Jan
24

BPO Site Selection

posted on 24th January 2016 in Blog, Business with no comments

Shot of Manila Cathedral at Nite. Big Stock Photo.

BPO Site Selection, An Amateur, Biased Guide

This blog post is a quick real estate survey I conducted some time ago. I think the conclusions and approach are useful for anyone investigating Manila for BPO set-up.

Manila BPO Location Overview

Real estate options vary; ranging from expensive, modern facilities throughout greater Manila to bargains with reliable infrastructure in Makati and Ortigas.

Manila sprawl is, well, sprawling. Traffic conditions continue to degrade with no plans for infrastructure to remedy the problem. Continued Malthusian population growth more or less guarantees that Manila workers will spend a larger portion of their day on the road. It is, therefore, advisable to select an accessible location because this will reduce commute time. Another answer lies in flexible work schedules, if operationally feasible.

The map below shows each considered location as well as Eastwood Cyber City. We included an additional area for consideration, Ortigas, since it has a great deal of available space, is nearly as central as Makati, quality telco infrastructure, and has a heavy concentration of small BPO’s and captive facilities.


Employees commute to work with no real relative value assigned to businesses near their home. Applicants focus on other considerations when choosing where to apply: often an application is simply opportunistic (the right opening at the right time), a referral from a friend or former colleague, signing bonus, etc.

Eastwood Cyber City: Purpose built cul-de-sac for BPO’s with residences and retail for BPOers.

Eastwood Cyber City: Purpose built cul-de-sac for BPO’s with residences and retail for BPOers.

Occasionally a group of employees will move into an apartment or condo near their office after hire.

The chart below rates destinations based on a relative scale of 1-5 for each consideration. Afterward, I discuss high-level discussion of the considerations for location assessment.

Makati The Fort Ortigas Suburban Manila Dumaguete
Access 5 3 4 3 5
Availability 5 4 4 4 3
Cost 3 2 4 4 5
Prestige 4 5 3 3 3
Infrastructure 4 5 4 4 3
Average 4.2 3.8 3.8 3.4 3.8

Accessibility:

  • Any Manila-based facility should be convenient to transit points: one jeepney ride away from a bus terminal or MRT station is the litmus test for this. Otherwise, employees are forced to add more time to an already lengthy commute. A standard commute ranges between one hour and three hours each way.
  • Avoid areas prone to flooding during typhoons and tropical storms. These low-lying areas hinder access as employees wade through standing water with a deleterious effect on morale and health.

 

Makati City: Central, Established, Modern - Manila’s Manhattan.

Makati City: Central, Established, Modern – Manila’s Manhattan.

Availability:

  • Availability gauges the variety and availability of property in a given area. Makati is a clear winner in this category due to its age and status as the Central Business District of Metro Manila. There is plenty of office space at a variety of price points.

Cost:

  • Real estate costs vary widely in areas like Makati and Ortigas, generally the cost hierarchy runs as follows: The Fort (Bonifacio Global City) > Eastwood > Makati > Ortigas > Metro Manila (including Alabang) > Suburban Manila (Cavite, Laguna) > Provincial Locations (Although Cebu real estate is nearly as expensive as Manila).
Location Low-end (Pesos) High-end (Pesos)
The Fort 600 1300
Eastwood 800 1200
Makati 500 1200
Ortigas 350 800
Metro Manila 350 600
Suburban Manila 250 600
Dumaguete 400 550

Infrastructure:

  • As expected, newer, high prestige districts like The Fort and Eastwood command greater rents and offer less negotiating flexibility. The Manila business community tends to favor newer construction with The Fort offering new, top tier construction. Most buildings are less than three years old.
  • Beyond rate per square meter, other considerations include openness to negotiation, security, and advances (and when the advances are collected), build-out cost, common area fees, etc. These vary widely by building.
  • Infrastructure should support BPO operations with generator back-up, separately metered air conditioning, as well as sufficient capacity and speed elevator access.
Consideration Summary
Negotiability Depending on the landlord and building management, flexibility goes a long way to striking the right lease deal and for gauging the landlord’s user friendliness. A pain-in-the-ass landlord can be a nightmare during build-out. If the building is will to deal on free month(s) for build-out, reduced rent for a longer term, etc., the relationship goes way more smoothly.
Back-up Generator (Genset) Programs that require 24×7 operations make automatic, single phase generator back-up necessary. Outages invariably happen at 04:00 on Saturday when you are at your finest. Manually triggered generators are okay for non-mission-critical work.
Air Conditioning (Aircon) Air conditioning is a significant consideration from a cost perspective. For large operations with many monitors, cooling a hot BPO floor can be expensive. For non-PEZA buildings with central air, the cost of after-hours usage can be massive. Ideally, office space should have separate meters or aircon in the office.
Telco/Internet Modern and PEZA buildings will have multiple telco providers. Older buildings may have a single provider or dated infrastructure. It pays to investigate this early. It is essential to have Globe and PLDT (or a provider that uses them as their underlying carrier) as they are the only facilities-based, last-mile carriers.
Build-out For all new buildings, and for many older properties, the lessor must build out the space. We recommend that locators find a warm-shell — an office space with electricity, ceilings, and flooring already in place. This limits the build-out cost to furniture, flooring, window covering, and structured cabling.
Elevator Fast, efficient elevators are a factor in tall buildings where large numbers of agents are arriving, departing, or leaving and returning from break can make for very long waits.

Prestige

  • Employees will tend to consider the relative prestige of a location when making a job choice. Where a person works is significant with Makati and The Fort widely perceived to be areas of quality organizations.
Bonifacio Global City: New, Swanky, Expensive, & Pretty Damned Cool.

Bonifacio Global City: New, Swanky, Expensive, & Pretty Damned Cool.

Real Estate Brokers & Landlord Negotiation:

  • There are three major players in the commercial real estate arena. These tend to maintain listings (and only show their listings) and also manage property many buildings. In my dealings with each of these organizations, I have found them capable and professional. They are advocates for the property owner.
  • Colliers
  • Jones Lang Lasalle/Leechiu (JLL)
  • CBRE
  • In most cases, I suggest you handle the negotiations directly to get the best lease rate and terms (we can assist you with this if you require). Listed below are some lease considerations:
Consideration Summary
Lease Term 3-5 Years
Advance/Deposit Either two or three months advance plus two or three months deposit. Advances are taken at the beginning or the end of a lease.
Escalation Annual rent increase, usually between 5-10%.
Build-out Consideration 1-2 months free rent to accommodate office build-out.
Common Area (CAM) Charge Added as a percentage of the per meter rate and not included in deposit/advance calculation.
Withholding Tax Additional fee — calculated as a percentage of monthly rent — for government remittance.

My Province – Dumaguete:

  • I included Dumaguete as an option but it is quite different from Manila regarding what should be considered. Dumaguete is a college town, which has implications for staffing that make it far more desirable (in my opinion) than Manila. I’ll cover this in the forthcoming staffing document.
  • There are BPO’s in Dumaguete, but this doesn’t mean that there is ample BPO-ready space. Be ready to accommodate a more laid-back approach to infrastructure. That said, every space I’ve toured in Dumaguete has been a partially built, warm-shell.
  • Things to consider:
  • Talent – As a college town, Dumaguete has ample, qualified talent for its size.
  • Telco/Internet providers are not as proficient as Manila’s — but the telco infrastructure is newer.
  • Easy access and decent availability.
  • Quality-of-life intangibles are compelling.
Dumaguete City: University Town, Eco-destination, Home to Atelier Lumikha.

Dumaguete City: University Town, Eco-destination, Home to Atelier Lumikha.

A rambling concoction of commentary about business and living in the Philippines, travel around Asia, things read and opined upon.

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