President Ferdinand Marcos Jr.’s order to ban Philippine offshore gaming operators (POGOs) drew reactions from the property sector, as the move will directly impact the office and residential market.
As POGOs still account for a notable portion of the office space demand in Metro Manila, their exit poses both challenges and opportunities for the real estate market.
Impact of POGO exit
At their peak in 2019, POGOs occupied around 10 percent of Metro Manila’s office space, according to Colliers Philippines.
The sector’s footprint has since shrunk considerably amid the pandemic and regulatory crackdowns.
POGOs now account for about 3.5 percent of the office stock, a decrease that reflects broader shifts in demand. Major developers’ exposure to POGOs has been limited, with most portfolios showing minimal POGO involvement.
Property resilience
While the ban on POGOs will still impact the office market, Colliers Philippines said the office landlords are being comforted by the fact that office demand from other drivers like the IT-BPM companies; traditional, local and multinational companies; and government agencies continue to pick up.
Data show that on the first half of 2024, these sectors accounted for the majority of office transactions, underscoring a diverse and stable demand landscape.
Leechiu Property Consultants (LPC), in its recent briefing, revealed that government agencies were emerging as among the key drivers of demand in the office sector and were upgrading to new buildings to enhance their workspaces and operations.
Leasing demand from government office surged by seven-fold to 113,000 square meters (sq. m.) from just 14,000 sq m in the same period last year, according the data from LPC.
Filinvest Land Inc. last month reported it bagged a contract for the lease of office space for the National Bureau of Investigation.
Office transactions for IT-BPM also increased by 13 percent in the first half of 2024 from the same period last year.
LPC chief executive David Leechiu said, however, office landlords with current POGO tenants would have longer time to find replacements that are willing to pay the same rates as POGOs, particularly in Bay Area, Alabang and some portions of Makati.
Leechiu said that because of the ban on POGOs, the recovery of the office sector, which is already saddled by oversupply problems, might be delayed by another year.
“There will be a delay the equilibrium in the supply and demand in the office sector by one year. Instead of having equilibrium by 2027, we will have it by 2028,” Leechiu said.
Leechiu said the ban on POGO would also be felt in the secondary market of the residential sector, which is into leasing condominium units to POGOs.
“POGOs, right now, are paying P40,000 to P50,000 per month of a small residential unit. Those rates will come down by 50 percent,” Leechiu said.
Property outlook
While the POGO ban presents an immediate challenge, the Philippine property sector is likely to navigate this transition effectively.
With a diversified tenant base and major developers’ minimal exposure to POGOs, the office market is poised to sustain its momentum. The sector’s focus will shift towards strengthening existing demand drivers and adapting to new market dynamics as regulatory details emerge.
LPC projected that by end-2024, some 786,000 sq. m. would be added to the office supply with live demand currently at 453,000 sq. m.
