How Offshore Gaming is Shaping the Real Estate Industry in the Philippines
Real estate sector in the Philippines booming
Since 2018, Philippine Offshore Gaming Operators (POGOs) have been the fastest growing industry in office space takeup in the Philippines. Their demand for office space in Manila has recently overtaken the demand from BPOs, who have traditionally been the country’s largest source of demand. But before analyzing the impact of this, let us address what POGOs are and how they have so rapidly become a major driver in the real estate industry.
In brief terms, POGOs is the official name given to those companies operating in the Philippines who offer online gambling to markets outside of the Philippines. A large portion of these are owned by Chinese nationals who have set up companies in the country. As a large part of the business is conducted in Mandarin, there has been an increase in Chinese migrants coming to work at POGOs to help with the day-to-day running of the business as well as with translations.
Why POGOs?
Before we go any deeper into the impact of POGOs on the real estate landscape in the Philippines, let’s quickly look at how they came to be. Gambling in China is illegal and the government has intensified shutdowns within the country. This caused gambling companies to set up shop elsewhere, and the Philippines has become a go-to destination, where gambling is legal and the President has warmed ties with China.
Previously having to go through PEZA, President Duterte signed Executive Order No. 13 in 2016 giving the regulation of POGOs to the Philippine Amusement and Gaming Corporation (Pagcor). Presently there are about 60 POGOs operating in the Philippines. They have created new jobs for Filipinos and they are expected to generate PHP24 billion a year in taxes. So how does that translate to reshaping the Philippine office landscape?
Real Estate Takeup
In 2018, PAGCOR eased their cap on the licenses granted to POGOs. This resulted in increased demand for office space from these offshore gaming companies. In terms of numbers, Leechiu reports a 306% increase in office space takeup by POGOs from just 2016 to 2017. A large part of this demand, approximately 70%, was in the Bay City in Pasay due to its proximity to PAGCOR’s entertainment city.
However, the demand isn’t restricted to just this part of the metro. Makati and Alabang have also experienced the demand from POGOs, causing rents to increase by 25% and 118% respectively. Outside of Manila, we also see large take ups in Laguna with 46,000 sqm, Cebu with 37,000 sqm, Clark with 34,000 sqm, and Cavite which is said to be the second Lucky Chinatown with 13,000 sqm.
Overall, Colliers reports that offshore gaming companies occupy about one tenth, or 1.14 million sqm, of the available office space in Metro Manila. As a result, they have brought in new income and opportunities to landlords and developers with POGO companies willing to pay any cost landlords ask for.
New developments are going up quickly.
New Developments
As the increase of migrant workers arrive in the country, not only are they looking at office space but housing as well. A general trend in location choices for POGOs has been accessibility to residences, retail, dining options, and transportation.
Local developers are taking advantage of the opportunity as we see the rate of new residential units moving in line with the rate of business activities in their respective districts. It is predicted that by the end of 2020, there will be 15,610 new residential units in the capital region. This is well above previous annual completions, most notably between 2016 and 2018 where the trickle-down impact of POGOs led to 10,700 new housing units. By 2021 it is estimated that there will be 152,000 new condominium units.
Not only are there new developments predicted for the capital, but as demand drives increases in rent, landlords and developers are looking outside the metro. As mentioned, POGOs look for areas of convenience, making it likely that new townships will arise. Recently we have seen these in Nuvali and Laguna, and currently in progress is Megaworld’s Arcovia City along C-5. If POGOs continue to grow, then these types of developments will be of key interest to them in terms of growth and more affordable costs.
New Life to Old Buildings
It’s not just new developments that are impacted by POGOs. Previously empty or older buildings in the capital have been given new life as they cater to these companies. Restaurants and convenience stores have opened or reinvented their menus to appeal to their new customer base.
Whether it’s having a dual language menu and signs or accepting WeChat payments, businesses located close to POGO operations have been able to take advantage of the new potential for customers.
The impact of POGOs on the country has been substantial, and we see this ripply heavily into its real estate. Whether this continues in the current trajectory or not is not guaranteed. Nevertheless, what we can be sure of is their definitive and lasting effect on the real estate industry in the Philippines.
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For those planning to attend SiGMA Manila, AIBC Manila and ICE Asia at SMX on June 8-9th, this is the buzzing business environment to be expected:
New developments are going up quickly.
