The Philippine retail scene remains bullish and upbeat, with an upside potential hinged on a booming food and beverage sector.
The latest report from Colliers International Philippines claimed that the F&B segment continued to be a major driver of retail spending in Metro Manila, and covers as much as 50 percent of leasable space in shopping centers—one of the highest levels in the Asia Pacific region.
Colliers Philippines attributed this robust F&B spending to strong remittances and increased purchasing power among millennial employees. And despite the higher cost of basic commodities in the past nine months, the growth of F&B segment remained strong at about 5.6 percent.
New foreign players
“We believe that these factors, coupled with a generally stable macroeconomic backdrop, are luring more foreign F&B brands to establish footprint in the Philippines,” Colliers said.
In the past nine months, the country saw the entry of foreign F&B retailers such as New York-based M Bakery and the South Korean fish cake brand Samjinhas. Existing players such as Wolfgang’s Steakhouse are also expanding.
“An aggressive entry in foreign food retailers should result in increased retail space absorption moving forward. Colliers believes that this trend should be buoyed by the government’s plan to further open up the country’s retail sector to 100 percent foreign-owned retailers,” it said.
More retail spaces
As of end September, Metro Manila’s retail stock inched up by a mere 1 percent to 6.85 million sqm. Colliers, however, expects Manila’s retail stock hitting 6.87 million sqm by the end of the year, to record a 4 percent growth from 2017.
From 2019 to 2021, Colliers sees the delivery of at least 200,000 sqm of new retail space a year. It expects new space expanding Metro Manila’s stock by 11 percent to 7.6 million sqm by end-2021.
Colliers also pointed out that while most retail projects completed from April to September 2018 were in Makati, it sees an aggressive completion in the Bay Area between 2019 and 2021 with the expected completion of the Ayala Malls Bay Area and the expansion of Mall of Asia.
Strategies
Given the continued growth of retail space and booming segments such as F&B, Colliers cites a few strategies that may allow one to cash in on the opportunities offered by these developments.
1 Increased differentiation
The pronounced delivery of new space intensifies the need to differentiate to sustain consumer traffic. To retain old customers and appeal to a younger profile of mallgoers, mall operators should aspire for a lifestyle-centric retail mix.
2 Carve out co-working space
With significant amount of leasable space, developers should consider carving out space for flexible workspace operators. The apportioning of co-working space in malls is also feasible given the worsening traffic in Metro Manila and tight office vacancy that persists in the market.
3 Curate offerings based on consumer spending sub-segments
Developers should feature a good mix of retailers that represent the spending pattern of consumers. From 2010 to 2017, the fastest growing sub-segments include health, restaurants, recreation, and F&B, among others.
4 More luxury items in the Bay Area
Colliers believes that the Bay Area is ripe for more high-end F&B, and footwear and clothing brands. Prada, Givenchy, and Salvatore Ferragamo have opened shops in Solaire. More high-end brands should differentiate the business district’s retail offering from the profile of retailers in nearby CBDs such as Makati and Fort Bonifacio.