The online gaming industry is virtually now a “new kid on the block” in terms of office take-up, and is expected to kick out today’s lead tenant—the business-process outsourcing (BPO) sector—in the near future, according to a leading wholly owned Filipino real-estate company.
Leechiu Property Consultants (LPC) CEO David Leechiu said in a media briefing that both of them mainly drive the demand for workspace nationwide, which this year is anticipated to aggregate between 1.2 million square meters (sq m) and 1.5 million sq m. “So, we anticipate the BPO industry to take up maybe 700,000 sq m to 800,000 sq m this year,” he noted. “This online gaming market could easily consume 400,000 sq m [or] 500,000 sq m of office space this year.”
They, likewise, have availed themselves most of the supplies yet to be completed, either for their flagship office or expansion.
In fact, the BPO almost accounts for 40 percent of the unprecedented 500,000-sq-m level of precommitments to date.
“But the big surprise for all of us is the online gaming market. They went from zero to now the second-largest demand driver for office space. [They’re] not just the second largest, but they are about equivalent to 50 percent of the BPO sector today,” the top executive said.
“And the amount of space we anticipate to take this year will be anywhere from 50 percent to almost equal that of the BPO industry. That’s how big their potential could be. For the last 15 years, the BPO industry has the office market all to itself. Now they have somebody also chasing space from the market. And that’s online gaming market. They did this practically overnight,” he added.
New licenses
Online gaming firms started to make their presence felt in the office market during the Ramos administration when some locators in the Cagayan Economic Zone Authority (Ceza) took space outside, such as in the RCBC Building, PBCom Tower, GT Tower and The Enterprise Center in Makati City. Other players expanded in different geographies.
The increase in office take-up has since then continued. Most recently, they took up 83,960 sq m of the supply in Metro Manila over the last six months alone. The figure is seen to rise further, given that the Philippine Amusement and Gaming Corp. (Pagcor) alone has granted 35 new licenses.
“These companies can sub-franchise that to as much as eight other subfranchisees, and that’s the result of that. Each of these 35 companies will take anywhere between 10,000 sq m and 20,000 sq m of office space. Most of them will take space this year,” the CEO said.
“I can just imagine how much space these guys can absorb from the market. So much so that there’s a possibility that between them and the BPO industry, they might wipe out all the space in the market,” he said.
As a trickle-down effect, the online gaming industry has also contributed to the makeup of residential units in key sites of the metropolis.
“This is because they’re flying in so much foreign talents and they need housing of all sort. So the amount of demand they generate as a whole, from the hotel sector to dormitories, expat housing, office space, and even restaurants, it’s fantastic,” Leechiu said.
BPO shift
SINCE most of the office spaces available in Metro Manila are mostly occupied as seen in low vacancy rates of 4 percent, there’s no way for the BPO players but to go outside. And where else do they often set up new facilities than in Luzon and the Visayas, which together could deliver as much as 800,000 sq m of workspace in the next five years.
For instance, the top seven information-technology (IT)-BPO firms in the country, which LPC did not name, have chosen to expand outside the metropolis by setting up offices in a number of other key cities nationwide.
This indicates that companies continue to look for new and untapped labor markets, mostly in the countryside.
Citing the Information Technology-Business Process Association of the Philippines Roadmap 2022, Leechiu bared that, while there’s a growing interest now to move to provincial or second-tier locations, the majority of the IT-BPO labor work force will still remain in the metropolis, at 70 percent of the totality.
Currently, there are 1.1 million people employed in the outsourcing field, and that’s anticipated to grow to 1.8 million people.
“Seventy percent of that will continue to grow in Metro Manila. But a 30-percent block will continue to grow in the provinces. There’s a possibility that this ratio might even improve from a 70:30 to maybe a 60:40 ratio,” he said.
Such growth level, according to him, will translate to basically a need of at least 3 million sq m of office space throughout the country, which merely fits the demand of the BPO sector alone.
Current supply stands at 10.3 million sq m, of which Metro Manila accounts for 8.8 million sq m (85 percent) and provincial areas hold 1.5 million sq m (15 percent) of the inventory.
With the national government’s all-inclusive plan, it is seen to positively impact expansion in the rural areas. It is for this reason that provincial talents are estimated to grow by 60 percent in 2022.
“The projected additional 200,000 employees in the provinces translate to a demand for approximately 800,000 sq m of office space or the projected annual office take-up in Metro Manila for 2017,” he said.
Moving further, a total of 5.4 million sq m of office space is expected to come on stream from now up to 2023 throughout the country, of which 4 million sq m (74 percent) is in Metro Manila, with the balance spread across Cebu, Calabarzon and other cities.
In the next five years, the Queen City of the South is seen to hike its supply by 4 million sq m. Other key cities in the Visayas and Mindanao regions, led by Davao and Iloilo, will have an additional projected supply of 779,996 sq m.
Meanwhile, Luzon, led by Cavite and Pampanga, will account for an estimated 541,981 sq m over the same period.
“What’s making that possible? Of course, the conscious drive of this administration to push jobs, improve infrastructure, and ensure safety and security conditions in these provinces,” Leechiu said.
Other growth drivers
THE office segment of the real-estate sector still has more rooms for growth. Other than the “sunshine” industry of BPO and the thriving online gaming field, banking and insurance also have spaces to fill in.
The CEO recalls that the banking and finance industry was considered a “big driver” to office space back in the 1990s.
The first boom happened 20 years ago—from 1992 to 1997—when they consumed bigger sizes fit for the facility of their respective companies, he said.
“So they could be another big driver for office space again,” Leechiu bared. We’re quite interested with the banking and finance, because, as we all know, the liberalization in the banking industry happened a couple of years ago and, yet, we’re still waiting for the foreign banks to come in.”
Given the country’s continuous economic growth, he is bullish they will find the Philippines as a good market to invest in.
“They will want to come [and] they will start coming in droves,” he noted.
Insurance is another industry that LPC is expecting to require more office spaces, according to him.
This is because the Philippines, with its young population at an average age of 23, is still one of the least-penetrated markets in the world for the surety sector.
“If you look at the list, insurance companies before 1990 was something like less than 10. In the late 1990s—1998 and 1999—that list of 10 became close to 60,” he shared.
When the global financial crisis compressed them, their numbers had dwindled and today is estimated to be between 30 and 40.
“But there could be more and more companies operating. Usually, they are growing primarily due to the young, untapped growing market for the insurance industry,” Leechiu said.
Image credits: Maxxyustas | Dreamstime.com, Welcomia | Dreamstime.com
1 comment
This is good for real estate industry.