How Does the POGO Ban Affect the Commercial Property Sector?
With President Ferdinand "Bongbong" Marcos Jr. announcing a permanent ban on Philippine offshore gaming operators (POGOs), there is some anxiety among investors in the commercial real estate sector. POGOS, after all, has been a major contributor to the market over the past five years. Unsurprisingly, in the aftermath of the peak years of POGOs, the Philippine commercial real estate market is starting to see more vacant offices in Metro Manila.
Data from Leechiu Property Consultants' (LPC)’ latest property market report, shows that 75,000 sqm of office space is attributed to POGOs during the first half of the year. This accounts for about 10 percent of the entire commercial real estate share.
In the same period last year, local online gaming operators took up quite the space. At the time LPC reported that roughly 88,000 sqm of office space were, in fact, reserved for POGOs, mostly found in the Bay area. The said area also recorded a robust demand at 101,000 sqm. It was in 2019 that POGO office occupancy had its strongest year, then becoming a major demand driver for the sector.
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Industry insiders are also predicting the reduction of rental rates amidst the uncertainty. David Leechiu himself noted in an interview with ANC that rent prices in the secondary market would be down by as much as 50 percent and that tenants might be hard to come by. This is because of the departure of more POGOs.
The effects of the POGO contraction are mostly seen in areas like Alabang, the Bay area, and Makati. LPC's report also noted that beginning in 2025, there is an expected drastic drop in office supply by as much as 50 percent annually.
Likewise, research by Colliers International-Philippines found that the vacancy rate for residential properties in Metro Manila should be able to rise by 19 percent after the ban.
In a separate interview with AGB, Colliers confirmed that POGO operators accounted for 20 percent of office space transactions last year. Of course, at the height of the demand, the industry saw about 1.3 million sqm of space going to POGO-related activities in 2019, taking 11 percent of the total supply in the metro.
The Bay area, in particular, saw a decrease in vacancy rates, as previously reported by LPC. This is attributed to the high occupancy led by traditional companies and government offices. An additional 98,000 sqm of new vacancy and 84,000 sqm of contractions were added in the second quarter of 2024.
