By means of Revin Mikhael D. Ochave, News reporter And Aubrey Rose A. Inosante
REAL ESTATE STOCKS fell on Tuesday on concerns about the ban Philippine offshore gaming onerators (POGOs) will leave many behind office and residential buildings empty.
On the Philippine Stock Exchange (PSE), the real estate index closed down 1.62% or 44.24 points to 2,681.82, a day after President Ferdinand R. Marcos Jr. ordered a total ban on POGOs in the country. The main PSE index rose 0.61% or 41.07 points to end the trading day at 6,753.12.
In his State of the Nation address on Monday, Mr. Marcos also credited the Philippine Amusement and Gaming Corp. (PAGCOR) ordered to phase out and cease operations of all POGO facilities by the end of 2024.
“The performance of the real estate index (Tuesday) was largely affected by the POGO ban. In the sector we can see that DoubleDragon Corp. and DDMP REIT, Inc. were the biggest losers, down 5.2% and 5.17% respectively, as these two have the most exposure to POGOs among real estate companies in the market,” Philstocks said. Financial, Inc. Research analyst Claire T. Alviar said in a Viber message.
DDMP REIT shares fell 5.17% or six centavos to P1.10 each, while DoubleDragon shares retreated 5.2% or 62 centavos to P11.30 each.
The shares of SM Prime Holdings, Inc. also fell 2.45% or 75 centavos to P29.90 per share, while shares of Ayala Land, Inc. fell 0.94% or 30 centavos to P31.60 each.
“The ban will certainly have a negative impact on vulnerable companies, especially DDMP REIT, as 51% of their total rental income for fiscal year 2023 came from a mix of POGO- and PAGCOR-accredited business process outsourcing companies,” says AP Securities, Inc. Analyst Jose Antonio B. Cipres explained Business in a Viber message.
Some analysts noted that several developers have already achieved significant resultsFicant eFFtrying to lower their POGO exposure during the pandemic.
Ms Alviar said most real estate companies have “less than 5%” exposure to POGOs, so the impact on revenue could be “minimal to insignificant” for some.
“It is important to remember that all major real estate players have already limited their exposure to POGOs, so a loss of rental income would not materiallyFaffect their earnings prospects or long-term prospects,” said Juan Paolo E. Colet, managing director of China Bank Capital Corp. in a Viber message.
Richard G. Laneda, senior research manager of COL Financial Group, Inc., said in a market note that the POGO ban will have a “minimal” impact on the securities brokerage firms.
“While some listed companies still have POGO operations, their exposure to POGOs has decreased significantly since the peak in 2019. The direct impact on listed companies is now minimal, compared to 2019 when Megaworld Corp.’s exposure decreased. 10% and Filinvest Land, Inc. was 15%,” he added.
“However, the sector-wide gross leasable area occupied by POGOs will significantly reduce average occupancy rates,” he added.
However, Ms Alviar said the drop in property shares is just a “reflexive reaction”.
“There is mainly anticipation of bargain hunting for real estate Fwith low exposure to POGOs,” she said.
IMPACT ON THE BAY
Some real estate advisors said they office vacancies will rise in certain areas where POGOs are concentrated, such as the so-called Bay Area.
“We expect an increase in vacancy in the office cream and residential markets in select areas of the metro where they are concentrated,” JLL Philippines head of research and strategic advisory Jan-Loven C. de los Reyes told us. Business on Tuesday.
In an email to BusinessAccording to Prime Philippines, the Bay Area, which is home to a significant number of POGO companies, is expected to be the hardest hit. Other areas that may experience “mild to moderate impacts” from the POGO ban include Makati, Cavite, Mandaluyong and Clark, Pampanga, it added.
Mr. Cipres said one area where housing vacancies could increase is the Bay Area, where many apartment buildings are home to POGO workers.
Leechiu Property Consultants, Inc. Founder and Chief Executive Officer (CEO) David Leechiu said the POGO ban will be detrimental to the recovery of the local real estate sector.
“POGOs will vacate a million square feet of office space and probably the same amount of condominium space. Bay Area office spaces will be hit and emptied at a time when there is still so much office space on the market. Rents will continue to decline and soften,” Mr Leechiu said.
Mr Leechiu said the hardest-hit segment is likely to be the mid-range residential apartment market, which has many spaces available for rent. He expects that vacancies will “remain quite high for a long time to come.”
“We have to see how the market will absorb the additional supply of office spaces and residential units from POGO tenants and landlords. A potential glut could put downward pressure on property rents and prices in certain locations with high POGO exposure,” Mr Colet said.
Joe Curran, CEO of brokerage and advisory firm KMC Savills, said in a Viber message that the overall impact of the ban will be “minimal and manageable.”
“The benefits of the restrictions to this (POGO) industry would outweigh the associated risks. This could also help further position the country as a transparent, world-class destination for foreign investment,” he said.
Mr Leechiu also expects that the recovery of the real estate sector will be delayed as a result of the POGO ban.
“The ban will delay the recovery of the office market by a year, with 2028 now seen as a full recovery. For the housing market it will take another two years, now in 2029,” he said.
“The biggest impact on sentiment is that many buyers do not want to buy because there is a surplus of supply. If people don’t buy, developers won’t build. This will further affect the construction sector,” he added.
Meanwhile, Maria Rochelle S. Diaz, executive vice president for commercial of publicly traded luxury developer Shang Properties, Inc., told reporters during a media briefingFthat the POGO ban will have no consequencesFinfluence the company.
“The proffesionalFThe majority of our buyers are mainly Filipinos. We have a healthy mix of foreign buyers who are not based in China, so we’re not like thatFinfected,” she said.
BENEFITS OF POGO BAN
National Economic and Development Authority Secretary Arsenio M. Balisacan told reporters that this is beneficialFThe ban on POGOs outweighs the costs, citing their low contribution to growth.
“We are probably losing because of the presence of these POGOs, for example because of tourism. China has made it clear that cross-border tourism will likely be regulated by them for the countries hosting these POGOs,” he said.
POGOs alone contributed less than 1% to gross domestic product in 2022, Mr. Balisacan said.
“When I said that the POGOs contribute to half of 1% of GDP, that already takes into account the characteristics,” he said. “The social and reputational costs to the country of hosting these types of companies are not good at all.”
Mr. Balisacan said aFAffected POGO workers could be absorbed by the information technology and business process management industries.
Meanwhile, Treasury Secretary Ralph G. Recto said Fimms using legitimate internet gaming licenses are not aFaffected by the POGO ban.
‘I don’t think they’re POGOs, that’s itFferent,” he told reporters on Tuesday.
Mr Recto had recommended the POGO ban to the President.
“It just shows that the president is also sensitive and listens, especially on issues of this nature… crime and the reputational risks it poses to us… so it’s hard to quantify that,” he said. — with input from BMDcruz