Weak consumer confidence hits Manila’s retail property sector

Fragile consumer confidence has hit Manila’s retail property sector in July 2001, where the overall vacancy rate is expected to reach 13.1 percent by year-end, according to a forecast by international property consultant, Colliers Jardine in its latest "Philippine Property Market Overview" report.

"The trend of weak consumer confidence has been reflected in a 12.7 percent Manila-wide retail vacancy rate at the close of the second quarter and is expected to deteriorate further to 13.1 percent by year-end," said Nigel Lucas, Managing Director of Colliers Jardine in the Philippines. With the harsh reality of the slowing economy setting in as the initial euphoria over the new government subsides, the consumer confidence index has declined to 97.5 points in June from 105.5 points in May.

However, Lucas observed that "the vacancy problem is particularly pronounced among retail premises that are poorly maintained, owned by financially distressed companies or not included in the portfolios of major developers". This is in contrast to occupancy levels of major shopping malls such as those maintained and owned by leading developers, SM Prime and Ayala Land, where vacancy rates are typically five percent and below. The stock of leasable retail space in Metro Manila stood at 3.2 million sq m in 2Q 2001, up 1.6 percent from the previous quarter, with a further 5.4 percent expansion anticipated in the next 12 months.

In the face of fragile consumer confidence and weak sales growth in the retail sector, landlords have been unable to impose rental escalations, Lucas said: "Rental growth came to a halt for the whole of last year and our year-end forecast of $16.7 per sq m per month is a meager three percent year-on-year increase. This is a marked contrast to the double-digit escalation recorded from first quarter of 1996 to third quarter of 1997. Nevertheless, the average prime retail rentals are estimated to have slightly increased to $16.5 per sq m in 2Q 2001 from $16.1 per sq m in the previous quarter."