POGOs vacated 53,000 sq. m of office space in Q3 2024, driven by a government ban linked to criminal activities, according to Leechiu Property Consultants.
The landscape of commercial real estate in the Philippines is undergoing a significant shift as Philippine Offshore Gaming Operators (POGOs) vacate more office spaces in response to a government ban linked to criminal activities. According to real estate consultancy firm Leechiu Property Consultants (LPC), POGOs terminated office leasing contracts for a total of 53,000 square meters (sq. m) during the third quarter of 2024.
This recent wave of terminations adds to an earlier reduction in leased office space, where POGOs withdrew from 21,000 sq. m in the first quarter. Interestingly, there were no terminations reported during the April to June period, suggesting a sudden acceleration in lease cancellations following a decisive government action.
Mikko Barranda, LPC’s director for commercial leasing, provided insights into the current situation. “It is not for them to transfer to another building. Majority of the time, they’re terminating completely for various reasons,” he was quoted as saying in a report published by the Inquirer. This indicates that POGOs are not merely relocating; they are withdrawing from the market altogether, likely due to the crackdown on the industry.
In July, President Ferdinand Marcos Jr. announced a comprehensive ban on all POGOs during his third State of the Nation Address. He directed the Philippine Amusement and Gaming Corporation (PAGCOR) to terminate POGO operations by the end of the year. This decision was driven by growing concerns about the sector’s links to various criminal activities, including human trafficking, money laundering, and online scams.
Before the ban, Barranda noted that there had already been a noticeable decline in the office space occupied by POGOs. “If you look back over the last four years, they’ve actually been giving up space in a consistent manner,” he explained. The sector, once thriving, has seen its office footprint shrink dramatically.
Currently, POGOs occupy approximately 500,000 sq. m of office space in the Philippines. This figure is a sharp decline from the 1.7 million sq. m they occupied in 2019. This drop reflects not only the impact of the ban but also the overall reduction in the industry’s presence. LPC’s data indicates that POGOs now represent just 8 percent of total leasing activity, a significant decrease from their pre-pandemic share of 45 percent.
Barranda emphasized the reduced exposure of POGOs in the commercial real estate market. “Their footprint is not as substantial as it was during their heyday in 2018 and 2019,” he remarked. The decline in POGO operations has opened up space in the commercial leasing market, but it also raises concerns for landlords who relied on this sector for occupancy rates.
While POGOs have receded, the information technology-business process management (IT-BPM) sector has emerged as the main driver of leasing activity over the past four years. This sector now accounts for nearly half of the total leasing activities in the country, highlighting a significant shift in demand for office spaces.
Landlords and property owners are grappling with the implications of this change. With POGOs exiting the market, there is an urgent need to fill these vacancies. Some landlords may need to adapt their strategies to attract tenants from other sectors, particularly as the IT-BPM sector continues to thrive.
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