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Via Philippine Daily Inquirer: The Rise of Pogo Market

Media Coverage

Philippine Daily Inquirer (PDI) ran a story on July 20, 2019 about Pronove Tai International Property Consultants' Mid-year Metro Manila Office Market Overview:

A shift in landlord strategy now welcoming Philippine Offshore Gaming Operators(Pogos) as office tenants has given rise to a stronger offshore gaming industry, according to Pronove Tai International Property Consultants.

“While in the past 2 years, the offshore gaming operators were beleaguered due to the lack of clear regulatory environment which virtually turned this type of occupier into a pariah in the business community, this year has significantly been different. More and more landlords and local government units have warmed up to having them as tenants. Proof of this is the increase in leasing transactions accounted for by the Pogos during the first half of 2019. Of the 703,000 sqm of office space transacted, 45 percent was taken up by Pogos while the Traditional office and IT-BPM lagged at 28 percent and 26 percent, respectively”, explained Pronove Tai president and CEO Monique Pronove.

It should be noted that from only three local governments giving Letters of No Objection (lonos) to Pogos in 2016, there are now seven cities in Metro Manila issuing this document required by Philippine Amusement and Gaming Corp. (Pagcor). These cities include Makati, Pasay, Paranaque (the three city pioneers), Mandaluyong, Las Pinas, Muntinlupa and recently Quezon City by way of Special Use Permits (SUPs).

Taguig City is still not issuing lonos to Pogos but currently hosts the largest IT-business process management locators in the country and remains to be its preferred district.

Leasing transactions

Overall, office leasing transactions grew by 36 percent year on year to 703,000 sqm in the first half of the year from only 481,000 sqm in the same period last year. Pogo demand over the year registered the highest growth at 216 percent while IT-BPM registered the first negative growth rate at -8% year-on-year to 187,000 sqm.

For the first time after 18 years, the IT-BPM sector -- which consistently topped demand -- has dropped to No. 3 in the demand ranking, behind Pogo and traditional office occupiers during the first half of the year, according to Pronove Tai.

The markedly slow presidential proclamations of office buildings as Peza zones for the past three years coupled with the seasonally low demand from this sector during the second quarter has contributed to its lower take up.

“There is also still Trabaho Bill which causes uncertainty among the industry,” Pronove added. “The moratorium order issued on June 17 banning economic zone proclamations in Metro Manila has exacerbated the situation for the IT-BPM market. While decentralizing demand to suburban areas is commendable to provide impetus for growth in other areas, the government should provide a business-friendly environment across all locations where businesses have the flexibility and support to choose where it deems fit to expand based on its own parameters.”

Pronove however noted that the IT-BPM remains a significant sector in this market. It occupies 35 percent of all office stock in Metro Manila or approximately 3.9 million sqm of space. In the past two years, its average annual demand is 425,000 sqm in an environment where the average supply is 1 million sqm a year.

"While we forecast the Pogo sector to double its space this year, a diverse tenancy mix is always a success formula, thus we suggest the government to rethink its moratorium order,” Pronove said.

Pronove Tai meanwhile projected 55 buildings or 1.1 million sqm supply (new buildings completed) by the end of the year. As of end June 2019, approximately 450,000 sqm were delivered or 42 percent of total projected supply.

“At 703,000 sqm of actual leased transactions during the first half, we are confident that demand will meet, if not surpass last year’s record take up. In fact, this mid-year performance is already 85 percent of the demand average in the last five years,” Pronove concluded.

*As published on July 20, 2019 Print Edition of PDI