Manila, 08 February 2017 – The offshore gaming industry is expected to play an increased role in the growth of the Metro Manila office sector this 2017. As of yearend 2016, 35 gaming licenses have been issued by PAGCOR with an upside potential of 25 additional licenses.

Colliers International Director for Office Services, Mr. Dom Fredrick Andaya said, “The significant size requirement and willingness to pay higher rents of these gaming companies will potentially offset any slowdown in office demand from the IT-BPM industry.”

Issuance of gaming licenses indicator of potential demand

In 2016, demand from offshore gaming accounts comprised 9% of total lease transactions in Metro Manila, which is a significant increase from the handful of gaming deals recorded in the last two years. The Bay Area was seen to be the preferred location of these gaming companies with 58% of the 81,000 sqm total transactions in the area coming from this industry.

With 35 gaming licenses issued by PAGCOR and an average minimum space takeup of 10,000 square meters, the gaming industry could contribute to as much as 350,000 sqm of office space demand in 2017. The sustained demand from gaming companies for the Bay Area will likely keep vacancies in the area low, potentially pushing other locators to consider alternative areas such as Quezon City and Alabang or even provincial locations.

Offshore gaming may drive up rents

Colliers observed that these gaming companies typically have liquid capital and prioritize securing space quickly rather than negotiating on the rates. This is expected to exert pressure on the rents in the Bay Area but will also impact the other submarkets due to possible demand shift from other locators.

Mr. Andaya also noted that, “This shift in the market to offshore gaming will push rental rates upwards in locations preferred by gaming companies, such as the Bay Area. This will also spur demand in alternative locations such as Quezon City, Alabang and possibly provincial sites.”

As a response, Colliers recommends tenants to be quick to lock-in deals as offshore gaming companies are scrambling for sizeable office spaces and closing them immediately with minimal negotiations.

Landlords should be careful though and not too quick on raising rents as this will affect the overall attractiveness of the Philippines as an outsourcing location. While the offshore gaming industry is a legitimate source of demand, there are also risks involved but are being mitigated by higher deposits being required by the landlords. Regardless, landlords should be able to distinguish, recognize and balance the upsides and risks of the IT-BPM industry which drove the market in the past ten (10) years and the offshore gaming industry.

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