Online casino operators quitting Manila and their employees gradually emptying the Philippine capital’s residential towers are pulling rent prices down and the worst has not even come yet, according to a recent report by property broker KMC Savills Inc.
The Philippines’ once thriving online gambling industry helped boost Manila’s property prices and rents in the past three years. However, higher taxes have slowed the sector’s growth. It took another heavy blow this year from weaker demand due to the coronavirus pandemic.
The online casino industry mostly caters to gamblers in Mainland China and the vast majority of its employees are Chinese nationals who occupy customer support and marketing jobs.
Gambling Companies Push Philippines Office Space Market to Record Heights
Since the coronavirus pandemic hit in March, online gambling companies have either given up their licenses or have reduced their operational capacity to add to the rent pressure caused by the fallout from the worst health crisis the world has seen in many years.
Amid dearth in expats and as hundreds of thousands of employees have left business districts to work from home, there has been a “massive demand destruction,” KMC Managing Director Michael McCullough said.
He further noted that they have seen entire residential towers emptied out as online casino operators reduce or shut completely their Manila operations. Mr. McCullough noted that while vacancies created from online casinos were just a “rounding error” in a multi-million-square-meter home market, a lot more of that “continuing compound” will be seen in the coming months.
“Massive Losses” in Q3
KMC said in its recent report that the third quarter of the year saw “massive losses” in the office market as the coronavirus shut many businesses, including online gambling operators. Metro Manila occupancy recorded a second consecutive quarter of a steep drop, with just under 48,000 square meters of vacated office spaces.
Property broker Leechiu Property Consultants Inc. notes that the online gambling industry’s exposure to the Philippines’ residential market stood at around 1.8 million square meters in 2019. KMC said in its recent report that office space vacancy has increased to 7.3% in the third quarter up from 5.4% in the last quarter of 2019.
All these has resulted in a drop in Manila’s residential condominiums. KMC estimates that the fall would reach 10% on average by the end of 2020. The broker further points out that the drop would depend on Metro Manila’s exposure to the online gambling industry.
If iGaming operators continue to flee the Philippine capital, some areas would probably see as much as 25% decline in residential prices in the coming months.
KMC Senior Research Manager Fredrick Rara said that “it’s hard to tell when this will be bottoming out” and that hopefully, “the worst scenario” will unfold in the first half of 2021.
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