Developers warned POGO induced demand is fleeting

CEBU, Philippines — An economist has warned developers not to over-build in the name of meeting the demand for office spaces driven by the strong entry of Chinese offshore gaming operators.

Former finance secretary Roberto de Ocampo expressed fears that the demand might create a real estate bubble in the future if it’s not calculated well, as these kinds of operations is not permanent.

De Ocampo recalled that the 1997 Asian economic crisis started because of the real estate bubble in Thailand caused by abandonment of building properties mostly by Chinese tenants and unit owners.

If developers were not careful in their accommodation of POGO related tenants, they might end up maintaining “white elephant” properties.

Yesterday, the Philippines’ gaming regulator PAGCOR announced yesterday it was suspending acceptance of applications for new offshore gambling firms, after China called on Manila to crack down on gambling hubs that illegally employ its nationals.

According to PAGCOR, it will “stop first and look at other concerns that we have not met comfortably” regarding Philippine Offshore Gaming Operations or POGOs.

De Ocampo gave the same suggestion saying the government should implement stricter measures in accommodating POGO investments.

Higher regulatory policies must be imposed on these companies, he said, although he stressed that the entry of POGO gives boost for the Philippine economy.

He explained that POGO is good, but government, as well as the developers should be extra careful in this new industry.

The Philippines has earned P11.9 billion in offshore gaming revenues since 2016, when several online gaming companies opened shop in the country after China banned all electronic casinos from operating in the mainland.

This year, PAGCOR collected almost P4 billion from POGO operations.

The influx of Mandarin-speaking offshore gaming workers in the country drove rental rates, according to data from real estate consultancy firm Leechiu Property.

Several government officials said the POGO industry must be investigated, as the country loses about P22 billion annually due to the unpaid income taxes of some 12,000 illegal POGO workers.

In Cebu, Mandaue City is now eyed as the next favorite site for online gaming companies, next to Mactan, a research firm revealed.

“After Mactan Island, Mandaue comes second” said Joey Roi Bondoc, senior research manager at Colliers International Philippines.

According to Bondoc, while Mactan Island still attracts online gaming firms, Mandaue is becoming the next favored destination because of its proximity to the airport and availability of office spaces.

Bondoc said with this high interest of online gaming firms in Mandaue, demand for commercial condominium is seen to rise within the city.

Usually, an offshore gaming company needs more or less occupies almost 5,000 square meters (sq.m).

Online gambling operators’ demand for Cebu office spaces grew by 25,700 sq.m. in 2017.

A POGO refers to an entity that offers and participates in offshore gaming services by providing games to players, taking bets, and paying the winning players. The gaming activity refers to online games of chance through the internet, using a network and software, exclusively for offshore-authorized players who have registered and established an online gaming account with the PAGCOR-licensed POGO. (FREEMAN)