Demand For Office Leasing Hints At Philippine Online Recovery

June 29, 2022
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More than two years of disruption and dislocation for foreign-facing Philippine online gaming operators (POGOs) may be at an inflection point, as operator demand for office space starts to pick up despite pandemic uncertainty.

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More than two years of disruption and dislocation for foreign-facing Philippine online gaming operators (POGOs) may be at an inflection point, as operator demand for office space starts to pick up despite pandemic uncertainty.

Office space leasing transactions by POGO licensees fell to zero in the second quarter of 2020, amid tough pandemic restrictions for all gaming sectors and heavy pressure from the Chinese government, with demand all but crippled for two years.

But the second quarter of 2022 to May 31 has recorded transactions of 21,000 square metres, industry data shows.

This increase is likely to make the second quarter the best performer since late 2019, and defies threats posed by Omicron sub-variants of the COVID-19 coronavirus, according to data released by Makati-based Leechiu Property Consultants.

There has also seen a bounce-back in leasing activity among the wider information technology (IT) and business process management (BPM) segment in the second quarter, amid a 22.6 overall increase in market leasing activity.

The BPM segment would include at least some of the much larger number of service providers to POGO licensees.

“So it looks like it’s on the path to recovery,” company founder David Leechiu told the Inquirer newspaper on Tuesday (June 28).

“If [the Omicron sub-variants] ever successfully stops the growth, then I think it will be very temporary, and as soon as people get well and more people get well, you’re going to see a continuation of this increasing demand because the sentiment has totally changed from a tenant market perspective.”

As in many other jurisdictions, daily COVID-19 case numbers have surged again in 2022 because of increasingly infectious Omicron mutations, but the Philippines has been reluctant to impose the severest restrictions applied during previous waves of the virus.

IT and other online businesses, and now POGO operators, appear to be expressing more business confidence as a result, with IT-BPM and POGO demand rising in tandem for the first time since the pandemic started.

Leechiu noted that the resumption of POGO demand for office space is only a first salvo, with a peak of POGO-leased office space of 500,000 square metres a very distant goal, especially given the halving of POGO licensee numbers over tax changes, operational woes and threats from Beijing.

He said the administration of President-elect Ferdinand Marcos Jr., who will be inaugurated tomorrow (June 30), may prove sympathetic to a healthier online gaming segment.

“Certainly, [the incoming] administration is quite pro-China, doesn’t necessarily mean that it’s anti-US,” he said.

“I think [it] is eager to achieve a balance between the West and the East. And I think that will be a good thing for China investors coming to the Philippines, and that will include the POGO sector.”

Marcos has yet to show his hand on any aspect of gaming policy, including the next board line-up at gambling regulator PAGCOR, which Marcos will select or vet and effectively control over his six-year term.

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