Why Clark can be Philippines' next BPO hub

Posted at 05/29/14 4:58 PM

CBRE Philippines CEO Rick Santos

MANILA, Philippines – Clark has the potential to be the country’s next hub for business process outsourcing (BPO) companies because of the growing labor supply in the area, property consultant CBRE Philippines said.

CBRE Philippines chairman and chief executive Rick Santos said Clark is seen as “possibly the next Fort Bonifacio for BPOs” as more property developers and investors are looking for projects outside the already congested Metro Manila.

Santos said BPO firms are drawn to Clark because of the “young, intelligent, and multilingual” labor pool in Central Luzon.

An estimated 60,000 graduates from Central Luzon are expected to join the workforce in the next two years, mostly from business administration and information technology-related courses, making the region an ideal spot for BPO expansions.

CBRE Philippines director Francis Bautista said that a labor analytics study showed that about 5 to 10 percent of office employees working in the business districts of Makati, Ortigas, and Bonifacio Global City come from provinces north of Metro Manila.

“People actually make the trip from Pampanga everyday, so obviously there is a strong labor pool there,” Bautista said.

“Before, the question about business is location, location, location. Now it’s about where the labor pool is. So instead of having people waste two to three hours commuting to and from their provincial home to have a taste of Metro Manila, if you have that location there, you can pay them less and they will just be happy to be working closer to home,” he added.

Central Luzon is contributing 9.2 percent to the country’s gross domestic product (GDP), ranking as the third highest contributor behind Metro Manila (35.7 percent) and Calabarzon (17.4 percent).

The region is the second wealthiest region outside Metro Manila with a catchment basin of 23 million people.

“Clark, with the proper infrastructure and strong demographic profile in Central Luzon, is coming out as one of the stronger potentials in real estate development. Developers are now looking to developments up north,” said CBRE Philippines senior director Jan Custodio.

Among the IT-BPO companies that have set up shop in Central Luzon are iQor/Cyber City Teleservices, Sutherland Global Services Stream, NCO, Wallem Innovative Solutions, Startek, and Source HOV.

Property developers like Ayala Land and Century Properties are also looking to develop mixed-use projects in Pampanga.

SM also expanded SM City Clark to provide office spaces for BPO firms.
Strategic location, lower lease

Aside from having the labor supply, Clark is also seen as the next BPO destination because it is highly accessible through the North Luzon Expressway, Subic-Clark-Tarlac Expressway, Tarlac-Pangasinan-La Union Expressway, and the Clark International Airport.

“The interconnectivity of Clark with the northern and the eastern portions of the country is one of its stronger points,” said Custodio.

Monthly lease rates in Clark are priced at P230.72 per square meter, lower compared to lease rates in its neighbors Subic (P251.46) and Angeles (P360).

“Clark, being a Freeport zone, is entitled to incentives similar to that of PEZA [Philippine Economic Zone Authority], so this makes it attractive for BPO companies to locate and do their operations in the area,” added Custodio.

He said the lifting of the PEZA incentives in Metro Manila opened doors for developers to pursue projects in nearby provinces.

Currently, there are 62,000 full-time BPO employees in Clark, with about 300,000 square meters of office space available.

CBRE believes that the 177-hectare Global Gateway Logistic City (GGLC) can be a “catalyst” for development in Clark.

GGLC, a logistics and business center, is set to construct five office buildings in the next few years.

“BPO locators coming into Clark, most of them would say, ‘If the facility is available, then we will locate,’” said Custodio.

Another project poised to bring in more investors is the Clark Green City, a mixed-use development encompassing 1,300 hectares of the Clark Economic Zone, which has residential, office and industrial components promoting renewable energy, efficient waste management, and a power and water conservation system.

'From bases to BPOs'

Santos said that Clark will see a boost in business from Americans returning to the former US base.

He said the recent visit of US President Barack Obama and the impending visit of US Secretary of Commerce Penny Pritzker further strengthened investor confidence in the growth of the Philippine market.

He added that the recent signing of the Enhanced Defense Cooperation Agreement (EDCA) will bring positive results and will bring in more attention to Subic and Clark.

“Strong relations with the US always help from a trading perspective, but also we want to see stability and prosperity and co-existence with China and the other neighbors,” said Santos.