According to a recent research by real estate broker KMC Savills Inc., the worst is yet to come as online casino companies pull out of Manila and their employees gradually empty the residential towers in the Philippine capital.
The formerly robust online gambling sector in the Philippines has contributed to an increase in Manila's rents and property values over the last three years. The sector's expansion has slowed, meanwhile, due to rising taxation. This year's decreased demand brought on by the coronavirus epidemic dealt it yet another severe hit.
The majority of the workforce in the online casino sector, which primarily serves gamblers in Mainland China, are Chinese citizens working in customer support and marketing positions.
Online gaming enterprises have either given up their licenses or curtailed their operational capacity since the coronavirus epidemic struck in March, adding to the rent pressure brought on by the aftermath of the largest health catastrophe the globe has seen in many years.
There has been a "huge demand destruction" due to the shortage of foreigners and the hundreds of thousands of workers who have relocated their offices so they can work from home, according to KMC Managing Director Michael McCullough.
He added that they have witnessed entire residential towers empty out when internet gambling firms scaled back or stopped operating out of Manila altogether. While the number of vacancies brought on by online casinos was only a "rounding mistake" in the multi-million square meter housing market, Mr. McCullough cautioned that there will be a lot more of that "continued compound" in the coming months.
The coronavirus shut down several firms, including online gambling providers, causing the third quarter of the year to see "huge losses" in the office market, according to KMC's most recent report. With just under 48,000 square meters of vacant office space, Metro Manila's occupancy saw a significant decline for the second consecutive quarter.
According to real estate agent Leechiu Property Consultants Inc., the residential market in the Philippines was exposed to the online gaming sector to the tune of 1.8 million square meters in 2019. According to a recent analysis by KMC, office space vacancies rose from 5.4% in the final quarter of 2019 to 7.3% in the third quarter.
All of these have caused a decline in residential condominiums in Manila. By the end of 2020, the fall, according to KMC, will average 10%. The broker adds that the decline will be influenced by Metro Manila's exposure to the online gambling market.
In the following months, residential rates may drop by as much as 25% in some areas if iGaming firms keep leaving the Philippine capital.
It's difficult to predict when this will bottom out, according to KMC Senior Research Manager Fredrick Rara, who added that he hopes "the worst situation" will occur in the first half of 2021.