Philippines catches recovery wave (Asia Times Online)

Written for and published by Asia Times Online on March 9, 2010. Click here for original article

Philippines catches recovery wave
By Jennee Grace U Rubrico
MANILA - As the global economy shifts from crisis to recovery, the business processing outsourcing (BPO) industry is sparking new demand and buoying employment and investment in the Philippines, where it is one of the country's most important industries.
BPO firms in the Philippines are hiring new personnel on expectations of strong business growth from the United States and Europe. Convergys Corp, an American customer support service provider that operates 12 sites across the country, says it plans to expand its 20,000 workforce by 6,000 employees this year. Stream Global Services, another BPO firm, says it plans to add 5,000 workers this year.
With the pick-up in hiring, property consultant Colliers International Philippines expects BPO firms quickly to take up oversupply in office space and spur new building. In the third quarter of last year, office space vacancy rates ran at 11.6% in Metro Manila, according to industry estimates.
Ayala Land, the country's largest property developer, has said it plans to build more BPO complexes in Pampanga and Davao City and a new technology hub in Iloilo City similar to the 37.5-hectare Technohub that now houses BPO centers and back-office operations for banks and other service sector firms in Quezon City.
Revenue growth in the Philippines' BPO sector, which averaged around 40% annually between 2002 and 2007, slowed to around half that pace in the wake of the global economic crisis. The overall sector accounted for 3.5% of the country's gross domestic product in 2008 and generated US$7.2 billion in revenues last year, up by 19% year on year.
The government says it expects BPO revenues to hit $9 billion this year; industry representatives estimate revenues will reach $12 billion and employ 700,000 workers in the Philippines by 2011. The sector employed 442,000 workers as of the end of 2009.
With its English-speaking population and cultural affinity with the United States - the world's biggest off-shoring client - the Philippines accounts for between 7% and 15% of the global BPO market. The country lags only India, which accounts for between 35%-50% of the global market.
Traditional call centers still account for the largest portion of the Philippines' BPO revenues, amounting to $5 billion last year, or 69% of the industry's total take. That segment's growth, however, has recently been outpaced by newer, non-voice services.
Computer game development posted a 50% rise in revenues last year, while the sector known as knowledge process outsourcing (KPO), which offer higher-value services than the likes of call centers, grew by 35% to $1.1 billion. Other non-voice segments also have room for growth: transcription revenues grew by 3% to $186 million, while IT design and animation held steady at $228 million and $120 million respectively.
"The back-office and KPO sector has been growing at a faster rate than the voice-based sector and we believe this trend will continue," said Gigi Virata, information and research director of the Business Process Association of the Philippines (BPAP), a trade organization. "In the next four or five years, we may see the voice and non-voice sectors at about the same size in the Philippines," she predicted.
That said, some analysts believe local companies may be overestimating how strongly the industry will bounce back. In the United States, an important source of business, high unemployment has become a political issue and there is a risk that populist segments of the US Congress may attempt to legislate against shipping potential domestic jobs off-shore.
BPO industry groups have scaled back some of their previously optimistic growth targets. In a roadmap for 2010 drafted three years ago, the industry had aimed to hit the $12 billion revenue and 1 million worker mark this year.
The targets were calculated on the assumption, undermined by the global economic crisis, that industry revenues would grow by a constant 40% from 2008 to 2010. The projection also failed to take into account productivity and efficiency gains accomplished through economies of scale.
"In 2007, it was estimated that more than 900,000 employees would be needed to generate $12 billion in revenues. This is no longer the case - we can reach this revenue level with about 700,000 employees," Virata said. "We will however have the capacity to employ one million Filipinos in this industry within the next five years."
Still, Philippine BPOs face challenges from shifting industry trends. European firms' growing participation in the outsourcing and off-shoring industry (O&O) is starting to tilt the competitive scales in favor of locations where English is not necessarily the dominant language - as it is in India and the Philippines.
Consulting firm AT Kearney noted that while US companies at present account for 70% of offshore outsourcing spending, Europe is now becoming a more aggressive player in the market. Philippine BPO firms have yet to penetrate non-English speaking Europe on a wide scale, but industry players have been taking steps to tap those potentially lucrative markets.
BPAP officials said the industry is wooing other English-language speaking countries such as Australia, New Zealand and the United Kingdom, as well as countries in the Middle East where English is widely used.
That expansion, some analysts say, will require Philippine BPO firms to enhance their competitive edge. In AT Kearney's O&O ranking for 2009, the Philippines ranked as the world's seventh most attractive off-shoring site, ranking below India, China, Malaysia, Thailand, Indonesia and Egypt.
The Center for Research and Communication Foundation (CRCF), a research organization based in the Philippines, identifies the lack of BPO professionals as the country's main competitiveness stumbling block. The CRCF has urged the government to address the deteriorating levels of education in relation to language proficiency, computer skills, critical thinking, analytics and problem solving.
Others say the industry and government need to do more to promote the Philippines as a BPO destination by streamlining legislation and regulation, improving infrastructure and helping to enhance operational excellence.
"Emerging markets like Vietnam, Malaysia, Thailand, Egypt and even Mauritius and Sri Lanka have done a great job in positively showcasing their countries as investment destinations," said BPAP chief executive Oscar Sanez. "The Philippine government has been very slow in this respect."
Jennee Grace U Rubrico has been a journalist for over 10 years.
(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

Property bounce in the Philippines (Asia Times Online)

Written for and published by Asia Times Online on January 26, 2010. Click here for the original article. 
 
Property bounce in the Philippines
By Jennee Grace U Rubrico

MANILA - Philippine property is showing new signs of life after enduring falling rental rates and rising vacancies in 2009. As developers reactivate projects stalled with last year's global economic downturn, cranes are swinging again on the skylines of Manila and other metropolitan areas with the brightened economic outlook.

Stronger demand from overseas Filipino workers (OFWs), who sent back a projected US$15.8 billion in remittances from January to November last year, is expected to drive new residential developments. Meanwhile, resurgent demand from the buoyant business process outsourcing (BPO) industry is projected to fill current commercial office space vacancies and spur new building.
If so, it will mark a dramatic turnaround from last year's downcast trends. Real estate consultant CB Richard Ellis estimated average rental rates across the Metro Manila area slid 4.3% from the second to third quarter last year, while overall office vacancy rates were up 200 basis points to 12.8% over the same period. By year's end, rental rates had fallen 25%-30% off their mid-2008 peaks, property consultant Colliers International said.

Now, developers are tapping into local debt markets to finance optimistic new expansions. Ayala Land, a subsidiary of the country's largest conglomerate, has said it plans to issue 1 billion pesos (US$21.6 million) worth of retail bonds that will be dedicated to home financing schemes for buyers of its properties. Filinvest Land, another top residential and commercial developer, plans to raise 3 billion pesos in bonds in addition to last year's 5 billion pesos worth of issuances to meet its projects' capital requirements.

Megaworld Corp recently raised 5 billion pesos in bonds, the proceeds of which will be used for a newly acquired 8.3 hectare land plot for its Megaworld development in North Bonifacio, near Manila's central business district of Makati. Another developer, Robinsons Land Corp, raised 5 billion pesos in new capital through a retail bond offering last year.

Indications are that they are putting those funds to quick use. Statistics from the Housing and Land Use Regulatory Board (HLURB) showed a spike in property permit issues, which property developers need to market new real estate projects, at the end of 2009. Developers who stalled on projects in the first half of 2009 rushed to get sales permits before the year ended, with the number issued in November up 146% over the same month in 2008.

Retail space investors are also coming out of the doldrums. Mall developer SM Prime Holdings plans to build five new malls, adding to its stable of over 40 retail centers across the country. Ayala Land has unveiled a nationwide expansion plan to construct more BPO complexes, residential projects and retail developments.

A number of factors support the projected growth. Most notably, OFW foreign remittances are expected to strengthen with an improved global economic outlook. Augusto Santos, acting director general of the National Economic and Development Authority, estimated that remittances would likely grow by 10% this year. Despite the global economic downturn, OFW remittances were up 5% in the 11 months ending November 2009, he said.

Those resilient remittances are expected to buoy in particular the residential housing segment, of which many developers identify foreign-currency earning OFWs as their main target market. That optimism hasn't shown up yet in the statistics. While licenses issued by the HLURB for non-residential units grew sevenfold year-on-year in November, residential licenses fell by 22.8% over the same period.

Commercial developers exposed to the globally oriented BPO industry appear to be the safer bet for investors. Ramon Jose E Aguirre, head of research at Colliers International Philippines, estimates that growth in outsourcing firms alone will be enough to this year absorb half the oversupply in the office space market.

"Obviously there is a glut in office space supply, but at the end of this year we expect many empty spaces to be taken up - this means construction can resume despite the fact that there are still plenty of offices available in the market," he said.

Bubble watch
With property price bubbling up in China, South Korea and Taiwan, analysts are now looking for similar signs in Southeast Asia's fast-recovering economies. Regional analysts believe that Philippine property will outperform most Southeast Asian neighbors, and there are no signs yet of emerging price bubbles, they say.

Property prices in Singapore rose by 15.75% quarter-on-quarter in the third quarter of 2009. That's prompted concerns about possible property price bubbles, but so far the overheating situation in Southeast Asia seems unique to Singapore.

Elsewhere in the region, economies have experienced more tempered price rises due to gluts of supply. Business Monitor International notes that the Malaysian property sector is expected to recover from last year's downturn, but price rises will be tempered by lingering oversupply.

Thai property has been hampered by political concerns and a lack of buyers, although the state-run Thai News Agency reported recently that the property developer confidence index posted a record high of 57.8 in the fourth quarter of 2009.

"The relative success of the Philippines to lure outsourcing companies and the steady flow of OFW remittances to finance other property development products will set it apart from neighboring countries," projected Claro Cordero Jr, head of research and consulting for Jones Lang LaSalle Leechiu in Manila.
The sector still has a long way to go before rates return to 2008 peak levels. Average prime office space rental rates in Metro Manila currently hover around 800 pesos per square meter, down from 1,200 pesos (US$17) in mid-2008. Danilo A Antonio, president of local property consultancy firm Land Excel Consulting, said that heated competition would prevent real estate developers from hiking prices too rapidly.

The Philippine central bank has also downplayed any property bubble concerns, maintaining that recent rises in local property prices and easing vacancy rates are indicative of legitimate demand rather than speculation.

National elections scheduled for this May represent another wild card for the sector. The new incentive-laden Real Estate Investment Trust Act (REIT) "lapsed" into law in late December when President Gloria Macapagal-Arroyo failed to follow up a veto recommendation from the finance department linked to its concerns the act would have a negative impact on tax revenues.

According to Cordero, REIT-derived financial instruments will enhance private-sector participation in infrastructure projects and promote more foreign participation in construction activities. However, the REIT's implementing rules and regulations are expected to be drafted by the next government.

The property sector is expected to get a boost if Manuel Villar, a real estate magnate and senator at present running second in opinion polls to front-runner Benigno Aquino, emerges as winner in the presidential election. Industry players are keen to see whether the next government will approve tax incentives for completing projects that reduce the current housing backlog of 3.8 million units and if it will follow up on Arroyo's efforts to sell off blocks of idle property now owned by the military.

"A new government will definitely affect the direction of business in the next few years and this includes the real estate and construction industries," said Aguirre. "How will [a new government] react? The private sector will be closely watching the results."

Jennee Grace U Rubrico has been a journalist for over 10 years

(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

Much ado about nothing? (BusinessWorld)

Published in the October 31, 2007 issue of BusinessWorld

BY JENNEE GRACE U. RUBRICO, Sub-Editor

Much ado about nothing?

Conclusion
THE CASE of property developers advertising developments even without licenses to sell, and in the process generating profits, should be a "non-issue," Colliers International Philippines Inc. director Richard Raymundo said.

"There are ways to do it in a legal way, anyway. The fact that you can announce projects, [means] you’re basically not breaking any rules," he said.

Danilo Antonio, a professor at the Asian Center for Excellence — a partner of the Asian Institute of Management — said property developers that put out advertisements with disclaimers should not be held liable.

"This is just image building and does not really put buyers at risk," he said.

Putting out advertisements before developers can sell does not really make sense financially, he added. Reservation fees, meanwhile, are "a mechanism that allows buyers to get the units they want."

"And reservation fees are usually refundable if the license to sell is not there yet. Developers [should] know better than accept non-refundable reservations," he added.

Developers, analysts and Housing and Land Use Regulatory Board (HLURB) executive officer Romul Q. Fabul said that ultimately, it is the buyers’ responsibility to find out whether the properties they plan to acquire are already covered by permits to sell.

"In the end, you still have to check if the developers have a license to sell," the Asian Center’s Mr. Antonio said.

Buyers should conduct due diligence before signing a contract and paying for the unit, Jones Lang LaSalle Philippines research head Kathy Marcelo said.

"They should check if the developer has secured all government licenses that are needed, as well as check the track record of the developer. They should make it a point to put all things in writing so that there would always be a reference in the future," she said.

Century Properties spokeswoman Terrie Fucanan agreed.

"As we have always maintained, consumers always have to be vigilant by doing a background check on the developers they are buying properties from. They should always check on the developer’s track record and ability to deliver projects on time," she said.

Mr. Fabul said buyers can always call the HLURB. They can also ask the sellers of the project to show them the license number released by the regulator, he added.

For advertisements, he said projects which have been given their permits include the HLURB license number in the ads.

Leechiu Associates senior manager Claro Cordero Jr., meanwhile, said that while a wise buyer should look for an HLURB license even before giving a deposit, "it’s not all the time that the buyer knows specifically whether the developers have been issued license to sell."

Amina Lim, who bought her condominium unit last year, said she did not know that she had to look for an HLURB number when checking out projects.

"None of the marketing people I talked to while looking for my unit told me their HLURB license number. They market their projects rather than tell buyers what needs to be done," she said.

Ms. Lim eventually settled for a condominium unit in a project that was already standing.
But advertisements that have the disclaimers would not deter her from buying the project being advertised, she said, "especially when I really like the project and it’s from a known developer."

Another condominium buyer noted that investors assume that property developers are selling when they come out with advertisements.

"Kaya ka nga naga-advertise eh, kasi nagbebenta ka (you are advertising because you’re selling the project)," he said.

Stick with the good ones

Analysts said it is best to bank on property developers’ reputations when making a purchase.
"Big developers would not risk their reputation to do a thing like that. It’s the small guys that are likely to do that," the Asian Center’s Mr. Antonio said.

The HLURB’s Mr. Fabul said that despite the number of violations, some followed the rules. Of the 180,000 units that were given selling licenses last year, the regulator only got 1,500 complaints.

"This is less than 2%," he said. The figure, however, does not include violations caught through HLURB monitoring.

Mr. Fabul said that among the companies that follow HLURB procedures are Ayala Land, Inc. and publicly listed Cityland.

"Cityland is very conservative — they always put their license numbers in the ads," he said.

Other property developers that sell condominium units that are already built also claimed to meet the HLURB’s requirement.

A DMCI Homes, Inc. official, for instance, said the firm does not need upfront money from buyers for its projects.

"Because everything is sourced from the group — the materials, the construction of the projects, etc. — we can afford not to sell immediately. Our marketing strategy is different," the official, who requested anonymity, said.

DMCI Homes is the housing arm of construction conglomerate DMCI Holdings Inc.
E. Ganzon, Inc. (EGI) President Eulalio Ganzon, meanwhile, claimed his company only sells its projects once completed.

"We are a technical company, our efforts are towards construction and planning specifications; we only do minor advertisements. We don’t work on pre-development sale," Mr. Ganzon said.

Tweaking the rules

Mr. Fabul said the HLURB is tightening its rules — where before it allowed ads meant for announcement purposes, it has decided to prohibit these as well.

"We found out that even these advertisements that say for announcement purposes only already sell. We called the numbers that were published in the advertisements and pretended to be buyers and they sold to us," he said.

Under a new memorandum signed last September, which has yet to take effect, property developers who wish to advertise projects need to file an application for advertisement approval.

Advertisements have to indicate the exact location of the project, license to sell number and date issued, project completion date, maximum selling price, and names of the owners/developer. Pictures should also be labeled properly and developers should differentiate between "actual photographs," "architect’s perspective" or "artist’s illustrations."

Disclaimers, any future development not covered by license to sell, and exaggerations or misleading information are prohibited.

Regulating and monitoring ads, said Subdivision and Housing Developers Association, Inc. Chairman Willie J. Uy, are part of the HLURB’s job.

"Although I would wish that they would be a little lenient, it is within the purview of HLURB to regulate and monitor the ads. This must be in response from buyers who were victimized by unscrupulous developers promising them heaven and earth," Mr. Uy said.

The new set of rules, however, does not change the penalties to be imposed. Whether it will lead to changes in the industry thus remains to be seen. — with inputs from Ruby Anne M. Rubio

Selling sans licenses (BusinessWorld)

Pubished in the October 30, 2007 issue of BusinessWorld

BY JENNEE GRACE U. RUBRICO, Sub-Editor

Selling sans licenses

First of two parts

EARLIER THIS MONTH, the Housing and Land Use Regulatory Board (HLURB) told Century Properties, Inc., one of the oldest property developers in the country, to stop selling its Gramercy Residences @Century City project in Makati.

The company’s application for a selling permit remained pending, the HLURB declared, and it scored the developer for coming out with advertisements for the project in July and September.

Century Properties officials countered that the advertisements the regulator referred to were actually press releases that came out in newspapers, and said the practice of selling while a license application remained pending was actually an industry-wide practice.

"Due to the extended length of time in filling and getting approval for permits in the Philippines, a majority of reputable Philippine developers start pre-selling their projects without a license to sell," Century Properties Chief Operating Officer Jose Victor Antonio said in a statement sent to  BusinessWorld when the notice of violation was released to media.

"The problem is not unique to Century Properties, it affect[s] all major developers," he said.
HLURB officials all but confirmed this, with the agency’s Executive Officer and Commissioner Romulo Q. Fabul saying the notice of violation sent to Century Properties was but one of 149 the regulator had issued since the start of the year, said. The list includes practically all of the major property developers, he said.

"You cannot sell without [a] license to sell. It is a reasonable assurance that the papers are in order and the developer’s warranty, approved plan, ownership and capacity to develop are in place," he said.

Under Presidential Decree 957 or the Subdivision and Condominium Buyer’s Protective Decree — the law that governs the HLURB — property developers cannot sell subdivision lots or condominium units unless they have obtained the requisite licenses.

"Those who violate advertising without license, we notify all of them and issue cease and desist orders. They should not sell until they get the license to sell," Mr. Fabul said.

He declined to provide the list of companies that had been issued notices of violations, saying it was "not updated." Noting that he was a "small fry", Mr. Fabul added that divulging the names of the erring firms "would not be good for the real estate sector, which is a pump-primer of the economy."
"We tell the developers that we are partners — we are all after buyer satisfaction," he said.

The regulator, he said, preferred to give things a "positive spin" by posting a list of projects that have already secured licenses on its Web site.

And while the list also has to be updated — as of press time, the site only identifies projects that got approvals as of August 2007 — Mr. Fabul said buyers can always call the HLURB to find out whether the projects are already licensed.

The license to sell, he said, is a way to protect the public from fly-by-night developers. He and property sector analysts said buyers who patronize reputable developers are basically not at risk.
Analysts said property developers would rather advertise ahead of the issuance of their licenses to sell and pay the fine of up to P20,000 than wait for as much as nine months. Doing otherwise, they said, allow the competition to capture their market.

"It is a common experience among developers that the processing time for the issuance of ECC (environmental compliance certificate), building permits, development permits and conversion usually takes several months and, in some instances, even years, depending on the issues that may arise concerning the project," Megaworld Corp. Vice-President for Legal Affairs Gary de Guzman said.

Mr. Fabul claimed that it only takes the HLURB 30 days to process the license to sell, but this is assuming that all other necessary requirements — like the ECCs (which are issued by the Environment department), the building and other local government permits — have already been secured.

"We even help them by processing the license to sell even while they still have to complete their requirements," he said.

Mr. Fabul also said the HLURB offers temporary permits to sell — valid for six months — to developers which only have to submit their building permits. Developers, however, do not want these, he said.

Delays in the issuance of the permits to sell are already being addressed, Mr. Fabul claimed. In particular, other agencies have already agreed through Executive Order 45 to issue their respective permits within prescribed periods, he added.

Media is also to blame, he said, for allotting advertising space and air time for projects that have yet to be covered by selling licenses.

Jones Lang LaSalle Philippines research head Kathy Marcelo, meanwhile, said another cause for violations is the issue of raising the money needed for actual construction.

"Due to the increasing demand in the market, most developers pre-sell their projects to accumulate additional capital for their construction," she said.

Other analysts also noted that the P20,000 fine for an advertisement that will generate millions of pesos in revenues makes for an easy decision to push the sale.

PD 957, however, metes out heavier penalties for the violation, including a 10-year jail term for repeat violators.

Mr. Fabul said property developers who repeatedly violate the rules on selling are told that their applications for permits would be denied. The denial, however, can be appealed, and Mr. Fabul admitted that the regulator has yet to issue a final denial of a permit to sell applications.
Jones Lang LaSalle’s Ms. Marcelo said the fine should be increased to make the system more effective.

Claro Cordero, Jr., Leechiu Associates senior manager for consultancy services, also called for stricter penalties.

"[For] The existing measures that HLURB has, specifically for license to sell issuance, they should have stricter ways of implementing the policies and should impose appropriate penalties let’s say suspension," he said.

CB Richard Ellis Philippines associate director for global corporate services Ryan Isip said the rules need to be tweaked.

"The rules on pre-selling without the license to sell are not clear they should be tweaked so that there are conditions — what can be done, what can’t be done," he said, adding that HLURB monitoring is important given that sales are also being conducted over the Internet and through telemarketing.
One gray area is the charging of reservation fees — Mr. Isip noted that for a buyer’s payment to be considered a sale, he should have put in 30% of the total cost.

"[The] reservation fee is only P20,000," he said.

It is also not clear if advertisements with disclaimers stating that they are being put out "for announcement purposes only" are legal.

Megaworld’s Mr. De Guzman, meanwhile, said their firm has proposed that the processing time for the development permit and the license to sell be cut short. The HLURB, he said, could remove the two-week waiting period between the publication of the license to sell and its effectivity.
Megaworld also wants the assessments and fees be computed as early as possible after the submission of the initial application.

The HLURB could also fast-track its clearance system in connection with the issuance of the development permit and license to sell, he added.

"If these improvements of the existing rules and regulations are implemented by the HLURB at once, the processing time for the license to sell will be greatly reduced to the benefit of the legitimate developers," Mr. de Guzman said.

Ayalas firm up deal with Saudi prince (BusinessWorld)

Published in the April 3, 2007 issue of BusinessWorld

Ayalas firm up deal with Saudi prince

BY JENNEE GRACE U. RUBRICO, Sub-Editor

THE AYALA GROUP yesterday firmed up a joint venture with a firm founded by a billionaire Saudi prince for a $153-million luxury hotel complex in the Makati business district.
The venture between Ayala Land, Inc. (ALI) and Dubai-based Kingdom Hotel Investments (KHI), founded and chaired by Saudi Prince Alwaleed bin Talal bin Abdulaziz Alsaud, would be the most expensive hotel project in the country.
A wire report yesterday said the prince – described as on a 10- day Asian tour – was looking at expanding in the region, and that KHI had a $1-billion war chest for investments. Quoting an interview in The Financial Times, AFP said the prince had described the United States as still obsessed with 9/11 and would not likely allow Arab investments in sensitive areas.
The prince, whose Kingdom Holdings owns big stakes in US companies including Citigroup and News Corp., said he personally has had no problem investing
and operating in the US. But he said KHI, whose portfolio is currently focused on the Middle East and Africa, is looking to expand its Asian holdings.
“There is a double impact in Asia,” the prince told the newspaper. “Countries are growing fast on their own and also benefiting from the spillover effects of China’s
growth.
“KHI has a war chest of US$1 billion and is actively looking to expand in China, South Korea and the Philippines. Asia has huge potential,” he was quoted as saying.
Prince Alwaleed flew in yesterday for what ALI officials said would be signing ceremony for the Makati project, an economic briefing and dinner with President Gloria Macapagal Arroyo.
Flight delays, however, meant a scheduled 5:30 arrival and subsequent briefing by Cabinet officials was not met. Malacañang officials confirmed that dinner
with the prince would push through, but added that a news blackout was imposed on the event for security reasons.
ALI President Jaime I. Ayala told reporters yesterday the planned complex, which would have a 300-room Fairmont Hotel, a 30-suite Raffles hotel and 189 Raffles-branded residences, would rise on a 7,377 square meter lot along Makati Avenue and Pasay Road which is currently being used by Anson’s department
store, Park Square 2, and a public  transport terminal.
The project, Mr. Ayala said, was an offshoot of President Gloria Macapagal-Arroyo’s visit to Saudi Arabia last year. During the visit, Mrs. Arroyo and the King of Saudia Arabia discussed investments in the Philippines and the King had asked Prince Alwaleed to look at opportunities, Mr. Ayala said.
The prince talked with the Trade department and consequently contacted Ayala Land, he added.
Mr. Ayala said that Ayala Land was hoping to enter into other partnerships with KHI, but added that his firm does not have exclusive rights to the Dubai firm’s investments in the country.
“But certainly, we’d like to talk to them about other opportunities in other areas,” he said. “By putting something that high end [in the area], the whole
site will be upgraded,” Mr. Ayala said.
He did not detail what the hotels’ rates would be.
Mr. Ayala admitted the complex will have to compete with existing hotels in Makati, including ALI’s own Intercontinental Hotel which was just renovated. But he also said that the price points will likely be different, and added that the other hotels in the area are “old,” the most recent being Makati Shangri-La Hotel
which was built in 1993.
He also claimed that Makati is also experiencing a shortage in hotels, as local and foreign investors, as well as tourists are flocking to the city.
Data from the Tourism department show that as of January, hotels in Makati posted an occupancy rate of 78.45%, above the Metro Manila average of 75.74%.
Mr. Ayala said that the new complex will cater to both the convention and banquets and the leisure markets. The Fairmont Hotel, he said, will have ballrooms, while the Raffles Suites will be built for privacy and exclusivity. Both hotels, Ayala Land said, will also have spas.
The new hotel complex will be placed under KHI-ALI Manila Inc., the joint venture firm that will own the property on which the hotels will stand, and KHIManila
Properties, Inc., the operating company. ALI donated the land, while KHI will shoulder the hotel’s development and operations.
The new complex will form part of ALI’s portfolio of hotels and serviced residences. Besides the Intercon, ALI also owns Cebu Mariott and, until recently, the former Oakwood Premier, which was sold to the Ascott group.
KHI is an international hotel and resort acquisition company that develops first class and luxury hotels in the Middle East and Europe. It has partnerships with
Four Seasons, Movenpick and Fairmont Raffles hotels.
The wire agency AFP, meanwhile reported that Prince Alwaleed had told The Financial Times “The US is still obsessed by 9/11 and sensitivities over security.”
He was quoted as saying the US is unlikely to allow Arab investment into airports, ports and other sensitive areas for several years as a result.
US security concerns over Arab investment gained prominence last year when DP World, controlled by the Dubai government, acquired US operations through a US$6.9-billion acquisition of Peninsular and Oriental, a deal making it one of the world’s largest port operators.
Following fierce congressional opposition to the US part of the deal on security grounds, and despite the backing of President George W. Bush, the Dubai government decided to relinquish DP World’s operations at six US ports.
Mr. Alwaleed told The Financial Times the Dubai ports issue “was unique and that matter is behind us.” — with a report from AFP

Call centers seen leaving Makati (BusinessWorld)

Published in the January 17, 2007 issue of BusinessWorld

By JENNEE GRACE U. RUBRICO, Sub-Editor

Call centers seen leaving Makati

Contact centers could begin moving out of the Makati Central Business District in two to five years as rents continue to escalate and qualified labor increasingly becomes a constraint, experts said.
Property analysts polled by BusinessWorld said cost-sensitive call centers may start their exodus when office rents go beyond a historical high of P1,000 per square meter.
But Makati’s loss will be other cities’ gain, as these call centers will likely relocate in alternative business districts, they added.
"A lot of call centers and support services type of operations ... got favorable rents [when they came in after the Asian financial crisis] and then suddenly, rates will be doubling. These guys are natural candidates [for leaving]," said David Young, managing director of Colliers International Philippines.
"They don’t need to be in the best quality buildings in Makati, they can happily function on any location in Manila as long as infrastructure services get to them."
Mr. Young said he sees these firms leaving the central business district in two to five years because lease contracts usually run this long.
In its third quarter 2006 market report, Colliers said premium grade space in the Makati CBD hit P798 per square meter per month, approximating early 1996 levels. It also predicted that by this year, office rental in the business district will breach P1,000 per square meter per month, the going rate just before the 1997 Asian financial crisis.
Four years ago, rental rates were at P350 per square meter per month, Asian Institute of Management Professor Danilo A. Antonio told BusinessWorld.
Call centers, the property analysts said, could transfer to cheaper business districts like Eastwood in Quezon City, Fort Bonifacio in Taguig, Filinvest in Muntinlipa or the periphery of Makati if their only concern is high rent.
If the concerns are expanded to include labor shortage, they will be looking at other areas in the region, said Paul Ryan L. Isip, associate director for global corporate services of CBRE Philippines
"This [labor] is a constraint," he added.
Even if costs escalate, however, a few call centers will remain in the central business district, experts said.
"Call centers might just stay [in Makati] since moving costs can be too high," Mr. Antonio said.
Mr. Isip said some outsourcing companies will stay "as not all outsourcing companies have the same cost structure."
But Makati, said Business Process Association of the Philippines president Danilo Reyes, is still the place to be for contact centers that want to establish their presence.
"Some will stay because they need to have presence while others will go once their rents double up," he said.
Colliers Research director Richard Raymundo also said that while P1,000 per square meter per month is a historical high in peso terms, this does not approximate 1997 rental rates in dollar terms.
"The dollar is now around P50. In 1997, it was at around P26. You will not go back to those rates. So rental rates are still much cheaper now if you consider it in dollars," he said.
Analysts said the vacancies resulting from the transfer of call centers will be taken up by multinational firms that want to either establish a presence in the country or expand current operations.
"At the same time that [call centers] are coming under cost pressure, we are seeing a general increase in demand for space other segments of the office market. Commercial services and the banking industry are doing well, and companies to support these industries are doing well," Mr. Young said.
He also noted that multinationals are "looking to put back office functions" in the country.
"Technically, this is business process outsourcing. We’re seeing that demand from multinationals," he added.
Mr. Young also said demand for space not necessarily in the Makati central business district is also coming from call centers abroad.
"It’s not just jobs in America, Canada, Europe. There is incredible interest in India. Traditionally, Bangalore has been the hub for call center business. Bangalore is now coming under cost pressure, they’re coming under labor constraints so we’re seeing companies operating in India now looking to the Philippines to secure their needs," he said.

Niche marketing, good location success factors for hotels, says Colliers Philippines (BusinessWorld)

Published in the November 3, 2005 issue of BusinessWorld

Property & Infrastructure

BY JENNEE GRACE U. RUBRICO, Senior Reporter

Niche marketing, good location success factors for hotels, says Colliers Philippines

Hotels that cater to a niche market or are in advantageous locations will continue to perform well as against those in saturated areas that will have difficulty to survive, an analyst said.
In a recent interview, Richard T. Raymundo, Colliers International Philippines, Inc. director for the research and consultancy, said that while hotels in the Makati central business district continue to do well, those in the Manila bay area are having a more difficult time.
"I don’t like to generalize that the whole hotel market is doing very well. There are locations that are doing better than others," he said.
He noted that hotels in the Makati business district are 75% to 80% occupied and have increasing room rates as against those in the bay area.
Data from the Tourism department show that in the capital, Pan Pacific Manila, which has 236 rooms, has the highest occupancy rate among accredited de luxe hotels -- at 86.1% as of July from 84% year on year.
The Westin Philippine Plaza, meanwhile, had an 80.64% occupancy rate, better than the previous year’s 77.57%.
Other hotels in Manila, however, did not fare as well, with Century Park Hotel having an occupancy level of 63.33% from 64.01%, and Hyatt Regency Manila at 67.23% from 56.99%.
Manila Diamond Hotel, meanwhile, had an occupancy level of 75.6% from last year’s 65.28%, Heritage Hotel Manila was 75.8% occupied from 70.67%, while Manila Hotel had an occupancy rate of 62.91%, an improvement from 2004’s 40.01%.
Vivere Suites suffered a decline in occupancy to 40.99% from 71.75%, while the new Hyatt Hotel and Casino Manila was 39.54% occupied as of July.
In Makati, the New World Renaissance Hotel had the highest occupancy rate at 85.15% from 84.11%. Makati Shangri-La was 83.12% occupied from 72.61%, Mandarin Oriental Manila was at 81.9% from 80.72% and Dusit Hotel Nikko was 82.37% from 75.7%.
Hotel Intercontinental Manila was 76.53% occupied from 73.50% last year, while the Peninsula Manila was 80.64% occupied from 77.57%.
The Bellevue Manila in Alabang, Muntinlupa City did well at 74.37% occupancy rate, while EDSA Shangri-La Hotel and the Holiday Inn Galeria Manila, both in the Ortigas (Pasig City) business district, had occupancy levels of 72.37% and 72.8%, respectively.
Mr. Raymundo said new hotels that are being constructed, such as the Marriott Hotel that publicly listed Megaworld Corp. is putting up at the Villamor Air Base in Pasay City, must have value propositions to be more attractive to the hotel-going market.
"The Marriott is near the airport. It makes sense because we don’t have an airport hotel in Manila," he said.
He added that those being constructed on Boracay in Malay, Aklan will likely do well given the sheer number of visitors that flock the island practically all year round.
"People are noticing that this is the fastest growing domestic location and during peak season, resorts are running at full occupancy," Mr. Raymundo said.
He noted that the Manila bay area may no longer be able to accommodate additional hotels given the saturated market.
"If you look at tourist arrivals it’s not going as fast as the other [countries]. We lag in the ASEAN [Association of Southeast Asian Nations] if you think about it. It could be a bit tough for [the hotels] to survive," he said.
Property developers have recently taken interest in building hotels.
Major developer Megaworld has allotted P7 billion for the construction of the Marriott Hotel, while Villar-owned upscale residential developer Brittany Corp. is in talks with property managers for a hotel it will be building in Alabang, Muntinlupa over the next three years.
The Lopez group’s property development arm, Rockwell Land, Inc., meanwhile, has allocated a space for a hotel in the future, while the Gokongweis’ Robinsons Land Corp., which has Holiday Inn Galeria, recently opened another five star hotel beside it and Robinsons Galleria -- the Crowne Plaza Galeria Manila -- in Ortigas Center.
Outside Metro Manila, Ty-owned Federal Land, Inc. ventured into the tourism business by acquiring the former Cebu Plaza Hotel and turning it into the Marco Polo Plaza Hotel.
Landco Pacific Corp., a joint venture between the Metro Pacific Group and the Xerez-Burgos family, is expanding its Fuego hotel chain over the next few years, and the Discovery and the Shangri-La hotel chain are building hotels in Boracay.
The Filinvest Group of the Gotianun family has also started venturing into property management with its casitas in the Leuna de Taal project, and in a much bigger scale -- Seascapes in Mactan (Cebu).
The development of additional hotel units is not limited to big companies, with the activities of smaller groups such as Philippine Investment Management, Inc.-owned Microtel Inns & Suites, and construction and property development firm E. Ganzon, Inc. also looking at putting up hotels.
For 2006, Microtel is looking at building budget hotels in Boracay, Tagaytay, Cabanatuan (Nueva Ecija) and Laoag (Ilocos Norte), while E. Ganzon is putting up classy hotels in Baguio and Cebu in addition to putting in a hotel component for its suspended Skycity project at Epifanio de los Santos and Ortigas avenues.
Hotel and serviced residences operators such as the Marco Polo group, the Ascott Group and Fraser Place are also looking at finalizing additional management contracts, particularly in Makati, Ortigas, Cebu and Alabang.
Data from the Tourism department showed visitor arrivals increased 13% to 1.73 million in January to August year on year. A bulk of these, or 1.64 million are overseas workers, or Philippine passport holders permanently residing abroad.
Property developers said that more than catering to the foreign market, their hotels aim to get a bulk of revenues from meetings, incentives, conferences and events.