Property consultancy Colliers sees the continued growth of the retail sector this year and recommends that mall developers take advantage of opportunities presented by this rebound.
Colliers believes property developers with retail footprint should consider divesting malls into their real estate investment trust (REIT) portfolio especially now that the retail segment is recovering. “Malls generate recurring income and are now a viable REIT asset class as vacancies are declining and lease rates are starting to increase. In our view, developers should carefully assess which retail outlets to add to their REIT portfolio and should consider projected mall space absorption as well as profiles of retailers willing to take up brick-and- mortar spaces,” Colliers said in a report.
Colliers said retailers should be quick in locking in prime spaces in major business districts while mall operators should seize the growing demand from foreign retailers.
Colliers projects greater space absorption from foreign retailers at over 114,700 square meters (sq.m.) this year.
“Developers should take advantage of renewed interest from foreign retailers as well as continued expansion of the Philippine economy mainly driven by personal consumption,” the property consultancy said.
Colliers said online and offline shopping will continue to complement each other, which should compel mall operators and retailers to ramp up their omnichannel strategies.
Colliers believes that while online shopping will remain relevant among Filipino consumers (especially among young shoppers), in-store shopping will continue to rebound, as shown by relentless absorption of physical mall space within Metro Manila.
In the first quarter of the year, food and beverage (F&B) and clothing and footwear segments led physical mall space takeup in the first quarter of 2023.
From 2023 to 2025, among the new malls likely to be completed are regional and super-regional malls in the Bay Area and Quezon City.
Colliers believes that retailers should be quick in securing mall spaces in key business districts across Metro Manila now that vacancy rates are declining while rents are gradually increasing.
“In our view, this trend is likely to persist in the market as footfall is rebounding across the capital region. We still see substantial vacancies in selected malls in Quezon City, Bay Area, and Alabang and retailers should further explore the viability of opening physical space in these locations. Looking forward, we see a heightened competition for prime retail space across the capital region,” Colliers said.
Colliers believes that mall operators should not consider online presence as competition but as a necessary complement to retailers’ omnichannel strategies.
“Both retailers and mall operators unable to update their omnichannel presence will be left behind.
Colliers believes that the retail sector is finally recovering after massive disruption in 2020 and 2021 when mall operators were compelled to provide rental concession just so they could retain tenants within their brick-and- mortar mall spaces. In our view, the popularity of e-commerce will continue to be complemented by in-store shopping as shown by an aggressive take-up of physical retail space especially in Metro Manila malls,” the report said.
