Office market adapts to changes as POGO ban takes effect

As President Bongbong Marcos’s ban on Philippine Offshore Gaming Operators (POGOs) takes effect, the office market in Metro Manila is undergoing significant changes. Joe Curran provides an in-depth analysis of these developments, highlighting the ongoing government measures and the evolving dynamics within the real estate sector.

Government Response and Enforcement

According to Joe Curran, the Philippine Amusement and Gaming Corporation (PAGCOR) has promptly acted by revoking the licenses of five out of 46 Internet Gaming Licensees (IGLs), with a directive to shut down all POGO operations by the year’s end. PAGCOR is also scrutinizing other entities, such as Special Class BPOs, to ensure compliance with new regulations and confirm that their workforce is primarily Filipino.

The Department of Finance (DOF) has endorsed this ban, with its spokesperson affirming that the negative socio-economic impacts of the POGO industry far outweigh its benefits. Meanwhile, the Department of Labor and Employment (DOLE) is gearing up to support displaced workers in finding new job opportunities. The Bureau of Immigration (BI) is managing the visa status of Chinese POGO workers, with a plan to cancel 9G working visas by mid-October. Additionally, the Philippine Economic Zone Authority (PEZA) is working to identify any online gaming companies within its economic zones to ensure they are not affected by the ban.

Shifts in Office Space Utilization

As Curran notes, the POGO industry previously occupied a considerable 1.3 million square meters of office space in Metro Manila, representing 10% of the total office stock. This surge in demand led to higher rental rates, particularly in Pasay and Parañaque. However, the sector’s footprint has drastically shrunk, now accounting for only 350,000 square meters—about 3.5% of the office space.

Developers have reacted by reducing their POGO-related holdings, now limiting it to a maximum of 5% of their portfolios. Despite POGOs contributing to 9% of office transactions in the first half of 2024, the demand is now predominantly driven by IT-BPM firms and traditional office occupiers, which together accounted for 62% of the transactions, as reported by Curran.

Long-Term Prospects

Joe Curran suggests that while the immediate impact of the POGO ban may cause some disruptions in the office market, the long-term outlook is promising. The reduction in POGO activities presents an opportunity for the Philippines to enhance its reputation as a transparent and competitive investment destination. This shift could attract multinational companies looking for a stable and regulated environment to expand their operations.

By addressing the challenges associated with the POGO sector, the Philippines is setting the stage for greater stability and growth in its office market, potentially making it a more appealing location for global investors in the future.