Is Trump to blame for this Philippine property chill?
Is Trump to blame for this Philippine property chill?
Signs that ‘America First’ is putting office real estate in the country last
Only a week after being sworn into office, US President Donald Trump signed executive orders that imposed extreme vetting procedures against citizens of predominantly Muslim nations, began dismantling the Affordable Care Act, and reinstated a ban on American non-governmental organisations (NGO) supporting reproductive rights.
Now Trump’s protectionist rhetoric, immortalised in tweets no less, is shaping up to be more than just a hollow threat to the business process outsourcing (BPO) industry in the Philippines. Credit Suisse reported that office real estate in the country, a sector heavily driven by BPO firms, has shown signs of a slowdown.
“Risk of slower occupancy ramp-up, or worse – cancellation of pre-commitments – for upcoming office space in the country seems to have been escalating in recent weeks,” according to a Credit Suisse note released Tuesday.
“Aside from our recent channel checks with property agents, there has been a constant flow of negative news citing uncertainties about US President Trump’s protectionist rhetoric about outsourcing, which could slow down and/or delay expansion plans particularly for US BPOs in the Philippines.”
More: Where does your country stand in a Trump presidency?
Office supply to the Philippines will have an absorption rate of 30 percent in 2017 and 10 percent in 2018, the rating agency stated. “We think the momentum of pre-leasing has been slower.”
Charito B. Plaza, director-general of the Philippine Economic Zone Authority (PEZA), told reporters last week that BPO investors have been “worried” and putting pledges on hold, pending the US president’s pronouncements.
The U.S. is going to substantialy reduce taxes and regulations on businesses, but any business that leaves our country for another country,
— Donald J. Trump (@realDonaldTrump) December 4, 2016
without retribution or consequence, is WRONG! There will be a tax on our soon to be strong border of 35% for these companies ……
— Donald J. Trump (@realDonaldTrump) December 4, 2016
The Philippines accounts for 12.6 percent of the global market for BPO, a USD23-billion sector in the country. “It’s a US-centric business,” Manuel Pangilinan, president of local telecommunications gaint PLDT, told Reuters in December. “To the extent that Trump compels, persuades or incentivises the BPO businesses to return … it will impact our business or the industry as a whole.”
Read next: The ultimate guide to SE Asian real estate in 2016
Source: Property Report