POGO exit drives repurposing of office spaces

Developers respond to Metro Manila vacancies with flexible space formats.

The government’s shutdown of Philippine Offshore Gaming Operators (POGOs) is prompting developers to repurpose vacant office spaces to meet shifting tenant demand. Formalised under Executive Order No. 74 signed by President Ferdinand Marcos Jr. on July 22, 2024, the directive mandates a complete halt to all POGO operations by year-end.

The policy has led to a sharp rise in vacancies, particularly in POGO-heavy areas such as Metro Manila’s Bay Area.

“When we take a look at other sub-markets, like Makati Fringe and Alabang, they may experience prolonged vacancies, but seeing Metro Manila office market as a whole, we're already seeing positive signs because of the volume of transactions increasing, mainly driven by traditional office occupiers and BPOs,” said Jasmine Margarette Estrella, Negotiator for Office Services, Tenant Representation at Colliers Philippines.

Developers are now adapting their strategies to meet shifting market demands, with a focus on flexible leasing and customisable spaces. Warm and bare shell units, which allow tenants to fit out offices to their own specifications, are becoming increasingly attractive.

“When a market is leaning in favor of tenants, of course, it gives investors and occupiers the chance to negotiate more flexible terms,” said Estrella. “Right now, we have an upcoming more than 600,000 square meters of warm and bare shell spaces that's going to compete with those pre-fitted spaces.”

Kim Bernardino Lutap, Manager for Office Services, Tenant Representation at Colliers Philippines, agreed that the market now leans toward smaller, customisable formats. “Some developers are repurposing their POGO floors into more adaptable office spaces,” he said. “The layout [of POGO spaces] is typically dense and has a high volume, which is not a priority for the upcoming market.”

Lutap added that capital expenditure may be necessary to enhance the marketability of vacated POGO spaces and that successful transactions are more likely when landlords help clients reconfigure those floors.

Lutap also flagged external factors such as U.S. tariffs, which may indirectly encourage more offshoring to the Philippines due to cost pressures on U.S. businesses. Additionally, Estrella pointed to a potential interest rate cut by Bangko Sentral ng Pilipinas as a confidence booster for new entrants.