Global cost pressures drive offshoring interest in Philippines, says Leechiu Property Consultants

Rising operating costs and tighter foreign labour restrictions in Western economies are prompting more companies to consider shifting jobs to the Philippines, with some international firms looking at operations involving 5,000 to 30,000 positions, according to Leechiu Property Consultants.

Rising operating costs and tighter foreign labour restrictions in Western economies are prompting more companies to consider shifting jobs to the Philippines, with some international firms looking at operations involving 5,000 to 30,000 positions, according to Leechiu Property Consultants (LPC).

LPC Chief Executive Officer David Leechiu said higher inflation, interest rates, and uncertainty over corporate revenues were pushing companies to focus more aggressively on reducing costs.

“Corporations have accepted that [the Middle East conflict] is going to go on for a while, and the consequence is that inflation is going to hit countries everywhere. Many corporations do not have visibility on their top line, but they have massive visibility on their cost base which is only going to go up,” Mr. Leechiu said during the firm’s third-quarter market briefing on Tuesday. “The only way they can show profits and meaningfully move cost is if they offshore to the Philippines and India,” he added.

LPC said stricter immigration policies and foreign labour restrictions in major Western markets were also contributing to greater interest in offshore hiring. Mr. Leechiu cited the United States, where he said tighter immigration rules were making it more difficult for companies to employ foreign workers. “The US is making it extremely difficult for foreigners to work there and for corporations to employ foreign talent. Because of that, there’s been a brain drain… forcing companies all over the US to tap offshore talent through offshoring and virtual jobs,” he said.

He also said European investors were looking more actively at Asia amid structural economic pressures in Europe. “European billionaires are touring this market and buying assets meaningfully because they want to spread their eggs throughout Asia away from Europe, which is facing long-term structural issues,” Mr. Leechiu said.

LPC said emerging technologies, including real-time language translation, could expand the Philippines’ potential offshoring market to non-English-speaking economies such as Japan, where demographic pressures are increasing labour demand. LPC Director for Commercial Leasing Mikko Barranda said international companies were also increasingly establishing their own global capability centres instead of relying solely on third-party outsourcing providers.

“Instead of accompanying the US using an outsourcing model, they’re doing it themselves. When they come to the Philippines, they’re looking to grow massively. They’re not looking to just hire 50 people, they’re looking at 1,000 to 2,000 people. The confidence of these companies to do it themselves says a lot about their foresight in being in the Philippines much longer,” he said. LPC also said demand had increased for managed office arrangements as companies sought to spread fit-out and other capital costs over longer lease periods rather than shoulder them upfront.