F&B sector helps fuel retail space demand in Cebu

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(Source: Cebu Daily News | September 8, 2017)

The entry of internationally-recognized brands and the aggressive expansion of homegrown restaurant chains in Cebu are seen to continue driving the absorption of retail space demand in the country’s second largest urban hub.

This, coupled with the Filipinos’ love affair with dining, is poised to sustain the food and beverage (F&B) segment’s place in local real estate’s retail sector.
“We see foreign brands entering the Philippine market, a lot of which are specializing in a single product. There are also some local brands that are thriving and are competing well against their foreign counterparts,” Joey Bondoc, research manager at Colliers International Philippines, said in an interview with Cebu Daily News.

Mall’s leasable spaces’ share

The property management and research firm observed that the F&B segment accounts for 30 to 50 percent of the total retail space in the country.

For instance, if a mall has 40,000 square meters (sq.m.) of leasable space, around 15,000 to 20,000 sq.m. is allocated for F&B, said Bondoc.

He said that 70 percent of the country’s gross domestic product (GDP) is attributable to consumer spending, in which every household spends 40 percent of their income on F&B.

“That drives retail space absorption in malls in Metro Manila and Cebu,” Bondoc said.

Remittances from overseas Filipino workers (OFW), which fuel household spending, also play a role in the growth of the retail sector in the country.

The Bangko Sentral ng Pilipinas projected a four-percent growth for OFW remittances this year, which is seen to increase the demand for F&B among households.

Consumer spending is broken down into health, food and beverage, and communication, among others.
Bondoc said that in the last seven years, the F&B segment has been growing by 5.5 percent annually while the national GDP has been expanding at a pace of 6 to 6.5 percent each year.

Spending indicators

Restaurants and hotels, meanwhile, have been growing by 7.3 percent annually, which is even higher than the country’s own economy.
“That’s a good indicator of food and beverage spending here, which will fuel the demand for retail space take-up,” said Bondoc.

He also cited the mix of foreign and Filipino F&B concepts driving the demand for retail space take-up not just in Manila, but also in Cebu, Iloilo, Bacolod, and even areas outside these urban centers.

“These are slowly becoming retail hot spots, attributed to growing disposable income and rising remittances of OFWs,” Bondoc added.

Real estate consulting firm Pinnacle earlier described the Cebu retail market as “robust,” led by homegrown firms like the Gaisano Groups and the strong presence of national players.
As of end-2016, total commercial-retail spaces in Cebu were estimated at 1,080,000 sq.m. with the steady completion of the SM Seaside City Cebu at the South Road Properties, marking a phenomenal 98-percent growth from the estimated 545,000 sq.m. of retail spaces in 2013.
Because of the rapid growth in retail spaces, vacancy increased in the last four years, Pinnacle said.
The estimated vacancy rate of commercial retail spaces started at a low 2.55 percent in 2013 and dipped to just 2 percent in 2014.
Due to the increasing retail stock, estimated vacancy increased to 12 percent in 2015 when more than 200,000 sq.m. of retail spaces were offered to the market. Vacancy dipped again to nine percent at presence, since the market is steadily absorbing vacant retail spaces.
Rents also show the strength of the Cebu retail market, with prices ranging from P600 to P1,200 per sq.m. per month in 2015. For 2016, Pinnacle observed that retail rents ranged from P700 to P1,300 per square meter per month.
Generally, F&B makes up a huge chunk of the retail sector in the country, said Philippine Retailers Association (PRA) Cebu chapter president Robert Go.
Food as driver of growth

F&B, which is considered a sub-sector under Fast-Moving Consumer Goods (FMCG), is seen to drive the country’s retail sector.
“In the Philippines, since we are still developing and many in the society are still “hand to mouth,” food will always be a driver of growth,” said Go.
Go also noted that the most successful commercial-retail establishments, whether malls or smaller arcades, are those with supermarkets as anchor stores.
Without these supermarkets, he said, there is no come-on for customers.
“Other categories will survive only as long as there are supermarkets. It is the main driver of the mall or arcade. Few will flourish without these anchors,” said Go.
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