PH real estate safe even if POGOs leave –analysts » Manila Bulletin Business

Manila Bulletin Philippines

Breaking News from the Nation's leading newspaper

Tempo

Online Newspaper

Showbiz and Celebrity News

Sports News

World News
News Asia

PH real estate safe even if POGOs leave –analysts

Published

By Bernie Cahiles-Magkilat

The potential closure of Chinese-owned POGOs (Philippine gaming offshore operators) in Metro Manila will create a temporary increase in vacancy rates in the short term but not a bubble burst as landlords are still covered by one to two-year advance security deposits paid by these operators, according to a leading property management consultancy firm.

David Leechiu, CEO of Leechiu Property Consultants, said there are now 1.1 million square meter of office floor space occupied by POGOs from the 200,000 sqm only before this activity was legalized in 2016.

Of this current figure, 65 percent are leased by Chinese POGOs and the rest are by POGOs operated by other nationalities.

Last week, the Philippine Amusement and Gaming Corp. (Pagcor) announced the suspension of acceptance of POGO applications pending a review of their operations. The Chinese government also announced plans of a crackdown on its nationals engaged in online gambling.

In a statement, Pagcor said that licensing fees and royalties from POGOs would likely hit P8 billion by the end of 2019.

“Of course, it will be bad situation, but it won’t be as bad,” said Leechiu adding, “What people don’t know is that POGOs have 1 to 2 years in advance security deposits and a big chunk of these transactions or roughly 600,000 sqms leased by Chinese POGOs were closed only in the last 18 months.”

If these tenants default on these contracts, their deposits are not refundable.

“This means landlords have 18 months or two-year buffer to look for new tenants. Even if the office spaces are vacant, they do not lose their rental income. In fact, they can earn more because they can already accept tenants as soon as the POGOs leave,” Leechiu added.

It is also good that there has been a slowdown in supply of office spaces because most of the projects from the overbuilding in 2016-2017 have already been completed and delivered, he said.

Although the scenario of POGOs closing their operations could cause an uptick in vacancy rates, Leechiu said it would not last longer than two years because supply is just meeting demand.

Besides, he noted, that even if the government has already stopped the issuance of new POGO licenses, it is still status quo in the real estate business and no POGO has stopped operation so far.

“This is far from the bubble burst, there should be a lot more to happen to create a bubble,” he said.

Francis Chua, chairman emeritus of the Philippines Chamber of Commerce and Industry, saw the planned closure of POGOs in another light saying the departure of the POGOS will pave the way for a sustainable and managed growth in building construction for office space.

While the potential departure of POGOs would definitely impact on the local economy, he said that the vacancy left by the POGOS can be eventually absorbed by the locals.

“The domestic economy is booming, there will be new takers,” he added.
Chua said that China is losing P700 million everyday from all these offshore gambling operations in the region. “This is a big drain on its economy,” he said.

The Philippines, he said, only accounts for a mere 10 percent of these offshore gambling operations of the Chinese.

“They are everywhere, not just in the Philippines but all over ASEAN,” he pointed out.

Christophe Vicic, country head of another property consultancy firm JLL Philippines, said China’s policy against their nationals engaging in gambling offshore would impact on the take-up of office and residential space as POGOs are currently a significant demand driver for office space and the residential market in the Bay Area. But Vicic also said that Chinese investments are only in POGOs but in financial and professional services, and retail, among others, that can support real estate demand.

“There would be buildings across the Philippines that may be vacant, assuming the ban on existing online gambling operations, but other demand sources such as local and foreign corporate occupiers and investors, as well as flexible workspace operators, are still projected to grow and drive real estate demand,” he added.

Related Posts