Office property rules, but retail is next


(Source: The Manila Times | February 8, 2016)

After the outsourcing-backed office sector, the retail segment is forecast to be the next main driver of the Philippine real estate industry.

Retail will be the real estate industry’s strongest segment this year, Claro Cordero, head of research and consultancy at global property advisor Jones Lang Lasalle, told The Manila Times on Monday.

Cordero said the same consumer spending power that has boosted the office sector and served as the economy’s insulator against global shocks would propel the retail property sector.

“The strongest performing sector would be retail because the consumer spending power is continued to be fueled by remittances coming from overseas Filipino, the improved economic standing of the middle class, as well as the bigger employment from the business process outsourcing (BPO) industry,” Cordero pointed out. “So, all of these factors make us a good market for retail development.”

He said the entry of foreign brands into the local market reflects the Filipinos’ unleashed spending power.

Citing the entry of furniture store Crate and Barrel as an example, Cordero said this signifies that more people now need furnishings in their homes, what with the so many condominiums that sprouted all over the metropolis.

“You also have the influx of convenience stores,” he added. “I think there will be a lot of that retail format. That’s also because of the new communities or townships being developed by developers.”

Michael McCullough, managing director of KMC Mag Group, the Philippine associate of global real estate firm Savills, echoed the same sentiment.

McCullough said private consumption is the top driver of the retail sector, along with the robust remittances and the service sector.

“Filipinos, especially from the young, working middle-class, are quickly upgrading their preferences, thus opening more opportunities for new and existing brands to enter the market,” McCullough said.

He noted that of the growth in Filipino household income has created a lifestyle “shift,” which has, in turn, opened opportunities for retail brands to enter the market.

“With the upcoming elections, we expect further boost in consumption in the first two quarters of the year, translating to higher sales and earning opportunities for the retail market,” he added.

According to Cordero, large foreign players have even been taking up much retail space, more than the local brands.

He noted, though, that the local players are likewise expanding.

Cushman and Wakefield, another global property advisor, said in its own report that demand for the retail sector in Metro Manila is fuelled by foreign brands entering or expanding in shopping malls and high streets.

“[That’s] robust activity due to healthy domestic consumption on the back of higher income from remittances and the BPO industry,” Cushman and Wakefield said.

Aside from heightened consumer spending, a shift in developers’ attention from office building to retail development will also drive the retail property sector, according to Cordero.

The retail property sector, Cordero noted, is now a strategy a lot developers are now taking to augment their recurring income.

“This could also be the strategy of the developers—moving into ventures and developments to bring more recurring income,” he said.

He said developers would start paying attention to the retail sector, since they already have a number of office developments underway.

“This time, since we have a number of office developments to be completed, I think retail will start to be the focus of some of the developers because that’s where demand is still very much heightened up,” Cordero said.

Cordero said there is still much room for more retail developments in the local scene.

— By Catherine Talavera


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