Lack of office supply driving POGOs outside MM — JLL

MANILA, Philippines — Strong office space take-up by Philippine offshore gaming operators or POGOs is seen to continue this year, as these firms are projected to expand outside Metro Manila due to tight supply, Jones Lang Lasalle Philippines said.

“We think online gaming will continue to maintain its momentum in 2020,” JLL Philippines head of research Janlo de los Reyes said.

“If we’re going to look now, a lot of POGOs are moving outside Metro Manila. It’s not because they’re required to leave Metro Manila, it’s because of the lack of available space,” he said.

De los Reyes said the size requirements of POGO firms are similar to that of business process outsourcing (BPO) companies, which range from 5,000 to 20,000 square meters.

He identified Cavite, Laguna, Clark and Cebu City as some of the areas POGO firms are setting their sights on.

Apart from supply constraints, another factor driving POGOs to locate outside Metro Manila is the policies of some local government units in banning POGOs from their cities and municipalities.

De los Reyes said the continued growth of the POGO market shows opportunities available for investors in the Philippine real estate market this year.

“For 2020, there’s a lot of opportunities in the Philippines. For office, I think we’re still relatively cheap in terms of the rent. You have a POGO market, we’re seeing demand from that side. The BPOs are also there, although they’re quite slow than the POGOs,” De los Reyes said.

JLL named the Philippines, particularly Manila, as among the most dynamic cities, as it ranked 8th in its global City Momentum Index.

Manila rose to eight spot this year from 12th last year.

In terms of real estate, Manila ranked 48th, with prime rental growth of +3.8 percent average for 2020-2022, ranking 19th globally; office net absorption registered at 7.3 percent of stock, ranking 14th globally; and hotel construction of 15.6 percent of stock, also ranking 14th globally.

Asian cities dominated the 130-country index, which combines socio-economic and commercial property metrics. These cities include Ho Chi Minh, Shanghai and Mumbai.

Moreover, apart from the office market, De los Reyes cited optimism for other property segments such as the residential and industrial markets.

“For residential, again we’re also cheaper than other markets still,” De los Reyes said.

Despite being cheaper than other markets, JLL reported that residential prices have been growing at a record high, posting annual average growth of 8.6 percent between 2008 and 2019.

“Again, I will be selective in terms of the product or the segment you’re investing in. I would stay still the luxury would be a good bet,” De los Reyes said when asked of which residential segment it would be best to invest in this year.

“For industrial, I think it’s a heavily underserved market. If you’re going to look across markets, a lot of the different markets across the globe are actually looking at industrial business as their bright spot and we have headwinds from Hong Kong. Majority is being funneled to Singapore, but we can also expect a bit growth capture from that area,” he said.