The Philippines, known for its vibrant and dynamic economy, now finds itself at a pivotal moment. SM Prime Holdings and its sister companies under the SM Group, are poised to navigate a new landscape following a decisive move by President Ferdinand Marcos Jr. Last month, Marcos Jr. ordered the closure of all Chinese-operated online gaming companies, or Philippine Offshore Gaming Operators (POGO), citing their links to criminal activities. This seismic shift threatens to leave gaping holes in the office, retail, and residential sectors, but SM Prime remains unruffled, banking on the country’s young, ambitious population and solid economic fundamentals to weather the storm.
Pogos, once a catalyst for the real estate boom, are now set to vanish, leaving behind a trail of empty offices and vacated flats. Office vacancy rates could skyrocket from the current 16% to over 20% by year’s end. The residential sector, too, is bracing for a wave of vacant units, as thousands of foreign POGO workers are expected to leave the Philippines. Despite the looming vacancies and potential rental stagnation, SM Prime is strategically shifting focus away from Pogo-reliant districts, ensuring that its residential arm remains robust.
But SM Prime isn’t just about surviving; it’s about thriving. The Philippines’ highlights a youthful population, with a median age of just 24.5 years, as a key driver of future growth. With unemployment at record lows and remittances from overseas Filipino workers remaining strong, the building blocks for a consumption-driven economy are firmly in place. This young, energetic workforce, coupled with a booming business process outsourcing (BPO) sector, presents a fertile ground for continued expansion.
As the company pivots, it’s clear that SM Prime is not solely reliant on the volatile local Chinese gaming industry. Instead, it’s gearing up to capitalize on the BPO sector, which is expected to employ over 2 million Filipinos by 2025, generating billions in revenue. Meanwhile, SM Development Corporation is carefully launching projects in non-POGO areas, safeguarding its investments against potential market disruptions. With 86 shopping centers, 22 office buildings, and 47 residential projects under its belt, SM Prime’s diversified portfolio seems well-positioned to absorb any economic tremors.
Yet, the road ahead is not without its challenges. Geopolitical tensions, climate risks, and economic uncertainties loom large. The property market’s recovery could be slower than anticipated, with these risks likely defining the market’s trajectory into 2025. However, with the central bank’s recent rate cut and the country’s low household debt, SM Prime and the broader SM Group remain optimistic, seeing opportunities where others see obstacles. In the face of uncertainty, SM Prime is not just bracing for impact; it’s preparing to forge a new path forward.
(Source: SCMP)
