Megaworld pins hope on BPOs to drive demand

MEGAWORLD Corp. on Monday said it expects to have one million square meters (sq.m.) of office space inventory by the end of 2017, as the property developer remains confident the business process outsourcing (BPO) sector will continue to drive demand.

“When we reach one million, it will continue to be driven by BPO still... So traditional offices and BPO, that will be the main driver for offices,” Megaworld Senior Vice-President for Business Development and Leasing Jericho P. Go said in a press briefing in Taguig City on Monday.

The property firm of tycoon Andrew L. Tan currently has an office stock of 888,500 sq. m., with another 111,5000 sq.m. scheduled for delivery by year end. These office buildings will rise in McKinley Hill in Taguig, Southwoods City in Laguna, Davao Park District, and Iloilo Business Park.

Megaworld’s statement comes amid industry reports showing a slowdown in investments of BPO firms in the Philippines, which in turn has led to a drop in office space take-up.

In a report issued by Colliers International Philippines on Monday, the property consulting firm said the BPO sector accounted for only 31% of total demand for office space in the second quarter, from an average of 60-70% recorded in recent years.

“The reasons for that are hard to quantify. The most cited factors are the lurch to economic nationalism in the United States, led by President (Donald J.) Trump’s anti-outsourcing stance and a perceived decline in the peace and order situation in the Philippines associated with extrajudicial killings,” Colliers Managing Director David A. Young wrote in the report.

In contrast, Mr. Go said the demand for office space in Megaworld’s townships continue to grow, noting a 99% occupancy rate in their developments.

“We’ve always said, until now we are still 99% occupied in our offices. The 1% are essentially the smaller spaces that have been vacated by companies that have decided either to consolidate, to put up their own building,” he said.

Mr. Go further cited the current surge in demand coming from online gaming firms, otherwise known as Philippine Online Gaming Operators (POGO). These companies are expected to lease more office space, primarily for back office and support operations such as IT and technical support, customer services, and financial services.

“We are the first, if not among the first, to see the potential of this segment in office rental. Our expertise in office development allows us to efficiently cater to the needs of POGOs. While only 8% of our total inventory caters to POGOs, we continue to see a bright spot for growth in this segment,” Mr. Go said.

Asked how much office space POGOs are expected to take up by the end of the year, Mr. Go said it could reach up to 10%.

“If POGOs were to reach 10% or a little more than that, that won’t be a problem. Currently out of almost 900,000 sq.m., close to 80,000 sq.m. is POGO already, it will be on that range,” he said.

Megaworld looks to book P7.2 billion in office rentals this year, out of the total P12 billion net income projected for the company. By 2020, income contributions from the office leasing segment is expected to reach around P10 billion to P12 billion.

The company’s attributable profit climbed 10.8% in the first half of 2017 to P6.4 billion due to the positive performance of its office developments.

Shares in Megaworld ended flat on Monday at P5.28 apiece at the Philippine Stock Exchange.