When the lockdowns limited their activities, Philippine offshore gaming operators (POGOs) packed their bags and relocated to neighboring countries.
This caused the local property market, which gained from the influx of POGOs under the Duterte administration, to suffer billions of pesos in losses.
Based on records from Leechiu Property Consultants Inc. (LPC), POGOs used to take up 1.67 million square meters of office space in business districts within and outside Metro Manila prior to the pandemic.
From this occupancy, the office space industry generated more than P25 billion in income yearly from leasing their properties to POGOs. Aside from that, the government earned around P3 billion through the 12 percent VAT charged from the gaming operators.
However, LPC CEO David Leechiu told Property Report PH that POGOs have either vacated or idled 875,000 sqm in office space since mobility restrictions were put in place in March 2020. At a price point of P1,200 per sqm, the office space industry missed out on P1.05 billion in revenue a month or P12.6 billion a year.
The government lost P1.51 billion in annual income from VAT paid by POGOs, aside from the real estate taxes their workers used to remit for their residential rentals.
Janlo de los Reyes, head of research and consultancy at JLL Philippines, said at least 350,000 sqm of office spaces were left behind by POGOs 18 months into the pandemic.
Most of the office space abandoned by POGOs were traced in the cities of Makati, Parañaque, Pasay, Pasig and Quezon, to as far as Pampanga and Cebu.
De los Reyes said office space owners are bleeding losses from the exodus of POGOs, as they find it difficult to fill up the vacancies due to uncertainties posed by the pandemic. He added that even business process outsourcing firms and corporate occupants hesitate to lease new office space on fears that their respective areas will revert to lockdowns.
POGO issues
POGOS will no longer take up the same volume of rentals that they obtained, especially in 2019. Various issues, ranging from the reverts to lockdown in select areas to the uncertainty on border restrictions against foreigners, dampen the industry’s outlook.
“We’re seeing variance across landlords and geographies with regard to their response to buoy office occupancy,” de los Reyes told Property Report PH.
“These are a mix of lowering rentals, flexible payment terms, accommodating interim demand, optimizing costs, shorter lease terms, among others,” he added.
Exit dialogues
Victor Padilla Jr., acting assistant vice president for offshore gaming licensing at the Philippine Gaming and Amusement Corp. (PAGCOR), said the 28 POGOs that have left the country during the pandemic flew to Dubai, Cambodia, Lao PDR and Vietnam.
Based on exit dialogues with POGOs, Padilla said these POGOs may no longer return even if the Philippines opens up the economy again. Unlike BPOs that keep on moving, POGOs settle in their locations when they deem the business environment conducive for their operations.
Comeback
LPC’s Leechiu, however, is more optimistic. He said POGOs may begin to take interest in the Philippines again by the second quarter of 2022, when the country is estimated to reach herd immunity.
He also said the passage of Republic Act 11590 will contribute in wooing new POGOs to locate their offices here.
Signed by President Duterte in September, the law requires POGOs to pay a gaming tax of five percent on their gaming revenues, and also charges foreign workers with a withholding tax of 25 percent on their gross salaries.
By taxing the operations of POGOs—which is seen to bring in P32.1 billion to state coffers next year—the government has, in turn, legalized their activities here, making it attractive for POGOs to set up now that a fiscal structure was put in place.
Only time will tell whether or not POGOs will return to the Philippines, Leechiu said. He added that what is important is for the government to manage the pandemic as soon as possible. Similar to any investor, POGOs get discouraged when the business climate is challenged.