“The ultimate measure of a man is not where he stands in moments of comfort and convenience but where he stands in times of challenge and controversy.” – Martin Luther King Jr.
The POGO Exodus
COVID-19 has been dubbed “the great equalizer”. It doesn’t distinguish between rich or poor, good or evil, young or old, the powerful and the weak, nor does it care about national borders or governments. It is simply a virulent, invisible force of nature that has spread to nearly every corner of the modern world as we know it. Unceremoniously shutting down big and small businesses and companies alike. The pandemic has impacted nearly all industries where human contact and interaction is an essential part of daily operations. And the gaming and amusement industry is no exception to this.
You may ask, what does this have to do with the real-estate industry? It has been no secret that the Philippines, through the PAGCOR (Philippine Amusement and Gaming Corporation) has welcomed POGOs (Philippine Offshore Gaming Operators) with open arms despite being a controversial or touchy subject matter for a lot of Filipinos. The government has touted the country as an ideal destination for online casinos due to. According to PAGCOR, there are 56 PAGCOR-licensed POGOs as of June 2019. And it has been estimated that at least 30 POGO firms are operating illegally in the Philippines. In fact, 265 Chinese nationals were arrested as the result of a raid of an illegal gambling operation in Las Pinas City on May 15, 2020. The illegal POGO was operating out of a rented hotel, even despite the pandemic and quarantine lock-down.
POGOs have come to the Philippines in droves bringing with them thousands of Chinese nationals that operate the lucrative offshore gambling businesses. This huge influx of Chinese nationals of course needed somewhere to stay, and the real estate industry was suddenly rife with opportunity as POGOs started snatching up properties in close proximity to their operations so they could quickly ferry their employees to work. Not only that, a study by KMC Savills Inc. has revealed that POGOs have utilized an estimated 800,000 square meters (or 8,600,000 square feet) of office space to house their operations.
This proved to be a big opportunity for those in the real estate industry. Chinese POGOs were willing to pay higher than the normal rate to lease property in locations near their operations. Property owners were now more than happy to lease out their property with preference for Chinese nationals working at POGOs. However, the downsides would soon rear its ugly head.
Those living in exclusive subdivisions now suddenly had a growing community of noisy Chinese nationals as their neighbors. Complaints and horror stories of property damage began to increase as a significant number of the Chinese nationals apparently had little respect for the property they were living in, as well as a general lack of household cleanliness and regard for property upkeep. Another sad by-product of the POGO real estate gold rush was the artificial shortage of property for Filipino families looking for fairly priced property. Rumors about local tenants being evicted or their lease not being renewed in order to give way to Chinese nationals started to spread as well.
Fast forward to March 21, 2020. In a bid to combat the Covid-19 outbreak, the PAGCOR orders all gambling operations to cease operations until further notice. Needless to say, POGO operations suddenly ground to a screeching halt. Except for those operating illegally, all legitimate POGOs found themselves in a bad financial situation. Gambling operations typically run 24×7 and thereby employs a large number of employees. Now these employees are unable to go to work due to the government-imposed quarantine measures. Surprisingly, PAGCOR even went so far to suspend work-at-home setups for those under their jurisdiction to ensure compliance. POGO licenses and services providers found to be non-compliant now faced possible cancellation of their license and accreditation, and will be reported to the authorities. On top of this, POGOs are currently under scrutiny for unpaid taxes with the BIR (Bureau of Internal Revenue), as well as controversies surrounding a growing number of “sex-dens” servicing foreign workers.
The pandemic in the Philippines still appears to be nowhere near “flattening the curve” as experts put it. To date, at least two POGOs have already left the country and more are now poised to leave the Philippines according to PAGCOR Chairperson and CEO Andrea Domingo. An unspecified number of POGOs have also filed for the cancellation of their licenses, while others have yet to file their official exit. PAGCOR claims that the primary reason for this is not just the impact of the pandemic, but due to “more appealing tax rates” and “friendlier environments” as decision-makers behind the POGOs re-evaluate their options.
With all of this in mind, the most likely scenario is that POGOs are on their way out. And with them goes the potential for cashing in on significantly higher lease rates. Just barely a year ago, POGOs overtook BPOs (Business Process Outsourcing) in real estate utilization and contributed over 6.4 Billion Pesos in taxes. Now, it is only a matter of time before the POGO real estate deep well dries out.
The post POGO and the Philippine Real Estate Industry in this Pandemic times appeared first on PHILREP Realty Corp..
