Growth in Metro Manila mall rents has slowed, amid cut-throat competition and rising vacancies, says property consulting company Colliers Philippines.
“We believe developers need to gear toward a more lifestyle-oriented tenant mix to survive in a highly competitive retail landscape,” says Colliers research manager Joey Roi Bondoc.
He says shopping malls have “diminishing uniqueness” with “practically the same retailer tenants”, while a good mix of tenants is needed to attract more customers.
Bondoc says vacancy rates are rising across all mall formats, while most “regional” or large malls still enjoy occupancy at 97 to 99 per cent. With an uptick in vacancy in smaller malls, average vacancy spikes to about 7 per cent, he says.
Colliers noted a marginal rise for the first quarter in the average vacancy rate among malls in Metro Manila to 7.3 per cent from 7 per cent in its previous survey, in last year’s third quarter.
With new malls, says Bondoc, the average vacancy rate could rise to 11 per cent, but might drop to 8 to 9 per cent as F&B and fast-fashion retailers absorb the extra space.
The company predicts that about 500,000 sqm of leasable space will be completed in the metropolis this year, 48 per cent more than last year. Smaller neighborhood and district malls will continue to post higher vacancy rates than “regional” and “super-regional” malls, says Bondoc.
Rental rates in the Makati CBD and Ortigas Center may grow by only 2 and 3 per cent respectively in the next 12 months, down from last year’s average of 5 and 6 per cent.
Bondoc says another factor accounting for the rising vacancies is the challenging environment for some international fashion brands.
For instance, US apparel brands such as Aeropostale and Payless, which have local franchisees, have filed for bankruptcy and shut some stores, he says.
Colliers says that about 340,000 sqm of gross leasable area in malls was completed last year, more than triple the 2015 figure. The increase in space coupled with the closure of high-end retail shops had led to an overall rise in vacancy in Metro Manila.
“Developers should future-proof their businesses by cashing in on the increasing popularity of online shopping and being more aggressive in acquiring logistics and warehousing businesses,” says Bondoc.
“Given the millennials’ rising contribution to demand, we encourage developers to apportion coworking space in their malls,” he says. Flexible office space could be rented out for a day or a month.