Demand for office space from Pogos gets stronger

Demand for Metro Manila office space from Philippine online gaming operators (Pogos) remained “relentless” in the second quarter and might soon breach the one million-square-meter mark in terms of occupied office space, making up for the slack in demand from the business process outsourcing (BPO) industry.

This will be equivalent to about 9 percent of the 11.5 million sqm of total office stock in the National Capital Region, according to property consulting firm Colliers Philippines.

Colliers reported that combined demand from call centers and knowledge process outsourcing (KPO) companies—which formed the country’s business process outsourcing (BPO) industry—declined in the first semester. The moratorium in the approval of Philippine Economic Zone Authority (Peza) applications is seen constricting the expansion of BPOs.

In the first semester, Pogos took up 274,000 sqm of new office space in Metro Manila, surging by 59 percent from a year ago. Deals were closed in Alabang, Bay Area, Quezon City, Ortigas, Makati CBD and its fringes in the second quarter, Colliers reported.

The Pogo sector accounted for 37 percent of all office property leasing deals in the first six months of the year. Recently, however, China has started taking a closer look at Pogos amid concerns about money laundering and social issues such as human trafficking and inhumane working conditions of mainland Chinese workers employed by this industry.

“Currently, they occupy 970,000 sqm and they will definitely breach one million sqm by the end of the year,” Colliers Philippines research manager Joey Roe Bondoc said in a briefing.

Enticed by the economic stimulus brought about by Pogos to host areas, more cities like Quezon City and Ortigas have started opening up to these locators.

In the meantime, voice or call centers and KPOs took up 199,000 sqm of additional office space in Metro Manila in the first six months, down by 45 percent year-on-year. KPOs accounted for 37 percent of total transactions in the first half while call centers accounted for 10 percent.

“We attribute the dip in transactions to the slower approval of economic zone applications in Metro Manila and the uncertainty regarding the approval of the second package of comprehensive tax reform program which intends to reduce corporate income tax rates but purge incentives given to foreign investors including outsourcing firms,” Colliers said in a research note.

Colliers sees Metro Manila’s leasable office stock reaching 14.3 million sqm in 2021, 21 percent higher than the end-2018 stock. About 54 percent of the new supply from 2019 to 2021 will likely be in Ortigas Center, Fort Bonifacio and the Bay Area as developers respond to rising demand from non-outsourcing and offshore gaming firms as well as companies transferring to newer buildings.

Despite the completion of 190,000 sqm of office space in the second quarter, Colliers recorded a lower vacancy of 4.9 percent in the second quarter from 5.4 percent in the first quarter.