Metro Manila office market could decline to two-year low amid Philippine crackdown on Chinese online gaming operations

Office vacancies could rise to a two-year high in Manila, as the Philippines starts to crack down on Chinese-operated online gaming operators to curb a rise in criminal activity associated with their operations.

Vacancies are likely to rise to 7.6 per cent this year, a level last recorded in the last quarter of 2017, from 4.3 per cent in 2019, based on data by consultancies Colliers International and Cushman & Wakefield. Rents are also likely to decline amid lower demand for projects set to be completed in the near term.

The online gaming operators, known as Philippine Offshore Gaming Operators (Pogos), occupied about 1.26 million square metres of office space in 2019 in Metro Manila, which covers other business hubs besides Manila, representing 11 per cent of the total office space in the capital. They have set up in Manila as online gambling is illegal in mainland China.

“Assuming that all Pogo firms leave the country due to the crackdown, we are likely to see a higher office vacancy in Metro Manila,” said Joey Bondoc, senior research manager for Philippines at Colliers. “If no additional space is taken up by the Pogo sector this year, vacancies could rise to 7.6 per cent,” he said, noting that in the last three years, these firms have accounted for about a third of total office deals in Metro Manila.

Colliers had trimmed its rental growth forecast for the segment to 5.6 per cent from 5.8 per cent, but this does not take into account developments around the Covid-19 outbreak.

The bleak outlook reflects the significance of Pogos to Philippine real-estate market. A legislative probe into their activities was first held in January after a Filipino lawmaker sought the suspension of visa-upon-arrival privileges for Chinese nationals, saying that the scheme was linked to the rise of criminal activity in the Philippines.