Mall operators continue to refresh retail spaces, and we see this trend across the Philippines as developers entice more mallgoers 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 co-working facilities within their retail establishments. As the result of a Colliers USA survey highlighted, workers in a flexible space within a mall tend to stay longer in a mall, spend more, and have a greater propensity to visit retail shops more frequently. This is a win-win for mall developers, retailers, tenants, and operators of co-working spaces.
F&B retailers dominating mall space take-up
Food and Beverage (F&B) retailers continue to dominate mall space take-up. Colliers sees the expansion of foreign retailers including those from home furnishing and personal accessory segments.
An estimated 39 percent of new retailers that will occupy physical mall space over the next 14 months are from the F&B segment. While we attribute this to Filipinos’ affinity for food, F&B retailers have been occupying greater mall space as mall operators are expanding and refurbishing food halls across Metro Manila. Among the malls that recently expanded and renovated include SM Bicutan, Gateway Mall 2, and GH Mall.
More refreshed and immersive space
From Q2 to Q3 2024, we recorded the delivery of 86,900 sq meters (935,000 sq feet) of new retail space with the completion of Opus Mall in Quezon City, SM City Caloocan, and the expansion of SM Bicutan in Parañaque City. In Q4 2024, the SM Mall of Asia expansion amounting to 250,000 sq meters (2.7 million sq feet) of retail space is projected to come online. From 2024 to 2026, Colliers projects the annual delivery of 159,600 sq meters (1.7 million sq feet) of new supply, down from our previous estimate of 162,300 sq meters (1.7 million sq feet) annually. Major developers have also been actively redeveloping their existing retail spaces to capture consumers’ shifting preferences. Some of the malls that are being renovated are: SM Megamall, SM East Ortigas, Greenbelt, Glorietta, Trinoma, and Robinsons Forum.
Among the experiential tenants that recently opened include Science Xpidition, Space and Time Cube+, Tennis in the City, Paeng’s Gateway Bowl, Superpark, Dreamland, The Bouldering Hive, and Fantasy World, the country’s largest indoor amusement park. These retailers took up space in Quezon City, San Juan, Parañaque, Taguig, Pasay and Makati City.
These new retail spaces are not just immersive and experiential, they also have the potential to attract greater consumer traffic and lure more mallgoers to visit brick-and- mortar retail centers.
Greater brick-and-mortar space take-up
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 vacancy to marginally rise to 15.3% due to new supply, with the rise in vacancy partly tamed by retailers’ aggressive absorption of physical mall space in time for the holiday season.
Seizing holiday-induced spending
Colliers believes that Q4 is historically a strong period for retail spending due to increased inflow of remittances from Filipinos working abroad and release of holiday bonuses for 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 the right time to ramp up marketing initiatives and take advantage of Filipinos’ greater disposable incomes.
Amplify omnichannel strategies
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 USD33.5 billion in 2023 and is projected to reach USD34.5 billion by end-2024, covering about a tenth of the Philippine economy.
The country’s retail sector continues to evolve. Mall developers and retailers should welcome these opportunities and should capture potential gains brought about by consumers’ evolving preferences. Retail stakeholders need to pivot to stay afloat.
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