Retail spaces are recovering fastest in the real estate market due to the reopening of the economy and the easing of mobility restrictions, according to Colliers Philippines.
“Retail will recover fastest in the real estate sector, with sales returning to pre-pandemic levels,” Richard T. Raymundo, managing director of Colliers Philippines, said in a briefing on Thursday.
“We’re seeing more consumer traffic, with mall operators saying 60% of mall shopping traffic has returned…so that should be positive for mall space absorption,” said Joey Roi H. Bondoc, associate director of Colliers.
In its first-quarter report, the real estate adviser said it expects revenge buying that will spur retail growth.
“Colliers is keeping a close eye on the return of malls as Filipinos’ de facto public spaces, especially now that consumer traffic is returning to pre-COVID levels and restaurants and activity centers are beginning to welcome more diners,” the report said.
“Aside from revenge shopping and restaurants, which we expect to deploy starting in Q2, we see more opportunities in the market given the propensity of malls and retailers to innovate amid a liberalized playing field,” it added.
Colliers forecasts new supply of 409,000 square meters (sqm) for 2022. the new supply.
Among sectors, he sees food and beverage (F&B) retailers at the forefront of physical land use for the remainder of 2022.
“We expect demand from non-F&B segments such as apparel and sportswear to pick up,” it said.
From 2022 to 2025, the Company forecasts the completion of new retail space in business districts such as Makati CBD, Fort Bonifacio, Bay Area and Araneta Center, which is expected to account for 58% of new supply.
Retail vacancy continued to increase in the first quarter, albeit more slowly in Metro Manila at 15.2%.
“Despite the threat of the Omicron variant and low consumer traffic in January 2022, some retailers have announced store openings in select cross-regional malls,” Colliers said.
By the end of the year, the company expects retail vacancy to hit 16%, slightly below its previous forecast of 17%.
“While this is still higher than Metro Manila’s pre-pandemic vacancy rate of 9% to 10%, the slight improvement indicates the beginning of a slow recovery for Metro Manila’s brick-and-mortar retail segment, despite ongoing challenges from the popularity of online shopping and potential threats from a new COVID variant,” the property consultant said.
In terms of retail rent, Colliers sees a slow recovery of about 1% from a 15% cumulative decline in 2020 and 2021.
It said the gradual increase in retail space absorption through the second half of 2022 should partially support the projected rental recovery as more retailers are encouraged to occupy physical malls as consumer traffic begins to improve.
“Colliers sees an increase in discretionary spending as consumer confidence improves and mall footfall returns to pre-COVID levels. Election-related spending should contribute in part to a surge in budget spending leading up to the May 9 national election. With the passage of the Retail Liberalization and Overseas Investment Law, we expect more overseas retailers to enter,” said Mr. Bondoc.
“This should contribute to greater retail space utilization, further diversification of supply and differentiation between mall operators, which should ultimately benefit Filipino consumers,” he added. — Luisa Maria Jacinta C. Jocson
