MANILA, Philippines – Although Philippine offshore gaming operators (POGOs) were key drivers of the property sector’s office market at one point, their exit is not expected to be as significant, according to JLL Philippines.
JLL Philippines head of research and consulting Janlo de los Reyes said the effects of the POGO ban are “not going to be as huge now” since most of the entities have already left. Some did not renew their leases back in 2021, while others left the country as early as 2020.
Business process outsourcing (BPO) companies and traditional corporate firms are also seen to offset the vacancies. The trend can already be seen in leasing transactions from the first half of 2024.
BPOs had the most deals, making up almost 40% of transactions, followed by corporate or traditional firms with 34.9% of the deals. POGOs only made up 25.2% from January to June 2024.
“We expect this distribution to revert to pre-pandemic or to the previous quarters, wherein we saw around 70% BPOs and 30% for the corporate occupiers in terms of demand distribution,” De Los Reyes said in a media briefing on Wednesday, July 31.
“Developers who have lost out on these POGOs, who are going to vacate their spaces, will likely target this true and tested office demand over the [next] couple of years,” he added.
In President Ferdinand Marcos Jr.’s third State of the Nation Address, he announced a ban on POGOs, ordering authorities to make sure the entities are out by the end of 2024.
Lawmakers have pointed out that the country’s economic losses from banning POGOs can easily be recovered through other means.
‘Tenant-favorable market’
De Los Reyes sees the exit of POGOs having an effect on the property market for at least two to three years, particularly on residential and office spaces. For Metro Manila, this would lead to a “tenant-favorable market” as demand remains weak when compared to the number of new office spaces.
Developers are adjusting to attract tenants. JLL Philippines expects offices to be taken up at cheaper rates and with better leasing conditions.
“We’re still seeing a lot of concessions still and also longer lease terms for a lot of companies,” De Los Reyes said.
Overall rent for office space currently stands at P991 per square meter monthly. JLL Philippines estimates rates may go up to around P1,000 by the end of the year.
Metro Manila has around 11.09 million square meters of office space, and another 1.2 million square meters is expected to be constructed by 2028.
Office vacancy declined to 19.5%, although JLL Philippines sees this going up to 22% by the end of the year because of new office spaces being built in Metro Manila despite weak demand.
“We anticipate around 460,000 square meters of new supply,” De Los Reyes said. “These have low pre-commitment levels, meaning the take-up in these buildings [has] not been robust compared to pre-pandemic.”
Many companies have either retained a work-from-home arrangement or shifted to hybrid operations. – Rappler.com