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Trump’s ‘America First’ has consequences on Phl real estate

By Iris Gonzales (The Philippine Star)
Updated February 27, 2017 – 12:00am
http://www.philstar.com/business/2017/02/27/1676012/trumps-america-first-has-consequences-phl-real-estate

MANILA, Philippines –  US President Donald Trump’s “America First” stance has consequences on the Philippine real estate sector — which has been driven largely by outsourced jobs from the US — even as industry players remain optimistic on the country’s property market.

In a report, real estate services firm JLL Philippines said the Trump effect could “potentially be a consequential impact on the real estate market in the Philippines.”

“In the context of Trump’s protectionist leanings, the future of the Philippine property market remains uncertain,” said Claro Cordero Jr., head of Research, Consulting and Valuation Advisory for JLL in the Philippines.

At the same time, Cordero said outsourcing and offshoring (O&O) would continue to drive demand for office space.

The O&O industry continues to be one of the bright spots in the Philippine economy. In an era of slow global economic activity and recovery, cost flexibility remains a top concern. The Philippines remains an attractive location given its low attrition and labor costs compared to the US. Despite Trump’s policy stance, the O&O industry is likely to grow, driven by strong government support for programs to enhance the service-oriented skills of the local labor pool. This will continue to drive demand in the Philippine office market,” he said.

The Philippines is regarded as the biggest call center market in the world, beating India two years ago.

Cordero said that more than two million square meters of office space would be completed within the next four years.

Despite Trump’s policy, Cordero said cheap labor cost in the Philippines would continue to attract global companies to the country.

“While labor costs in the customer service industry in India are almost on par with similar types of jobs in the US, labor costs in the Philippines have remained competitive. According to the 2015 Total Rewards Survey conducted by Willis Towers Watson, labor costs in the Philippines are still a quarter cheaper than in the US,” Cordero said.

Another factor that contributes to lower operating costs is the low attrition rate, which lessens the resources needed to train and retrain the labor force in the O&O industry, Cordero added.

“In the same Towers Watson survey, the estimated attrition rate in the Philippines is 20 percent, while attrition rates in both India and the US remain within the range of 25 to 40 percent,” he said.

For their part, property developers remain optimistic on the business process outsourcing industry, saying there is no slowdown in demand for office space from the sector despite the Trump effect.

Trump said he would bring back to the US jobs that have been outsourced to countries in Asia such as the Philippines.

But Megaworld Corp., the Andrew Tan-led property and mall developer which is the biggest lessor of BPO office space in the country, said demand remains strong.

In Iloilo for instance, the challenge is to be able to complete office buildings immediately because of strong demand, said Megaworld senior vice president Jericho Go.

He said that the company has pre-commitments for BPO expansion until 2018.

Furthermore, Go said there are also new trends in the sector that makes the industry sustainable.

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