Real estate experts in the Philippines predict that the government’s recent ban on Philippine Offshore Gaming Operators (POGOs) could send shockwaves through the real estate industry.
The industry insiders predict that rental rates for residential spaces could drop by 50 percent, while the vacancy rate for residential units in Metro Manila is projected to rise from the current 17 percent to 19 percent.
David Leechiu, a property sector expert and CEO of Leechiu Property Consultants, detailed in an interview with ANC that the secondary rental market may face considerable challenges.
“I think the secondary market will have a tough time because rents will come down by 50 percent, and it will take longer to find tenants, with most being local rather than foreign tenants,” he said.
He noted that POGO and POGO-related tenants have been significant lessees in this market. Despite the anticipated decline in rental rates, Leechiu believes that both the high-end and low-end segments of the market should remain stable.
Condo vacancy rate could reach 19%
Joey Bondoc, Director for Research at Colliers International-Philippines, notes that the vacancy rate for residential units in Metro Manila is projected to rise to 19 percent following the POGO ban.
Bondoc told the Philippine News Agency (PNA) that this increase will likely impact an already sluggish residential market. The POGO exodus, which began before the presidential directive during the COVID-19 pandemic, has led to significant price corrections in the sector. The vacancy rate was 17.9 percent in Q4 2021 and has remained around 17 percent since.
The complete POGO ban is expected to push this rate up to 19 percent, potentially dampening the take-up of residential units and slowing price and lease rate growth.
Approximately 20,000 foreign POGO workers have been given a deadline of September 24th to voluntarily leave the Philippines or face deportation. The Bureau of Immigration (BI) has stated that this order offers no exemptions, even for those with families and children in the Philippines.
Despite these challenges, Bondoc sees a silver lining for local investors. The price correction, driven by reduced demand from POGO workers, presents opportunities for local buyers. In 2019, during the POGO boom, prices per square meter increased by 10.9 percent quarter-on-quarter. With the decline in POGO activity, price growth has slowed to around 2 to 3 percent, with lease rates expected to recover gradually from 2024 to 2026.
Meanwhile, developers have continued to deliver new residential units, with 11,300 units turned over in 2023, close to the 11,700 units delivered in 2018. These projects, initiated during the POGO boom, are now expected to attract local investors and overseas Filipino workers as the market adapts to the new conditions brought about by the POGO ban.
Office market
The full impact of the total POGO ban on the real estate market in Metro Manila remains uncertain until concrete regulations and policies are issued. Despite this lack of clarity, property management consultancy firm Colliers International-Philippines anticipates that the ban will still significantly affect the office market in the region.
According to a study shared with AGB by Colliers’ Executive Director of Office Services, Dom Fredrick Andaya, although POGO-occupied spaces have decreased to a modest 3.5 percent of the total office stock in Metro Manila, the ban’s repercussions are expected to be significant.
The firm notes that while the proportion of POGO-occupied spaces has diminished, the overall influence of this sector cannot be entirely dismissed.
In a previous interview with AGB in February of this year, Colliers revealed that POGO operators comprised 20 percent of office space deals in 2023. At the height of POGO demand in 2019, the sector occupied an estimated 1.3 million square meters of office space, accounting for 11 percent of the total office supply in Metro Manila.
As of the first half of 2023, only 656,000 square meters of office space are currently occupied by POGOs (including IGLs) in Metro Manila, representing about 5 percent of the total office supply. Fifty percent of the remaining POGO-occupied spaces are located in the Bay Area.
Meanwhile, in the latest research, Dom Fredrick Andaya notes that there is some reassurance in the fact that major developers’ exposure to the POGO industry has also significantly decreased.
Other demand drivers, such as IT-BPM companies, traditional, local, and multinational businesses, and government agencies, continue to drive demand for office spaces. This diversification of demand is seen as a positive counterbalance to the decline in POGO-occupied spaces.
Ambiguity in policy
To ensure the effective implementation of the POGO ban, it is crucial for government agencies like the Department of the Interior and Local Government (DILG) and the Philippine Amusement and Gaming Corporation (PAGCOR) to coordinate and develop detailed policies and implementing rules.
Currently, the ban lacks specifics regarding affected entities and the process and timeline for winding up operations. A key issue to resolve is whether Internet Gambling Licensees (IGLs) and back offices supporting gaming within special economic zones, such as Philippine Economic Zone Authority (PEZA) and Cagayan Economic Zone Authority (CEZA), which have operated independently of PAGCOR and existed prior to the creation of POGOs, will be included in the ban.
Until the implementing rules and regulations are finalized, Colliers expects that POGO occupiers will adopt a wait-and-see approach. The uncertainty surrounding the implementation method—whether it will be through an executive order, a law passed by Congress, or PAGCOR regulations—adds to the ‘ambiguity’.
Colliers cites Pasig City’s approach in December 2022, where an ordinance effectively banned POGOs by not renewing existing business permits and denying new applications, as a potential model for executing the national ban.
