NCR office space vacancy seen rising to 15.6%, rental rate falling by 20%
Amid the exodus of once high-flying Philippine offshore gaming operators (Pogos), about 15.6 percent of total office space in Metro Manila may end up vacant by the end of this year, dragging down rental rates by about a fifth of last year’s level, property consulting firm Colliers Philippines said.
From 11 percent seen before the pandemic, Pogos now occupy only 6 percent of total office stock in the metropolis due to a confluence of tax uncertainties, pandemic-related travel restrictions and the crackdown against gambling by China.
“So are Pogos in or out? It’s hard to have a definite answer, though there are more signs that are unfavorable to Pogo people. The fact remains their reduced occupancy is still significant at 6 percent, so if they do reopen, they still have more than enough offices to jump-start their operations,” Colliers director for office services Dom Fredrick Andaya said in a property market briefing on Friday.
Pogos have vacated a total of 550,000 square meters (sqm) of space in the metropolis as of end-June this year, leaving about 790,000 sqm still occupied by remaining players, Andaya said.
Aside from the direct effects of the pandemic like the travel ban and the lockdowns, the government had wanted to slap a 5-percent franchise tax on Pogos but the Supreme Court issued a temporary restraining order against this. Congress is now working on a tax framework deemed more acceptable to the sector.
Andaya noted that pandemic-related travel bans remained while China—where gambling is illegal—was making it more and more difficult for its citizens to work in overseas (online gaming operations). Apart from jacking up penalties on Pogo workers in various jurisdictions, families of overseas Pogo workers were threatened with economic sanctions to force these workers to return to China.
The sector boomed when President Duterte came to power in 2016, as he rekindled economic ties with China.
The 15.6 percent vacancy rate and 20 percent decline in rental rate projected by Colliers were worse than earlier expected. It earlier projected vacancy rate would be 12.5 percent, while rental rates would fall by only17 percent.
The forecasts had been revised as second quarter vacancy rate already hit 12.7 percent.
But there are green shoots in the sector that may lead to some stability in 2022.
After staying relatively “quiet” in 2020, Colliers managing director Richard Raymundo said business process outsourcing operators were showing signs of improved activity.
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