MALL OPERATORS continue to refresh retail spaces, and we see this trend across the Philippines as developers entice more mall goers and encourage them to stay longer and spend more. Colliers believes that the traditionally strong fourth quarter is an opportune time for retailers and mall operators to ramp up their refurbishment and redevelopment strategies. We see greater physical mall space absorption moving forward as foreign brands continue to open shop in the Philippines while existing brands continue to expand within and outside Metro Manila.
Colliers believes that mall operators and retailers need to cash in on the festive season and seize greater spending across the country. With continued mall space take-up from local and foreign brands, mall operators should take the lead in ensuring that retail spaces are more immersive and experiential while proactively taking into account the tenants’ size and fit out requirements. Meanwhile, mall operators should also look at the viability of featuring coworking facilities and work with their tenants to amplify their brick and click (omnichannel) strategies.
Interest rate cuts should positively influence retail spending across the Philippines. With the release of holiday bonuses and the inflow of more remittances from Filipinos working abroad, we see a more dynamic retail sector for the Philippines for the remainder of the year. A ramped up omnichannel promotion strategy should complement developers’ brisk expansion thrust.
SEIZING HOLIDAY-INDUCED SPENDING
Colliers believes that fourth quarter is historically a strong period for retail spending due to increased inflow of remittances from Filipinos working abroad and release of holiday bonuses of private and public sector employees. Colliers believes that mall operators and retailers need to cash in on the festive season and seize greater spending across the country. With inflation also starting to ease, Colliers believes that the holiday season is a right time to ramp up marketing initiatives and take advantage of Filipinos’ greater disposable incomes.
AMPLIFY OMNICHANNEL STRATEGIES
Mall operators and retailers should continue to capture Filipinos’ rising propensity to spend whether online or offline. While brick-and-mortar retail centers remain attractive especially among Filipinos that utilize malls as de facto public spaces, consumers remain to be drawn to online shopping due to discount vouchers and seasonal promos offered by online shopping platforms and their retail partners. Retailers should sustain Filipino shoppers’ interest by amplifying their brick-and-click strategies. While developers continue to entice greater consumer traffic by introducing trade fairs, bazaars, and other programs within their activity centers and offering “instagrammable†retail areas, online platforms should continue to pique consumers’ e-commerce interest by improving check out process of their e-commerce sites and partnering with retailers and logistics providers by offering vouchers as well as discounted shipping rates and expedited deliveries. Colliers believes that an effective omnichannel strategy is important in expediting the retail sector’s recovery. This is crucial especially as the impacts of interest rate cuts are likely to kick in by 2025. The right mix of online and offline retail promotion strategy also plays a central role in boosting the retail interest of OFW remittance-receiving households. Cash remittances from overseas Filipinos reached a record high $33.5 billion in 2023 and is projected to reach $34.5 billion by end-2024, covering about a tenth of the Philippine economy.
EXPLORE THE VIABILITY OF HOUSING CO-WORKING SPACES
The results of our Q2 2024 Survey Report reveal that 40% of our respondents said that malls are viable locations for flexible workspaces followed by hotels (20%), and cafes and restaurants (19%). Flexible workspace operators may also consider taking up space in transit-oriented retail developments to attract more consumer traffic. Previously, Colliers highlighted that a number of developers are already offering flexible workspaces, exploring the feasibility of these facilities within their retail spaces.
VACANCY IMPROVES
In Q3 2024, vacancies across malls in Metro Manila improved to 15.1% from 15.5% in Q1 2024 due to significant take-up from retailers. This despite the ongoing redevelopments of some regional and super-regional malls. By end-2024, we expect vacancies to marginally rise to 15.3% due to new supply, with the rise in vacancies partly tamed by retailers’ aggressive absorption of physical mall space in time for the holiday season. In the first nine months of 2024, the central bank reduced interest rates by 50 basis points (bps), with the key policy rate now at 6%. In our view, further policy rate cuts should help prop up demand in the retail sector. Economic analysts are optimistic that the central bank will likely continue cutting interest rates in 2025 with the policy rate eventually settling into the 4.5% to 5% range.
Joey Roi Bondoc is the director and head of Research at Colliers Philippines.
joey.bondoc@colliers.com
