Latest game changer in Metro Manila’s office property market

The offshore gaming industry is seen to play an increased role in the growth of the Metro Manila office sector this year.

“The significant size requirement and willingness to pay higher rents of these gaming companies will potentially offset any slowdown in office demand from the IT-business process management industry,” Colliers International director for office services Dom Fredrick Andaya said in a statement.

According to Colliers, demand from offshore gaming accounts comprised 9 percent of total lease transactions in Metro Manila last year. This showed a significant increase from the handful of gaming deals recorded in the last two years.

The Bay Area was said to be the preferred location of these gaming companies with 58 percent of the 81,000 square meters of total transactions in the area coming from this industry.

Colliers further pointed out that Pagcor issued 35 gaming licenses last year, with an upside potential of 25 additional licenses. The growth in issuance of gaming licenses is said to be an indicator of potential demand.

“With 35 gaming licenses issued by Pagcor and an average minimum space take up of 10,000 sqm, the gaming industry could contribute to as much as 350,000 sqm of office space demand in 2017. The sustained demand from gaming companies for the Bay Area will likely keep vacancies in the area low, potentially pushing other locators to consider alternative areas such as Quezon City and Alabang or even provincial locations,” Colliers said.

Colliers observed that gaming companies typically have liquid capital and prioritize securing space quickly rather than negotiating on the rates.

This is thus expected to exert pressure on the rents in the Bay Area but will also impact the other submarkets due to possible demand shift from other locators, it added.

“This shift in the market to offshore gaming will push rental rates upwards in locations preferred by gaming companies, such as the Bay Area. This will also spur demand in alternative locations such as Quezon City, Alabang and possibly provincial sites,” Andaya said.

As a response, Colliers recommends tenants to be quick to lock-in deals as offshore gaming companies are scrambling for sizeable office spaces and closing them immediately with minimal negotiations.

Landlords should meanwhile be careful though and not too quick on raising rents as this will affect the overall attractiveness of the Philippines as an outsourcing location.

“While the offshore gaming industry is a legitimate source of demand, there are also risks involved but are being mitigated by higher deposits being required by the landlords. Regardless, landlords should be able to distinguish, recognize and balance the upsides and risks of the IT-BPM industry which drove the market in the past 10 years and the offshore gaming industry,” Colliers said.