The onset of the pandemic in 2020 had a significant impact on the Philippine economy. It saw the rise of remote workers and the acceptance by various industries (albeit begrudgingly) of the importance of giving knowledge workers the ability to work from home. It was a tidal wave of hardship for many, and a multitude of businesses had to scramble to adapt to the so-called “new normal” where contactless transactions became a top priority as face-to-face transactions became the last option for many.
The Electronics and BPO industries largely stayed in place in the Philippines, but one particular sector of the BPO industry was impacted to such a degree that it ensued in a mass exodus. POGOs (Philippine Offshore Gaming Operators) were not immune to this sudden change brought on by the global pandemic. A huge influx of POGO companies became prevalent in 2018 as PAGCOR (Philippine Amusement and Gaming Corporation) announced that there were over 55 POGO licenses issued to e-casinos and sports-betting. POGOs quickly began setting up shop in the Philippines and saw a huge uptake in real estate sales and leasing. The pandemic upset that influx of ex-pats and profit overnight. Revenue from POGOs reportedly fell by nearly 25 percent in 2021.
PAGCOR cited a Commission on Audit report last June 2022 that a majority of the 2.3 billion pesos in uncollected income from POGOs was due to the pandemic. PAGCOR also stated that the said amount was the result of the gaming regulator’s intensive fight against illegal online gambling and drive to maximize collections.
From a real-estate industry perspective, POGOs have either vacated or left office spaces in an idle state which translates to approximately more than 800,000 square meters of unoccupied office space. If we take the most recent price point of 1,200.00 Pesos per square meter, the property market would be dropping over 1 billion Pesos in revenues a month, or over 12 billion Pesos in the span of a year. This also means the Philippine government would be missing out on the 12 percent VAT from office spaces rented by POGOs.
PAGCOR disclosed that many POGOs asked for the cancellation of their gaming licenses as they struggled to keep their operations afloat. The resulting lockdown from the pandemic stopped them from resuming activities as many foreign workers could not enter the Philippines due to border restrictions. Many of the exit interviews with POGOs revealed that operations relocated to our neighbors in Cambodia, Laos, Vietnam, and even as far as Dubai.
With the easing of pandemic-related restrictions and no further indications of another lockdown in 2022, projections point to the recovery of the property sector and the recovery of POGO operations in the Philippines. Indicators include the quicker-than-expected pace of recovery in the hotel sector. Condominium uptake is also expected to surpass 2021 figures. Colliers Philippines associate director for research Joey Roi Bondoc said that hotel occupancies in Metro Manila in the first half of 2022 reach 47 percent, higher than the 44 percent occupancy rate recorded in the second half or 2021. This can be attributed to the gradual return of business travel where investors start to conduct due diligence, and local guests and visitors from other countries start to increase their spending on leisure. The “staycation” market also saw a rise in the months of April to June 2022. As far as the office space market is concerned, Colliers Philippines was also bullish as it projected that office space supplies would revert to pre-POGO levels. Although POGOs are expected to either resume their leases on the office spaces they left vacant or look for new locations to set up shop. On a broader scope, more and more office spaces will be occupied as more traditional businesses are implementing RTO (Return To Office) and outsourcing firms continue their plans for expansion. Rentals are also expected to rise in 2023. Lastly, demand for condominiums and other residential properties in Metro Manila is also expected to rise as projections for the second half of 2021 and the first half of 2022 were already surpassed. Many companies are also expected to support hybrid work setups where employees can work from home and also report to the office on certain days of the week. Many responsible companies are now putting into high consideration the safety and well-being of their employees and a hybrid work setup has significant advantages for both company and employees. This is also being supported by the government’s push to finish infrastructure projects specifically related to transportation and railways. Support for digital businesses is also going to play a big role in the expansion of data centers. All of this taken into account will encourage businesses to operate close to pre-pandemic levels. Ultimately, all of this is good for the real estate industry.