METRO Cebu is projected to benefit from the retail sector’s recovery being the largest metropolitan hub outside Metro Manila as mall operators here brace for revenge shopping and dining, property consultancy firm Colliers International said on Friday.
Cebu’s expansion of its consumer base, supported by projected growth in office and residential supply, should sustain retail buoyancy post-2022, Colliers said.
In the first quarter of 2022, vacancy across malls in Metro Cebu reached 6.4 percent, higher than the 2.6 percent recorded in 2018. The disruptions caused by Covid-19 pandemic have resulted in the closure of some brick-and-mortar shops especially in regional and super-regional (50,000 square meters and above of leasable area) malls.
Colliers estimates that about 60 percent of upcoming retailers in Cebu are likely to come from F&B retailers followed by clothing and footwear at 17 percent. This is similar to what was seen in Metro Manila in Q1 2022 where F&B accounted for 42 percent of new retailers followed by clothing at 17 percent.
Some of the new and upcoming retailers in Cebu include Nature Republic, New York Fries & Dips, Sumo Niku, Lantaw Seafood and Grill, Nanyang. Skechers also opened its biggest branch in Cebu.
“By the end of 2022, we see vacancy dropping to about 5.5 percent as we project retail space absorption to pick up amid limited new supply,” Colliers associate research director Joey Bondoc said in a statement.
The consultancy firm believes that the enactment of stimulus measures such as the Foreign Investments Act and Retail Trade Liberalization should facilitate the entry of foreign retailers and contribute to greater retail space take-up beyond 2022.
Major mall operators in Cebu should be proactive in tapping foreign retailers’ retail space demand.
The Inter-Agency Task Force for the Management of Emerging Infectious Diseases also further relaxed Covid-19 restrictions in areas under Alert Level 1 by allowing all establishments (indoor and outdoor) to operate at full capacity.
Limited new supply
National and local developers also continue to build new malls in Cebu. From 2019 to Q1 2022, Colliers has recorded the delivery of 87,800 square meters (944,700 square feet) 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, it sees the annual delivery of about 44,400 square meters (473,400 square feet) of new supply. Among the malls due to be completed are Astra Lifestyle Center by Cebu Landmasters and Gatewalk Central Mall by Ayala and Aboitiz Land.
Sustaining retail demand
Data from Philippine Statistics Authority (PSA) show that growth in household spending for non-essential items such as clothing and footwear grew by 11.9 percent in 2021, a turnaround from -16.4 percent in 2020.
Household consumption should also be supported by continued inflow of overseas Filipino worker (OFW) remittances. In 2022, the central bank projects remittances to grow by four percent in 2022.
In 2020, the Central Visayas region accounted for 5.3 percent of total OFWs deployed abroad from 5.1 percent in 2019.
Colliers believes that the improving consumer and business confidence should also result in greater consumer traffic in malls.
A recently released survey by the central bank noted that consumer confidence in the next 12 months surged to its highest level in more than four years.
The 5.4 percent growth of the Central Visayas region from a 9.9 percent contraction in 2020 should also support the recovery in retail demand and other property segments. These factors should encourage more retailers to lease out physical mall space.
Prevailing headwinds
However, the rising inflation is likely to clip consumers’ purchasing power, according to Colliers.
Data from the central bank show that the country’s inflation reached 5.4 percent in May 2022, the highest since November 2018.
The central bank projects average inflation to reach between 5.0-5.8 percent by the end of 2022.
Some of the headwinds that are also likely to affect the retail segment are the spread of new Covid-19 variants, higher oil prices and global supply chain disruptions.
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 Cebu.
“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,” Bondoc said.
The Philippine economy surged by 8.3 percent in Q1 2022, a growth that is seen benefiting the retail sector as the domestic economy is mainly consumption-driven. (CSL)