The introduction of offshore gaming or electronic gaming (e-games) by foreign operators has opened opportunities for the office propertysector, according to property consultant Colliers InternationalPhilippines.
In its Top 10 Predictions for 2017, Collierssaid over 80,000 square meters (sq.m.) of office space was taken by offshore gaming in 2016.
Joey Bondoc, research manager at Colliers, said while bulk of the office space uptake and pipeline are still for traditional andbusiness process outsourcing (BPO) operations, the propertyconsultancy has noted in the last quarter of 2016 a surge in inquiriesfrom offshore gaming companies, each with a minimum requirement of 10,000 sq.m. taking BPO spaces.
In late 2016, the Philippine Amusement and Gaming Corp. (Pagcor)launched Philippine Offshore Gaming Operation (POGO), initially setting 25 POGO licenses, with a potential to increase to 50,according to Colliers.
Bondoc said these offshore gaming firms use the spaces both for online gaming and technical support.
“As demand from offshore gaming companies increase, concrete government
policies on Pagcor’s role will be key,” Colliers said.
“Colliers recommends landlords to consider accommodating offshoregaming companies who are looking to expand immediately,” the reportsaid.
According to Bondoc, the office market is poised to deliver a recordof more than 800,000 sq.m. of space this year, after a minor setbackin 2016 when the sector suffered some delays.
About 40 percent of the new office spaces will be in Bonifacio GlobalCity.
Bondoc said some of the spaces unfinished in 2016 would be carriedover in this year’s office stock.
He attributed the delay to the lack of construction workers across thesector who are either going abroad or poached for other jobswithin the country.
Bondoc said industrial suppliers for buildings confirm that poachingis prevalent in the industry as workers seek better pay.
He added that lack of training is also a concern in the construction sector.
In the report, Colliers said at the beginning of 2016, theprojected supply of new office space was close to 900,000 sq.m.
This has been adjusted downwards by more than 30 percent due toproject delays related to the tight labor supply in the constructionsector.
Citing a BCI Economics latest report, Colliers said the number ofconstruction that starts in the fourth quarter of 2016is expected toincrease by more than 1,000 percent from the previous quarter.
Construction starts in the residential segment alone.
Top general contractors are already declining to provide their companyprofiles to prospective clients due to a shortage of adequatelyskilled workers.
“We believe that private construction in 2016 could’ve been morerobust if not for construction delays brought about by the lack ofadequately-skilled workers. The intensified development of publicinfrastructure projects around the country will exacerbate thisproblem,” the report said.
Colliers said private construction will continuously grow due tosustained appetite for office and retail developments, whileoutsourcing and tourism-related activities will continue to drive theservices sector.
Colliers also believes BPOs will continue to drive the office marketwith a shift to higher value services and provincial locationsenvisioned to drive growth.
“We consider Cebu, Bacolod, Iloilo, Pampanga and Davao as most viablealternative locations for growth given the talent pool, businesscompetitiveness, and LGU (local government unit) and ICT (information and communications technology) council support,” Colliers said.
In 2016, the property consultancy said companies like Google, TowersWatson, Wells Fargo, Pharmaceutical Product Development have definedthe market.
Colliers also does not see this trend among knowledge processoutsourcing slowing down.
Another trend noted by Colliers is the flexible office space.
“As mobility, connectivity and flexibility become the norm in workingin the 21st century, occupier demands will also change dramatically,requiring for more flexible office spaces,” Colliers said.
Approximately 100,000 sq.m. are occupied by flexible office spaceoperators in Metro Manila alone, with many still looking to expandnext year, it said.
The profile of tenants vary from start-ups, to law firms, Fortune 500companies and freelancers.
There are about 1.3 million freelancers in the Philippines, accordingto Colliers.
Market leader Regus, for example, is looking to launch Spaces, itsco-working alternative, to compete in the growing sub-segment.
Colliers added Regus is also considering setting up flexibleworkspaces in local airports.
In the report, Colliers said a surge in manufacturing investments over the near to medium term will further raise demand for industrialspace.It suggested that developers should start developing industrial parksoutside of Cavite-Laguna-Batangas area.
As infrastructure spending ramps up, Colliers sees public constructionto be a major source of growth.
The implementation of infrastructure projects nationwide shouldprovide access to properties that could be redeveloped into mixedcommercial, residential, hotel/leisure and industrial estates.
Colliers anticipates developers to be more aggressive in pursuingprojects outside of Metro Manila as access will be significantlyenhanced.
For retail, Colliers sees developers constructing morelifestyle-oriented malls rather than retail-centric ones todifferentiate themselves especially with the emergence of onlineshopping.
In the residential development, Colliers noted condominium living isincreasingly being accepted by the market with approximately 70percent of new condominium units being studio and one-bedroom units.
This spurs demand for home furnishings and accessories that luresforeign brands such as Crate & Barrel, H&M Home, Pottery Barn and WestElm to set up shops.
Ikea is set to enter the Philippine market.
According to Colliers, the emerging segment of affordable hotels islikely to drive the market given the rising number of localentrepreneurs and domestic tourists. It sees local developersexpanding their hotel portfolio to cater to this market.
Colliers projects hotel occupancy rates in Metro Manila stabilizingbetween 65 percent and 70 percent over the next 12 months.
The entry of more foreign hotel brands such as Grand Hyatt, Okada andDusit’s D2 will continue in 2017, it said.
Colliers anticipates the development of more resort hotels in tourismhubs in Visayas and Mindanao.