The Philippine capital is fast becoming a top low-cost destination for many multinational companies (MNCs) to set up base, according to global real estate consultants Cushman & Wakefield. The consultancy group published a research paper in August reporting that many MNCs prefer to set up headquarters in India and China.
The MNCs include research and development pharmaceutical firms (China), and information technology (IT) and business process outsourcing (BPO) companies (India). However, the research paper titled "Should MNCs Stop Paying Rent Overseas?" reported that the steady economic growth in the two countries was accompanied by high rental rates in the central business districts. More international firms are buying office space in other regions to cut costs.
According to Cushman & Wakefield, American companies are on trend, switching from leasing to buying space because of corporate taxation policy in the U.S. Profits earned outside the U.S. are not subject to federal taxes, so several companies prefer to re-invest profits earned overseas into international operations. Cushman & Wakefield speculated that a portion of the profits were being re-deployed into real estate properties that offer major returns.
Cushman & Wakefield noted that the Philippines and Vietnam may soon join India and China as the top destination for many multinational companies' overseas headquarters.
"If China or India is the present, perhaps the Philippines is the future. The economic trajectory of the Philippines is nascent compared to India, and presents great opportunities for global giants," it said.
"Financial institutions such as Citibank and J.P. Morgan occupy large spreads in the Philippines, but they currently follow a rental strategy. However, this strategy may take hold in the Philippines after companies feel more confident about growing in the region."
MNCs would benefit from investing in China, India and the Philippines "sooner rather than later," according to Cushman & Wakefield's managing director of research for Asia-Pacific.