CBRE: Manila, Cebu hot retail destinations

MANILA, Philippines - Based on CBRE Global Research, the Philippines is among the countries with an active retail market and current appeal to investors—one of the most viable destinations that retailers from Europe, the Americas, and Asia Pacific are looking into given their large-scale, cross-border expansions.

In a survey conducted with more than 130 global retailers, the Philippines ranked 28th out of 58 in the global list of top target markets for 2014. Asian retailers likewise showed significant potential in their own region, with the Philippines ranking 8th in the top 10 target markets.

Similarly, a recent study conducted by the Urban Land Institute and PricewaterhouseCoopers titled “Emerging Trends in Real Estate Asia Pacific” showed Manila ranking fourth out of 23 Asian cities for city investment prospects, putting it high on the list of investors. Cebu is likewise gaining interest with the expansion and openings of upcoming malls.

 “Right now, robust retail activity can be seen in Manila and Cebu—two of the most progressive cities in the Philippines. The maturity of the market in these areas is what retailers are going for,” explains Rick Santos, CBRE Philippines CEO, chairman and founder.

The consumption-driven economy and increase in purchasing power of the population have encouraged the expansion of international retailers. Cebu, in particular, is awaiting the opening of SM Seaside City—a high profile, 496,000-sqm lifestyle destination envisioned to be the fourth largest shopping mall in the world.

Ayala Center Cebu, SM City Cebu, and other Grade A malls in the area are also expanding and welcoming a variety of global brands, from luxury houses such as Gucci to high street fashion like Gap, Superdry, Onitsuka Tiger, Yves Rocher, and even specialty lifestyle brands like Muji.

Metro Manila, meanwhile, is gearing up for the opening of several community shopping centers, including Ayala Fairview Terraces, Century City Mall, and Blue Bay Walk.

Retail strategies

With the increase in OFW remittances and BPO (business process outsourcing) revenues, retail developers are increasingly focusing on the potential of these market segments. In Metro Manila, stores like Family Mart are aggressively taking up space within and near central business districts. Podium retail spaces in office building developments are likewise experiencing an increase in demand.

Some investors have tied up with, or acquired, brands to further their market reach. In Manila, Puregold Price Club has been absorbing local players. Other supermarket chains have been observed undertaking the same strategy in Cebu.

 “Based on the trends, the Philippines has the potential of being a top retail destination in the future. As purchasing power and the economy continue to get stronger, global investors will see the great expansion opportunities that the country can offer,” added Santos.

These investors are expected to take advantage of prevailing competent lease rates in the Philippines. In Manila, current average rent is at P1,200/sqm and prime rent at P1,400/sqm. In Cebu, meanwhile, current average rent is at P950/sqm and prime rent at P1,400/sqm. Lease rate in the country is at $36/sq ft., the most affordable across Asia.