BPO, gaming sectors still pushing demand for office space

Property developer Megaworld Corp. is upbeat on the demand for office space, betting on the rebound of the business process outsourcing (BPO) industry and the resilience of the burgeoning online gaming sector.

“Surprisingly, BPOs are on the comeback trail, it helps that there are new Peza (Philippine Economic Zone Authority) zones being proclaimed,” Megaworld senior vice president Jericho Go said.

Go had also noted earlier that the non-PEZA certification of certain areas created pent-up demand from BPOs. He noted that BPOs were then reluctant to sign up for long-term leases for buildings, which were not sure to get a Peza accreditation, because the fiscal and nonfiscal incentives tied to these special economic zones have a big bearing on the viability of operations.

“BPOs have been with us for 15 to 20 years and they have proven to be a very reliable, very predictable and very strong (sector) and we are still very much skewed towards BPOs,” Go said.

Malacañang’s recent actions to clear pending Peza applications, Go said, could be a game-changer that would further invigorate the BPO sector.

In the case of online gaming firms, referring to companies that locally operate gaming firms serving offshore clients, the sector became a driver of office property only in the last year. Go noted these firms did not need Peza incentives to thrive.

“We don’t want to prejudice a new entrant because they may also prove to be a viable, very reliable source of office rental or office leasing,” Go said.

To date, about 10 percent of Megaworld’s office portfolio has been leased out to the online gaming industry. The share has risen from only 8 percent in the earlier part of the year.

Growth in demand from offshore gaming has eclipsed BPOs in the past six months, he noted.

The best way to serve the online gaming firms, whose workforce mostly comprise Chinese nationals who do not speak English, would be to set them up in township projects. There, they could have their own buildings or, at the very least, their own entrance lobby and elevators.

Go said the key was to create an environment that won’t result in conflicts.

By end of the year, Megaworld will be the first Philippine property developer to put up one million square meters of office space inventory, translating to around P7.2 billion in rental revenues.

By 2020, Megaworld aims to reach around P10 to P12 billion in office rental revenues, more than half of its P20-billion annual recurring income target by that time.

In the case of Megaworld, Go said many of its PEZA applications were for office buildings outside Metro Manila.