May 1, 2017 | MANILA, PHILIPPINES

Online gaming seen to drive office space demand

ONLINE GAMING can match the office demand generated by business process outsourcing (BPO) firms, which are embarking on a solid push to the countryside as major business districts in Metro Manila near full development, real estate advisor and brokerage Leechiu Property Consultancy (LPC) said.


Considered the “new kid on the block,” online gaming accounts for 17% of the unprecedented 477,928 square meters (sq.m.) of pre-committed office space and those under negotiations for this year, the second largest source of demand after the BPO industry at 38%, data from LPC showed.

Total demand for office space is estimated at approximately 800,000 sq.m. this year, but this can increase further due to the strength of online gaming, which could easily take up 400,000 sq.m. to 500,000 sq.m. of space, LPC President and CEO David Leechiu said in a briefing in Makati City on Tuesday.

“They are equivalent to 50% of the BPO sector today. The amount of space we anticipate them to take is anywhere from 50% to almost equal of the BPO industry this year,” said Mr. Leechiu, who is also a trustee of the Information Technology and Business Process Association of the Philippines (IT-BPAP). However, the real estate veteran said it is “too early” to conclude if the online gaming market could join the BPO industry as another consistent driver of office demand, but it has “huge” potential.

“In the last 15 years, the BPO industry has the office sector all to itself. We now have somebody chasing space from the market and they did this practically overnight,” Mr. Leechiu said.

The robust demand for office space can extend the growth in rental rates to a record eighth year, with rates projected to rise by 7-10% depending on the take-up from online gaming companies, Mr. Leechiu said.

State-run Philippine Amusement and Gaming Corp. is issuing licenses to offshore gaming operators that will offer casino games through the Internet exclusively to foreigners aged over 21 years and are based abroad.

Current vacancy rates across Metro Manila is tight at 4.2% and scarcity of developable land with most of the established business districts reaching full development status by next year will accelerate the movement of BPOs to the countryside.

This will make Bonifacio Global City and Arca South in Taguig, Bay Area in Pasay City, Filinvest City in Alabang, and Evia straddling Las Piñas and Cavite the most important districts moving forward because of the availability of office supply in these areas, Mr. Leechiu said.

“We think the shift will happen very soon, beginning 2018, when land becomes scarce,” Mr. Leechiu said, noting that this is a “fantastic” time for the government to monetize their land assets by selling them or developing them through joint ventures.

On the supply side, a total of 5.4 million sq.m. of office space is projected to come on stream this year until 2023 -- half of the existing supply of 10.3 million sq.m. -- throughout the country.

Metro Manila’s share in the pipeline of new office space will be reduced to 74% from the current 85%, with the balance spread across Cebu, Davao, Calabarzon and other cities.

Cebu will continue to be the main option of IT-BPO firms outside Metro Manila, increasing its supply by 462,000 sq.m. until 2023.

Luzon, excluding Manila, will add 495,000 sq.m., and Visayas and Mindanao, excluding Cebu, will generate 190,000 in new office supply in the next five years.

The national government’s ambitious infrastructure drive, availability of manpower, presence of Philippine Economic Zone Authority sites and local government support will complement efforts to bring BPOs to the provinces, Mr. Leechiu said.