited private sector parties to bid for three state-owned properties in Taguig, and Pasay, They are confident that these properties will be sold since the location and size strategically fit any envisioned residential, retail, and institutional site development. BCDA reports that a number of companies had already signified their interests.

In general, whether these sites will be used for residential, retail, or institutional site development by the companies who win the bid, a positive impact can be expected for Real Estate Industry. Moreover, using these sites for institutional site development will deliver the highest positive impact compared to residential and retail site developments. According to Colliers International Report on the Philippine Real Estate Market 1st Quarter of 2012, the supply for office spaces are narrow across Metro Manila. Take-up rates are expected to drop by 26% this year mainly because of the limited office space and negligible increase in supply. In addition, there is a strong demand for offices coming from the Owned-and-Operated station Industry. IT-related and BPO firms with immediate, sizable requirements have resorted to plug & play options for their desired offices.[1]

Considering the low supply and high demand for offices in Metro Manila, specifically for above Grade B and plug & play offices, these sites offered by BCDA should be used for institutional offices development to deliver the optimal positive impact. Aside from being able to satisfy the demands for these types of offices, a positive growth in the Owned-and-operate industry as well as in the Real Estate Industry may be expected.


[1] Karlo Pobre, “REASEARCH & FORECAST REPORT PHILIPPINE REAL ESTATE MARKET 1Q 2012.” Colliers International, July 18, 2012.

Authors:
Altuna, Gilleane
Sacbibit, Mary Grace
Villacorta, Charles
 

News article from Inquirer.net by Doris Dumlao

The AMA Group of Companies is investing 60 Billion Pesos over the next 10 years in various property developments. Their main property subsidiary, Picar Development, Inc., a fairly new entrant in the world of the real estate business, ambitions to set its position in the industry through the execution of big projects such as the 74-story tower in Makati which is said to possibly become the tallest skyscraper in the country, and what they call “Telepolis” which will be the first completely wifi-enabled township. These are only two out of the 10 to 15 real estate projects Picar is planning to develop in the described time period.

Since it was established in 2007, Picar has invested 400 Million Pesos in property developments which include a mix of both residential and commercial projects. For its first few years, Picar has ventured mostly in residential property developments such as the Chelsea and Stratford Residences, but in the next years to come, they are planning to expand into developing more commercial properties, extending this as well to other metropolitan regions outside NCR.[1]

What makes this company a hot target in the run for potential rising industry players is how they manage to effectively utilize their investments through an effective development process, which has also turned out to produce high-quality property developments. In 2009, their Stratford Residences was awarded “Best Architectural Design”.

Picar Development Inc.’s investments and achievements together with their most recent 60 billon, 10-year plan aligns with the company’s vision to be one of the top five real estate industry players in the next three years, running against established real estate players such as Ayala Land (ALI), Filinvest Development Corp (FDC) and other listed property companies. This presents more competition on the area of Real Estate Investing, thus giving rise to better quality offers in property development.

[1] James Loyola, “Picar Plans 2012 Stock Listing,” Manila Bulletin Publishing Corporation,  July 11, 2012.

Authors:
Altuna, Gilleane
Sacbibit, Mary Grace
Villacorta, Charles