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 



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