The steady growth of the Philippine BPO sector

The Business Process Outsourcing (BPO) industry in the Philippines has grown significantly in recent years, contributing 7.5% to the Philippines’ total GDP in 2021. The latest figures from the IT and Business Process Association of the Philippines (IBPAP) show that the industry revenue and headcount have climbed consistently with a compounded annual growth rate of 5.1% and 4.6% from 2016 to 2022, respectively, despite the economic slump brought on by the pandemic and macroeconomic headwinds. The continued increase of the sector translated positively to the real estate market, specifically in the office segment, where BPO transactions accounted for 65.2% of Metro Manila office leases in 2022.

Figure 1: Philippine IT-BPM services industry revenue (2016-2028E)

Source: IT and Business Process Association of the Philippines (IBPAP)

Figure 2: Philippine IT-BPM services industry headcount (2016-2028E)

Source: IT and Business Process Association of the Philippines (IBPAP)

However, short to medium-term headwinds are anticipated for the industry.

BPO companies registered with the Philippine Economic Zone Authority (PEZA) were recently allowed to shift to the Board of Investments (BOI), where they can implement complete remote work without losing fiscal incentives. PEZA reported that half of its 1,000 registered companies have moved to BOI. The shift in policy may impact the office market in short- to medium-term as select players are anticipated to release spaces to adjust to the level of operations they intend to implement. This may also taper office demand as firms may not acquire additional spaces.

Despite the headwinds, the sector is still projected to be the main driver of office demand in the Philippines as the industry expands. As per IBPAP, the expansion is anticipated to continue, with leading BPO companies planning to maintain or increase their office space by roughly 10.0% over the next three years. Though on a smaller scale, the upward trend is expected to persist as firms in a hybrid work model may prefer flexible workspaces. The continuous expansion of select firms, backed by easing economic headwinds and companies with firmer strategies on their office space directions, may translate into more office transactions in the coming years, balancing the slowdown brought by the structural shift.

Nowhere to go but up for the BPO sector

The BPO industry intends to expand further in the next five years with a target revenue of $59 billion and 2.5 million workers. This expansion will occur through enhancing business services, upskilling workers, improving ease of doing business, and boosting digital infrastructure to support steady growth.

With this, the BPO industry is still well-positioned to continue its long-term growth and may become one of the backbones of the real estate market in the future.