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After 18 years, Philippine offshore gaming operators (POGO) dislodged Information Technology and Business Process Management (IT-BPM) as the top lessor of office space, according to an international property consultant.

In a presentation on Wednesday, Pronove Tai President and CEO Monique Cornelio Pronove said offshore gaming contributed 58 percent or 210,000 square meters of the total 359,000 sqm actual leasing transaction in Metro Manila for the second quarter of 2019.

“POGO has now taken up most of the supply. In fact, most of the demand transaction,” Pronove said.

She said second are traditional offices at 22 percent or 76,000 sqm followed by ITBPM at 19 percent or 70,000 sqm and flexi-work spaces with one percent shares or 3,400 sqm.

“So offshore gaming last year was just 51,000 sqm of space. Now it’s 210,000 sqm. It’s a huge jump, it’s 309 percent year-on-year increase,” she said.

For the last five years, ITBPM topped demand drivers for office space leasing with 57 percent of share.

As of the first half of 2019, POGO took over with 45 percent share which is almost half of ITBPM’s share of 26 percent.

Pronove said strong pre-leasing, high supply, more letter of no objection from city governments, and shift in strategy of landlords are factors which lead to the strong take up of POGO.

“In the previous quarters, previous years, we did not see POGOs taking up space that are not completed yet but because their requirement has grown, they are also taking up spaces that are not completed,” she said.

Pronove said 74 percent of POGO recorded take-up were pre-leasing transactions.

Based on their data, Mandaluyong City and Muntinlupa City dropped their vacancy rates by more than one percent. Mandaluyong City’s vacancy rate dropped from 11 percent to eight percent while Muntinlupa City fell from seven percent to five percent.

Pronove added that landlords and cities are more open to POGOs. She said seven cities are issuing letters of no objection and these are Makati, Pasay, Paranaque, Mandaluyong, Las Pinas, Muntinlupa and Quezon City.

“If you want to lease your spaces then better open up to POGOs because that is where the demand is,” she said.

“There is also a shift in strategy by the landlords. So when before they were very uncertain about whether getting POGOs are good for their building but because PEZA (Philippine Economic Zone Authority) also delayed, they already changed their strategies and open their spaces to POGOs,” she added.

However, Pronove said offshore gaming only accounts for nine percent of the entire stock.

“Number one stock is still traditional office, your bank headquarters, legal firms, finance firm. So 54 percent of the stock in the first half is accounted for traditional spaces. Second is ITBPM, the third and not even double digit is the offshore gaming,” she said.

“But if you look at these two, they are actually decreasing,” she added.

Using their 2016 data, which is when the POGOs came in, Traditional offices’ stock share was 58 percent and ITBPM at 39 percent. For 2019, both drivers decreased by four percentage points compared to offshore gaming which increased by seven percent from two percent in 2016.

Pronove said 34 percent of POGO stock is located in the Bay Area (Pasay City and Paranaque).

She said for the first half of 2019, demand for office spaces is higher than supply.

“First half demand, 703,000 sqm is already 85 percent of the average in last five years (from 2014 to 2018) which is 830,000 sqm. So we see that it will continue to be strong by the end of this year,” she said.

“And 45 percent of the demand or 315,000 sqm is actually POGO-driven,” Pronove added.

In terms of stronger demand, she said POGOs are taking over demand by 216 percent or 315,000 sqm while ITBPM slowed down to 187,000 sqm from last year’s 204,000 sqm.

“Right now, we have only around 265,000 space that are available for ITBPM because they need to be PEZA-zone. We don’t have much PEZA-zones anymore available for ITBPM. So there growth is also curtailed,” she said.

“POGO is free for all as long as the landlords want them,” she said.

Pronove said Administrative Order 18 issued last June 17, 2019 which put a moratorium banning economic zone proclamations in Metro Manila will hurt ITBPM firms.

As of June, there are 167 IT parks and centers in Metro Manila.

While the AO18 aims to decongest Metro Manila, this may lead to loss of job opportunities and decrease in peripheral services.

“This will obviously impact on the expansion of ITBPM and we will see that POGO will benefit by this by next year,” she said.

Pronove said they are expecting more demand from POGO lessors in the future as the Philippines is the only country where offshore gaming is legal.

And despite new rules set by the government where they are going to pay their taxes, POGOs will still come into the country.

“We are still the only country in Asia that legalized offshore gaming,” she said. Ella Dionisio/DMS