Philippine property developers are now looking at online gambling firms to play messiah and save the cooling office space sector as business process outsourcing (BPO) investments dwindle.
For years, the BPO sector accounted for 60 to 70 percent of total office space demand while the online gambling sector played second fiddle.
Property consultancy firm Colliers International, however, noted that the story will be different for the Philippine office space this year as BPO investments cool down.
Analysts are expressing concern over the impact of the BPO slowdown to the property sector, especially when office space taken up by the so-called sunshine industry fell to 21 percent in the first quarter of 2017 before a modest rebound to 31 percent as of the first half of the year.
Malaya reported that the reasons for the BPO slowdown were hard to quantify, especially when investors take their cue from economic and political developments in and outside the Philippines.
“The most cited factors are the lurch to economic nationalism in the United States, led by President Trump’s anti-outsourcing stance and a perceived decline in the peace and order situation in the Philippines associated with extrajudicial killings. BPO industry factors such as increasing talent recruitment difficulties (and cost) together with the threats to jobs from automation are also inevitably playing a part,” Colliers said.
The silver lining in the Philippine office space, according to Colliers, is the online gambling sector, which has been gobbling more office spaces.
The Philippine Amusement and Gaming Corporation (PAGCOR) has awarded at least 42 Philippine Offshore Gaming Operators (POGO) licenses and they filled about 120,000 sq. meter void left by the BPOs. By the first half of 2017, Colliers said that online gaming firms accounted for 30 percent of office space transactions.
More office spaces will be filled up by online gaming firms if PAGCOR issues the remaining eight of the 50 POGO licenses.
“But with transaction volumes merely holding-up, that means net take-up is also flat and suggests that in 2017 we will see a supply surplus of about 270,000 sq.m and vacancy will rise to 6.3 percent by year end,” the property consultancy said.