Colliers projects slight rise in retail rents through end of 2022.
Filipino consumers’ propensity to shop and visit brick-and-mortar malls is starting to rebound, according to leading diversified professional services and investment management company Colliers.
“We now see the resurgence of high-density retail segments such as family entertainment centres, and this should result in greater traffic in malls. Many mall operators are reporting that consumer traffic is starting to bounce back to 2019 levels,” said Joey Roi Bondoc | Associate Director, Research.
Colliers sees holiday-induced spending further propping up the sector and supporting a slight rise in rents through end-2022. More retailers are now willing to take-up physical space, which should bode well for retailers and mall operators. The company is optimistic that vacancy across Metro Manila will improve by 2024 and this should lift mall lease rates.
Marginal rise in vacancy
In the third quarter of 2022, vacancy across malls in Metro Manila reached 15.4%, a slight increase from the 15.2% recorded in the first quarter of 2022. Major developers have been reporting that consumer traffic has now reverted to 85% to 95% of pre-Covid-19 pandemic levels. Retailers have also been active in taking up physical mall space from the second to the third quarter of 2022 as they take advantage of rising consumer traffic coupled by an anticipated increase in purchasing power due to the holiday season.
“In our view, the headwinds that will likely hinder the retail sector’s expansion include supply chain disruptions, global recession fears, and persistently high inflation,” said Bondoc.
Colliers retains its forecast of a 16% vacancy in 2022 from 14.8% in 2021, which is attributed to the completion of 356,000 square meters of new supply. Retail vacancy is projected to inch up further to 17.0% in 2023 before receding to 14% in 2024.
Slight rise in rents
Colliers recorded a slight uptick in lease rates in the third quarter of 2022, rising by 0.4% compared to the 1.7% correction in the first quarter of 2022. “In our view, the projected pick up in retail space absorption and consumer traffic for the remainder of 2022 should support the rebound in rents. In 2022, we project rents to grow by 1%, an improvement following a combined 15% correction from 2020 to 2021,” said Bondoc.