By Beatriz Marie D. Cruz, Reporter
PROPOSED LAWS in the USA aimed toward deterring the offshoring of American call center jobs could lift office vacancies within the Philippines, in accordance with property consultants.
“While it continues to be too early to evaluate the precise impact on real estate take-up, efforts by the US government to discourage offshoring to the Philippines may result in higher office vacancies and would require landlords and developers to rethink their leasing strategies,” Edward Gador, associate director for industrial leasing at Leechiu Property Consultants, told BusinessWorld in an e-mail.
The proposed Halting International Relocation of Employment (HIRE) Act and the Keep Call Centers in America Act don’t impose an outright ban on offshoring, but their passage may decelerate demand within the country’s office market, said CBRE Philippines Country Head Jie C. Espinosa.
“Our projection for overall emptiness out there to go right down to single-digit levels again — just like how things were pre-pandemic — is contingent on the continuing growth of the knowledge technology-business process management (IT-BPM) sector,” he said in an e-mail.
The Philippine IT-BPM industry, considered one of the world’s top outsourcing destinations, has long been a serious demand driver within the country’s office market.
Within the third quarter alone, IT-BPM firms accounted for 42% of net take-up in Metro Manila, in accordance with CBRE data.
“If we suffer a setback on this sector, emptiness will remain within the double-digit levels,” Mr. Espinosa added.
The proposed Keep Call Centers in America Act seeks to limit federal advantages granted to firms that outsource call center jobs overseas.
Meanwhile, US Senate Bill 2976, or the HIRE Act, proposes a 25% excise tax on American firms’ payments to foreign service providers for work consumed within the US.
Each measures are aimed toward protecting US-based call center jobs threatened by the rise of offshoring and artificial intelligence (AI)-powered bots.
If passed of their current form, the measures could push up Metro Manila’s office emptiness by 150-300 basis points, affecting business process outsourcing (BPO)-heavy submarkets comparable to the Bay Area, Ortigas, and the Bonifacio Global City fringes, in accordance with Savills Philippines Chief Executive Officer (CEO) Joe Curran.
“If each bills pass of their current form, we could see a 30% to 50% slowdown in latest leasing activity from US-based customer-experience or voice-BPO tenants over the following 12 months,” he said in an e-mail to BusinessWorld.
Emptiness rates in provincial hubs comparable to Cebu, Clark, Bacolod, and Iloilo could also rise by 200-400 basis points, mainly in single-tenant voice centers, Mr. Curran said.
Nonetheless, modern business parks hosting diversified global capability centers (GCCs) or in-house shared-service hubs that serve global markets are expected to stay resilient against the impacts of US protectionist bills, he added.
“Should these two proposed US legislations be enacted, we may even see a slowdown in outsourcing decisions and, consequently, a tempered demand for office space,” said Kevin Jara, director and head of tenant representation at Colliers Philippines.
The IT and Business Process Association of the Philippines (IBPAP) has been monitoring the impact of the 2 bills, noting that these aren’t affecting current IT-BPM operations within the country.
“If passed of their current form, the measures would increase the fee of offshored services and introduce additional compliance requirements for US firms operating overseas,” IBPAP President and CEO Jonathan Jack R. Madrid said in an e-mail.
“For now, it’s viewed as a low-likelihood but high-visibility development, and organizations are following closely — assessing potential risks, preparing phased response plans, and monitoring the bill’s progress,” he added.
While US protectionist laws may dampen take-up, the Philippines’ office market continues to be prone to attract global IT-BPM tenants, supported by its network of high-quality office parks and expert workforce, Mr. Curran said.
“Protectionist measures may slow short-term activity, however the Philippines’ depth of talent and flexibility will keep it among the many world’s top service-delivery destinations,” he noted.
Mr. Gador also noted that the 2 proposals don’t address cost and staffing challenges within the US, casting doubt on large-scale reshoring.
“A typical US-based call center agent earns around $18/hour (excluding advantages, training, insurance, etc.), bringing total costs to $30-$40/hour. As compared, a Philippine-based agent earns $12-$15/hour, all-inclusive. This gap alone discourages reshoring, even when factoring in possible penalties from government,” he said.
Nonetheless, the specter of US offshoring should push office developers to supply competitive rates and high-quality spaces to sustain take-up, property consultants said.
Landlords must diversify their office portfolios to draw non-US global capability centers; offer ready-for-occupancy suites; and put money into dual power feeds, connectivity, and AI-ready infrastructure, Mr. Curran said.
Developers also needs to take a more “pragmatic approach” in renewal negotiations, Mr. Espinosa said.
“A variety of these firms engage their landlords way ahead of lease expirations and would generally ask for flexibility heading into their renewal terms,” he said.