IN A briefing in Makati City yesterday, the real estate consultancy services firm Colliers International Philippines said travel restrictions on China due to the novel coronavirus may lead to a shrinking of the Philippine Offshore Gaming Operators (POGOs) sector and a resultant increase in vacancy rates, especially in the Bay Area.
“There’s a travel ban imposed by the government to and from China. We see this constricting the flow of more Chinese offshore gaming employees here in Metro Manila. Hence, we expect lower take-up for office space from POGOs, because while POGOs want to expand operations, they do no have the people to man the operations,” Colliers Research Manager Joey Roi H. Bondoc said.
The Philippine government has imposed a temporary travel ban on flights to and from China, Macau, and Hong Kong since Sunday. Local airlines have suspended flights in these territories.
Data from Colliers said POGOS took up 333,000 square meters (sq.m.) of office space in Metro Manila in 2019, translating to a vacancy rate of 4.3%. With the blanket travel ban on flights to and from China, the firm projected that the vacancy rate in the metro this year may shoot up to 5.3%, with POGO take-up at 300,000 sq.m. This will tick higher to 6% if POGO take-up falls to 200,000 sq.m., to 6.8% if take-up is at 100,000 sq.m., and to 7.6% if POGOs take no space at all.
The effect is likewise expected in residential properties, as Colliers said POGOs contributed to higher demand in 2019, especially in Makati City, the Bay Area, Ortigas, and Quezon City.
“Note that 80% of new units that will be completed in 2020 are in the Bay Area, and (fewer POGOs) will have an impact on overall secondary vacancy in Metro Manila,” Mr. Bondoc said.
He said 11,400 new residential units are expected to be finished in the Bay Area this year. If this is fully taken up, vacancy rate in the whole Metro Manila would fall to 10.4%.
However, if take-up in the Bay Area settles at 6,000 units, the vacancy rate will rise to 14.4%; or if it falls to as low as 3,000 units, the vacancy rate will jump to 16.6%. In the worst case scenario that none of the 11,400 new units is taken up, the vacancy rate across Metro Manila increase to 18.8%.
Comparing the effect of the novel coronavirus against 2003’s SARS (Severe Acute Respiratory Syndrome) outbreak and 2009’s H1N1 influenza outbreak, Colliers Philippines Managing Director Richard T. Raymundo said the bigger impact may be traced to the the increased economic relationship between the Philippines and China.
“There’s only one difference right now with the coronavirus. Back with those two viruses (SARS and H1N1), we were not dependent on China. When there was SARS, our tourism numbers from China was (less than 10%). The tourism number right now for China is (21.73% as of November 2019),” he said.
Mr. Raymundo added the retail segment may also be affected, as most Chinese nationals living in the Philippines are luxury shoppers. “Anecdotal evidence from the high-end ones (say) it’s mostly a Chinese clientele for them,” he said.
Hotels may likewise feel the immediate impact, as the flight cancellations directly translate to reduced bookings and reservations.
Despite these challenges, Colliers believes the real estate sector may still enjoy several growth drivers this year: continuous demand for space from outsourcing and traditional sectors for the office segment; more launches in the fringes for the residential segment; the redevelopment of food courts for the retail segment; a record supply of 2,800 rooms for the hotel segment; and the growth of consumer spending for the industrial segment. — Denise A. Valdez