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Exodus of online casinos empties Manila's residential towers
[MANILA] An exodus of online casinos from Manila is slowly emptying the Philippine capital's residential towers, pulling rents lower, according to property broker KMC Savills. Next year could be worse, it said.
"We've seen entire residential towers emptied out," Michael McCullough, managing director at KMC in Manila said on Tuesday. While vacancies from online casinos are so far just a "rounding error" in a multi-million square metre (sq m) home market, "we'll continue to see a lot more of that continuing to compound in the next six months", he said.
The third quarter also saw "massive losses" in the office market as the pandemic shut many businesses, KMC said in a report, even as it sees demand from outsourcing companies absorbing the glut.
Metro Manila's occupancy deteriorated for the second consecutive quarter with nearly 47,800 sq m of vacated work spaces and incoming pipeline will continue to add pressure, it said.
The Philippines' US$8-billion online gaming industry, which caters mostly to Chinese punters, is taking a beating from higher taxes and weaker demand due to the pandemic. The once burgeoning sector - which employs mostly mainland Chinese for customer support and marketing jobs - helped boost property prices and rents across metropolitan Manila in the past three years.
The industry's exposure to the Philippines' residential market stood at 1.8 million sq m in 2019, according to broker Leechiu Property Consultants. Office space vacancy in Metro Manila has risen to 7.3 per cent as of the third quarter from 5.4 per cent in end-2019, KMC said in its report.
The Philippine property stock index closed 2 per cent lower on Wednesday, the steepest decline since Sept 9. SM Prime Holdings, the nation's largest builder, fell 3 per cent. Ayala Land declined 1.6 per cent.
Online casino operators are either giving up licences or operating at a lower capacity, adding to rent pressure in residences amid a dearth in expatriates and as employees leave business districts to work from home, Mr McCullough said. "There's a massive demand destruction."
KMC estimates that rents in the capital's residential condominiums would fall 10 per cent on average by year end. The drop will depend on a district's exposure to the online gambling market, with some areas possibly seeing as much as 25 per cent decline, said Fredrick Rara, the company's senior research manager.
"Somehow, it's hard to tell when this will be bottoming out," Mr Rara said. "Hopefully, the first half of 2021 will be the bottom, the worst scenario."