The Latest Site Selection Trends in The Philippines in a Post-Covid World

by King White, on Jun 15, 2022 3:58:55 PM

The Philippines became the leading call center offshoring location over the last decade with an estimated 1.4 million call center and business process outsourcing (BPO) workers now employed in the sector. The country was challenged by the impact of the COVID-19 pandemic and the rapidly evolving geo-diversification site selection strategies of companies as they sought to diversify their footprint. The labor market appears to be recovering while real estate conditions are lagging. Many call centers are implementing new site selection strategies to navigate some of the emerging provinces. To help assess the situation, Site Selection Group takes a look at the current state of the Filipino call center industry.

The Philippines was hit hard by the COVID-19 pandemic

The COVID-19 pandemic hit the Philippines hard and significantly stalled growth in 2020 and 2021 as government mandates only allowed health workers and essential workers to report regularly to their workplace. This caused a mass migration of over 1 million call center workers to working from home (WFH). The country wasn’t ready for such a rapid switch which caused a lot of challenges due to slow bandwidth in homes and difficult living conditions where large families are often living in the same household. In the last few months, the government has lifted the restrictions and is trying to get at least 70% of the workers back into the office if companies want to be eligible for their tax holidays (see below on PEZA). However, it is leaving most employers faced with employee attrition risks since many of the workers would prefer to work from home (WFH). The impact on site selection strategies and employee attrition will begin to unfold in the coming months.

Job creation remained steady during the COVID-19 pandemic

Call center job creation continued to grow in the Philippines as U.S. consumer activity created more call volume and U.S. labor conditions eroded, which forced companies to expand in other countries. Some of the major announcements in the last year include AFNI (3,000 employees), iQor (1,500 employees), transcosmos (340 employees), R1 (1,000 employees), Support Services Group (500) and OfficePartners365 (500 employees). The IT Business Process Association of the Philippines’ (IBPAP) data estimates approximately 120,000 jobs were created between 2020 and 2021 per the diagram below:

IT-BPM Revenue and Headcount Growth

2010 to 2021

IT-BPM RevSource: IBP AP

Labor costs remain some of the lowest in the world

The Philippines remains one of the lowest-cost locations in the world for call center and back-office workers. As a result, it has become highly competitive with Metro Manila and Cebu being the most saturated markets where entry-level wages are from $2.50 to $3 per hour. You should expect to add an additional 50% for bonuses and employee benefits. Comparatively, wages in the Latin America region are ranging from $3.50 to $6 per hour. It is very important to evaluate currency fluctuations as changes in exchange rates can impact the long-term value proposition of one country over another.

Tertiary provinces see more activity and are worth consideration

Many companies are considering expansion into the next tier of provinces. Iloilo and the Davao region saw a resurgence of interest from BPO companies looking for new labor markets. In the next 12 months, industry experts, such as Leechiu Property Consultants, expect interest in Cavite, Laguna, Bulacan, and Pampanga to increase as BPOs look to cities immediately outside of Metro Manila to take advantage of lower costs and less competition. TaskUs is a good example of a BPO company that recently opened a site for 1,000 seats in Antipolo (Rizal) and has an upcoming 1,000-seat site in Batangas. Some companies may even revisit cities such as Dumaguete and Cagayan de Oro.

PEZA requirements create challenges

Since the entry of call centers into the Philippines in the late 90s, companies have utilized the Philippine Economic Zone Authority (PEZA) economic incentive program to avoid income taxes on revenue. Call centers typically would only locate in PEZA-certified buildings to take advantage of these economic incentives. WFH created challenges for the industry as workers were not coming into the registered buildings; however, the government waived the requirement during COVID-19 to help call center employers.

In the last few months, PEZA has ended the exception and returned to the provision requiring 70% of a company’s workers to be located in the office. Now companies are having to decide if they want to force their employees back into the office or lose the PEZA tax benefits. Concentrix, the largest call center employer in the Philippines with about 100,000 employees, recently announced it decided not to utilize PEZA incentives as it has kept most of its employees at home.

As an alternative to PEZA, several companies are now exploring registration with the Philippine Board of Investments (BOI) for tax incentives available under the recently enacted Republic Act (RA) No. 11534, or the Corporate Recovery and Tax Incentives for Enterprise (CREATE) Act. One of the features of CREATE is that it makes available similar tax incentives as PEZA. Once companies get used to BOI, we anticipate more companies to follow suit. In fact, registration with BOI will allow BPOs to enter new labor markets where there are few or no PEZA registered buildings.

Micro-call centers and hub-and-spoke sites emerge

The latest site selection trend has been many companies opening up smaller “micro-call centers” and “hub-and-spoke centers” that provide a hybrid WFH and in-office recruitment strategy. These smaller sites are benefitting from a more balanced recruiting strategy. They also allow call centers to locate in smaller, emerging provinces where there are fewer competitors and lower labor costs. A good example is Teleperformance, which recently set up a hub call center in Ilocos Norte, in the northernmost part of the Philippines.

Demand for call center office space dramatically declines

There was considerably less office space leased by the BPO industry in 2020 and 2021. According to Leechiu Property Consultants, the leading independent property consultant in the Philippines, the demand for call center office space slowed dramatically which is summarized below.

Philippines Office Space Demand (Square Meters)
2016 – 2021

  Online Gaming IT-BPM (BPO) Others Total
2016 57,000 500,000 90,000 647,000
2017 268,000 404,000 196,000 868,000
2018 437,000 658,000 538,000 1,633,000
2019 782,000 579,000 390,000 1,751,000
2020 27,000 189,000 173,000 389,000
2021 1,000 257,000 282,000 540,000

Source: Leechiu Property Consultants

The office market was severely affected by the lockdowns with over 2 million square meters vacant and vacancy rates of 20% in many business districts. Without demand from online gaming (POGO), it will likely take one to two years for vacancy to diminish significantly and up to three years in districts with predominantly non-PEZA registered buildings.

Many companies terminated or did not renew leases as they tried to shift to WFH and couldn’t determine in enough time, if or when they would need their call center facilities. In addition, government guidelines required companies to maintain a distance of 1 meter from one another which resulted in the underutilization of office space to as low as 50% of capacity.

Rents have dropped in most districts as landlords compete with tenants looking for office space. Rents in the prime Bonifacio Global City have dropped by 10% to 15% and in some districts like the Bay Area, rents have dropped by as much as 50%. We expect to see a recovery in rent possibly toward the end of 2021 when leasing volume starts to pick up.


The Philippines will continue to be the dominant offshore location for call centers. The scalability and cost benefits make it extremely attractive to companies seeking low-cost geographies for expansion. Despite the road bump that the COVID-19 pandemic created for the Philippines, companies will continue to invest in the country and will adapt a site selection strategy aligned with changing market conditions. If you need help finding a site in the Philippines, Site Selection Group can help you find the right location for you.

Topics:Call CenterReal EstateSite SelectionCOVID-19WFHPhilippines



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