By Beatriz Marie D. Cruz, Reporter
PROPOSED LAWS in the United States aimed at deterring the offshoring of American call center jobs could lift office vacancies in the Philippines, according to property consultants.
“While it is still too early to assess the exact impact on real estate take-up, efforts by the US government to discourage offshoring to the Philippines may lead to higher office vacancies and will require landlords and developers to rethink their leasing strategies,” Edward Gador, associate director for commercial 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 do not impose an outright ban on offshoring, but their passage may slow down demand in the country’s office market, said CBRE Philippines Country Head Jie C. Espinosa.
“Our projection for overall vacancy in the market to go down to single-digit levels again — similar to how things were pre-pandemic — is contingent on the continuing growth of the information technology-business process management (IT-BPM) sector,” he said in an e-mail.
The Philippine IT-BPM industry, one of the world’s top outsourcing destinations, has long been a major demand driver in the country’s office market.
In the third quarter alone, IT-BPM firms accounted for 42% of net take-up in Metro Manila, according to CBRE data.
“If we suffer a setback in this sector, vacancy will remain in the double-digit levels,” Mr. Espinosa added.
The proposed Keep Call Centers in America Act seeks to limit federal benefits granted to companies 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 in the US.
Both measures are aimed at protecting US-based call center jobs threatened by the rise of offshoring and artificial intelligence (AI)-powered bots.
If passed in their current form, the measures could push up Metro Manila’s office vacancy by 150-300 basis points, affecting business process outsourcing (BPO)-heavy submarkets such as the Bay Area, Ortigas, and the Bonifacio Global City fringes, according to Savills Philippines Chief Executive Officer (CEO) Joe Curran.
“If both bills pass in their current form, we could see a 30% to 50% slowdown in new leasing activity from US-based customer-experience or voice-BPO tenants over the next 12 months,” he said in an e-mail to BusinessWorld.
Vacancy rates in provincial hubs such as Cebu, Clark, Bacolod, and Iloilo could also rise by 200-400 basis points, mainly in single-tenant voice centers, Mr. Curran said.
However, modern business parks hosting diversified global capability centers (GCCs) or in-house shared-service hubs that serve global markets are expected to remain resilient against the impacts of US protectionist bills, he added.
“Should these two proposed US legislations be enacted, we may 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 two bills, noting that these are not affecting current IT-BPM operations in the country.
“If passed in their current form, the measures would increase the cost of offshored services and introduce additional compliance requirements for US companies operating overseas,” IBPAP President and CEO Jonathan Jack R. Madrid said in an e-mail.
“For now, it is 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 legislation may dampen take-up, the Philippines’ office market is still likely to attract global IT-BPM tenants, supported by its network of high-quality office parks and skilled workforce, Mr. Curran said.
“Protectionist measures may slow short-term activity, but the Philippines’ depth of talent and adaptability will keep it among the world’s top service-delivery destinations,” he noted.
Mr. Gador also noted that the two proposals do not address cost and staffing challenges in the US, casting doubt on large-scale reshoring.
“A typical US-based call center agent earns around $18/hour (excluding benefits, training, insurance, etc.), bringing total costs to $30-$40/hour. In comparison, 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.
However, the threat of US offshoring should push office developers to offer competitive rates and high-quality spaces to sustain take-up, property consultants said.
Landlords must diversify their office portfolios to attract non-US global capability centers; offer ready-for-occupancy suites; and invest in dual power feeds, connectivity, and AI-ready infrastructure, Mr. Curran said.
Developers should also take a more “pragmatic approach” in renewal negotiations, Mr. Espinosa said.
“A lot of these companies engage their landlords way ahead of lease expirations and would generally ask for flexibility heading into their renewal terms,” he said.