Philippine offshore gaming operators (POGOs) are slowly returning to the Philippines after a mass exodus last year brought on by the pandemic, according to Leechiu Property Consultants. Their return is expected to significantly benefit the local real estate industry.
David Leechiu, Leechiu Property Consultants chief executive, explained that the company has begun receiving numerous inquiries from POGOs for potential office space rentals in the fourth quarter of the year.
He cited the ratification of Senate Bill 2232, which aims to add more taxes and clarify concerns regarding POGO tax regulations, as one of the biggest growth-driving factors for the sector that will likely result in improved investor sentiment.
The rise and return of POGOs
POGOs have been making a significant mark on the Philippine financial landscape these past few years, particularly in the real estate industry.
These firms contribute almost Php 550 billion worth of revenue to the local economy every year, surpassing the Php 446 billion average annual contributions of business process outsourcing and information technology companies.
Moreover, yearly office rental for POGO companies is estimated to be around Php 11 billion, while housing rental for POGO employees is roughly Php 36 billion.
The flood of investors and employees from China were partly responsible for the surge in growth for commercial real estate in Pasay City and Paranaque City which comprise the Bay Area in Manila, as detailed in Lamudi’s 2019 market review.
In an article by the Manila Standard, Leechiu Properties revealed that over 1.7 million square meters of real estate in the Philippines was already taken up by POGOs in the first quarter of 2020.
At the height of the pandemic, around 396,000 square meters of that total occupied space was vacated, with 30% of POGOs leaving the country while the remaining 70% stayed put. This resulted in a noticeable decline in rental rates and over 1.6 million square meters of unoccupied office space throughout the pandemic, said Rappler.
The firm predicts office space demand to reach 600,000 square meters this year, driven by strong take-up from both POGOs, logistics, e-commerce, and business process outsourcing companies. During the first quarter of 2021, demand for these properties peaked at 291,000 square meters.
Jumpstarting the office space rental market
Strict lockdown protocols during the pandemic caused a drastic slump in office space rentals last year.
However, the lifting of quarantine restrictions, vaccine rollouts, and the passing of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law in April this year have jumpstarted vacancy levels once again. These conditions have made companies more confident to return to physical workspaces.
Interest in renting office spaces is also being further encouraged by an increasingly tenant-favored market, with more landlords becoming amenable to lenient lease conditions for tenants and lower rental fees to attract potential occupants.
These factors, in conjunction with the return of POGOs to the country, reflect the positive trends observed in central business districts in a report published by Lamudi in February. According to the data presented in the report, demand for commercial real estate is expected to climb in Makati, Taguig, and Quezon City.
These predictions are supported by the completion of numerous transportation and mobility projects, such as the Metro Manila Subway and the Bonifacio Global City-Ortigas Bridge, which are expected to further incite revitalized interest for commercial real estate in these locations.
Fringe cities, particularly those with technoparks, are also experiencing a surge in demand as companies are seeking less congested areas with plenty of large-scale logistics and warehousing opportunities.
Silang, Cavite and Santa Rosa, Laguna are among the fringe cities that more companies are setting their sights on. This may be due in part to the presence of Sterling Technopark and Laguna Technopark in these areas, respectively.
All of these conditions point to more favorable conditions for the commercial real estate industry in the months to come.
Sources: Manila Standard, Rappler, ASEAN Briefing