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PEZA Revival: Opportunities for PEZA amidst POGO Contraction

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The Philippine Offshore Gaming Operators (POGO) took off in the Philippine market in 2016 and has accounted for 1.3 million square meters of office transactions since then which gives this sector 11% share overall Metro Manila office stock.

Various locations in Metro Manila have welcomed the strong demand of POGOs taking up PEZA and non-PEZA buildings alike. Their offices are mostly concentrated in Bay Area, Makati, Alabang, Quezon City and Ortigas, affecting the average rental rates in these areas to increase by 10 to 50% in a span of four (4) years. Notably, 340,000 square meters or 27% of the recorded POGO transactions are in PEZA-registered buildings which somehow constricted the expansion of the Business Process Outsourcing (BPO) companies.

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Since the start of lockdown in March 2020 due to the COVID-19 pandemic, Colliers has tracked 123,000 square meters of POGO-committed spaces returning to the market. The travel ban affecting POGO manpower, the requirement to settle tax to operate during quarantine period and China’s crackdown are seen as the main factors for their contraction and, seemingly, exodus. Based on the spaces that became available as of August 2020, the office vacancy in Metro Manila is forecasted to be 7.0% by year-end and this does not factor in yet new building completions by 2H 2020.

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The lack of PEZA-registered supply due to limited approvals by the government since 2016 and the issuance of the Administrative Order 18 banning the approval of new PEZA zones in Metro Manila in June 2019 caused the artificial rise in rental rates. With some PEZA-registered spaces being given up by POGOs, the availability of PEZA-registered spaces improved by 54,000 square meters, thus, putting additional downward pressure on rents on top of the COVID-19 pandemic effect.

The available total area size per building are ranging from 1,000 square meters up to 33,000 square meters which are handed over in fully-fitted or as-is-where-is conditions. These spaces can be found in Alabang, Quezon City and Ortigas. Should POGOs continue to downsize, 294,000 square meters of their remaining office footprint are in PEZA-registered spaces which could benefit BPOs with immediate permanent or temporary office requirements. Please note that this is on top of the other PEZA-registered spaces that were vacated by non-POGO occupiers.


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Cecille DelaPena

Manager

Office Services

Manila

More than 5 years of experience in the Philippine CRE which specializes in office lease transactions and negotiations with different companies and landlords. Has experience in all angles of Office Leasing along with other areas in Retail and Industrial Leasing.

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