By Denise A. Valdez
PHILIPPINE offshore gaming operators (POGOs) have fueled Philippine office space demand to a record-high 1.7 million square meters (sq.m.) in 2019, according to a report released by real estate service firm Leechiu Property Consultants (LPC) on Monday.
In its year-end briefing in Makati City, LPC said POGOs have accounted for 44% of office space demand this year at 738,000 sq.m., growing 67% from 443,000 sq.m. last year.
It has replaced the information technology-business process management (IT-BPM) sector at the top driver which accounted for 34% of office space demand in 2019 with 573,000 sq.m. from last year’s 652,000 sq.m.
Other businesses took the remaining 22% with 379,000 sq.m. from 491,000 sq.m. in 2018.
LPC President David T. Leechiu said this high demand from POGOs is expected to hold until 2020, given POGOs’ aggressiveness in setting up in the country.
But unlike Makati Mayor Mar-Len Abigail S. Binay who has imposed a moratorium on POGO permits, Mr. Leechiu said POGOs could yield net gains for any local government.
“I don’t look at it as China. I look at it as foreign investment. I come color blind in that sense,” he said, referring to the fact that the bulk of POGO workers come from China.
He noted that the entry of foreign investors such as POGOs fuels the growth of real estate tax collections, business permit applications and revenues for local governments, providing much-needed cash to fund projects.
“Foreign investment is a need. Law enforcement is another need. Tax collection is a different problem, prostitution is another problem… The solution is not shutting down these operations… but to enforce the law,” Mr. Leechiu said, referring to concerns that some POGOs have been found involved in crimes like narcotics distribution and prostitution.
LPC noted that in Metro Manila alone, demand from POGOs has grown 11-fold in the past four years to 608,000 sq.m. office space in 2019 from 57,000 sq.m. in 2016.
The bulk of these operations can be found in the bay area, where POGOs occupied 657,000 sq.m. of office space in 2019. They are also in Makati City (292,000 sq.m.), Alabang (137,000 sq.m.), Cavite (146,000 sq.m.), Quezon City (103,000 sq.m.), Pampanga (140,000 sq.m.), Ortigas (120,000 sq.m.), Laguna (65,000 sq.m.), Cebu (48,000 sq.m.), Taguig City (23,000 sq.m.) and Nueva Ecija (12,000 sq.m.)
Mr. Leechiu said this high demand from POGOs will prevent oversupply, as there are 4.8 million sq.m. of office space projected to open in the next five years, spread across Metro Manila (70%), Cebu (15%), Pampanga (seven percent), the rest of Luzon (four percent), the rest of Visayas (three percent) and Davao (one percent).
But he admitted that the presence of POGOs has “priced out” locals from residences.
Still, he believes “there are more people benefitting from it (POGOs) than being priced out.”
“If you want a country to ourselves only, fine. But how long will it take for us to lift these people out of poverty?” Mr. Leechiu said, referring to job opportunities for drivers and household helpers that opened to serve POGO workers.
“If you want this country to blossom and grow and prosper, we have to open up the country to foreigners as many others have.”
At the same time, the IT-BPM industry is expected to continue taking a hit from a moratorium on Metro Manila economic zones under the Philippine Economic Zone Authority (PEZA) imposed by Malacañang last June.
LPC projects the country will no longer have a supply of vacant office space for IT-BPM by 2022, thus failing to absorb the demand for 600,000 sq.m. of office space every year.
“Lack of PEZA supply is likely to make the Philippines a less attractive hub for IT-BPM firms on expansion mode. We need more PEZA-accredited buildings in the pipeline if we want the country to continue being an ideal location for these companies,” Mr. Leechiu said in a statement.
The implementation of Administrative Order No. 18 starting June, or the ban on the processing of applications for ecozones in Metro Manila, has already been flagged by industry stakeholders as threat to the growth of IT-BPM in the country, resulting not only in a lack of office space but also in 50,000 prospective jobs gone.