According to Collier’s latest market report, many mall operators including in Cebu are now reporting that consumer traffic is starting to bounce back to 2019 levels.
“We now see the resurgence of high-density retail segments such as family entertainment centers and this should result in greater traffic in Cebu malls,” said Joey Roi Bondoc, associate director and head of research at Colliers.
Colliers sees holiday-induced spending further propping up the sector and supporting a slight rise in rents through the end of 2022.
“More retailers are now willing to take up physical space, which should bode well for retailers and mall operators. We are optimistic that vacancy will improve by 2024 and this should lift mall lease rates within and outside Metro Manila. Metro Cebu should benefit from an improving retail environment across the Philippines,” the firm said.
Cebu-based developers should take advantage of the retail sector’s rebound and the lifting of travel curbs and mask mandates by strategically opening malls sized to the catchment area considering the new retail environment, said Bondoc.
In addition, mall developers should also curate retail mixes, future-proof high density retail, and utilize activity centers to draw more customers and entice them to spend.
“In our view, the headwinds that will likely hinder the retail sector’s expansion include supply chain disruptions, global recession fears, and persistently high inflation,” said Bondoc. “The rise in remittances projected by the central bank as well as release of employees’ holiday bonuses should also boost retail spending in the fourth quarter of 2022, historically a strong quarter for retail.”
Data from the Philippine Statistics Authority show that inflation as of the first nine months of 2022 reached 5.1 percent from four percent in the same period in 2021.
F&B, fashion big winners
Bondoc recommends that mall operators and retailers constantly monitor which segments are likely to be affected by inflation spikes and which are likely to withstand the impacts of rising consumer prices.
Despite rising inflation, Bondoc said they observed that retailers from the food and beverage and fashion segments continue to take up physical space. He said retail players in these segments consider opening pop-up stores especially those testing the Metro Manila retail market, which is starting to rebound post-Covid-19 pandemic.
“We recently saw this with the opening of Ikea’s pop-up shop at Ayala Center Cebu,” said Bondoc.
Colliers also encouraged Cebu mall operators should reactivate their event spaces or activity centers and attract more mallgoers by organizing events such as trade fairs, exhibits and concerts to drum up retail interest.
National and local developers also continue to build new malls in Cebu.
Space supply
From 2019 to the first quarter of 2022, Colliers has recorded the delivery of 87,800 square meters of new retail space with the completion of Ayala Malls Central Bloc in Cebu IT Park, Il Corso by Filinvest and Elizabeth Mall expansion.
From 2022 to 2024, Colliers data show an annual delivery of about 44,400 square meters of new retail space supply.
Among the malls due to be completed are Astra Lifestyle Center by Cebu Landmasters and Gatewalk Central Mall by Ayala and Aboitiz Land.
More developers and retailers are also exploring the viability of opening new malls and shops in Metro Cebu.
“This will likely hinge on the pace of acceleration of Metro Cebu’s consumer base and rise in the residents’ purchasing power,” Colliers said.
Colliers believes that the stronger-than-expected economic growth is likely to support the country’s retail sector.
This optimism is likely to be seen in major economic centers, including Metro Manila and Metro Cebu. Leisure tourism will also benefit the recovery of the retail sector.
According to Bondoc, “we also see greater potential for the retail sector of Metro Cebu as the leisure sector starts to recover after more than two years of slump. The recovery of Cebu’s tourism sector is likely to chip into the rebound of retail sector. We also see Metro Cebu benefitting from foreign retailers’ rising interest to enter the Philippine market, partly facilitated by the liberalization of the country’s retail trade law.” (KOC)