Metro Cebu retail to benefit from economic growth

Bright prospects are seen for the Metro Cebu retail market this year driven by the growth of the Philippine economy, Colliers Philippines said.

In a statement, Colliers said the 8.3 percent growth of the Philippine economy in the first quarter of the year is seen to benefit the retail sector as the domestic economy is mainly consumption-driven.

“In Colliers’ view, Metro Cebu will benefit from the retail sector’s recovery as it is the largest metropolitan hub outside Metro Manila. The expansion of its consumer base, supported by Colliers’ projected growth in office and residential supply, should sustain retail buoyancy post-2022,”Colliers said.

It added that a greater potential is seen for Metro Cebu’s retail sector as the leisure sector starts to recover after more than two years of slump.

Colliers reported that vacancy in the Metro Cebu retail market is projected to drop to about 5.5 percent by the end of the year as retail space absorption picks up amid limited new supply.

Vacancy across malls in Metro Cebu reached 6.4 percent in the first quarter of the year, higher than the 2.6 percent recorded in 2018.

“The Covid-19-induced disruptions have resulted in the closure of some brick-and-mortar shops especially in regional and super-regional (50,000 square meters and above of leasable area) malls,”Colliers said.
From 2022 to 2024, Colliers projects the annual delivery of about 44,400 sqn of new retail supply. Among the malls due to be completed are Astra Lifestyle Center by Cebu Landmasters and Gatewalk Central Mall by Ayala Land and AboitizLand.

“Colliers estimates that about 60 percent of upcoming retailers in Cebu are likely to come from food and beverage (F&B) retailers followed by clothing and footwear at 17 percent,” Colliers said.

It added that this is similar to what was observed in Metro Manila in Q1 2022, where F&B accounted for 42 percent of new retailers followed by clothing at 17 percent.

Some of the new and upcoming retailers in Cebu include Nature Republic, New York Fries & Dips, Sumo Niku, Lantaw Seafood and Grill, and Nanyang, while Skechers is set to open its biggest branch in Cebu.

“The enactment of stimulus measures, such as the Foreign Investments Act and Retail Trade Liberalization Act, should also facilitate the entry of foreign retailers and contribute to greater retail space take-up beyond 2022,”Colliers said.

It added that major mall operators in Cebu should be proactive in tapping foreign retailers’ retail space demand.

Despite optimism for the retail sector, the property services firm emphasized that the rising inflation is likely to clip consumers’ purchasing power.

It cited data from the Bangko Sentral ng Pilipinas showing that the country’s inflation reached 5.4 percent in May 2022, the highest since November 2018. In addition, the BSP projects average inflation to reach between five percent and 5.8 percent by the end of 2022.

“Some of the headwinds that are also likely to affect the retail segment are the spread of new Covid-19 variants, higher oil prices, and global supply chain disruptions,”Colliers said.

“Colliers believes that the stronger-than-expected economic growth is likely to support the country’s retail sector,”it added.