Colliers: BPOs, tourism drive Cebu retail sector
Still, Cebu remains a major retail hub outside Metro Manila, driven by its continually expanding economic and rising incomes, Colliers International Philippines said in report yesterday.
The property consultant and management firm said Cebu's retail sector is continuously driven by the proliferation of outsourcing companies; the continued deployment of Filipino workers abroad whose monthly remittances fuel household spending; the influx of local and foreign tourists; and the sustained generation of employment opportunities by traditional companies.
Colliers has observed that despite the substantial increase in retail stock since 2008, overall vacancy remains low as the additional supply is offset by a continuously expanding local economy which effectively boosts Cebuanos' disposable incomes.
"Over the next 12 to 36 months, we see the completion of new supply from both local and national developers. Given the competitive retail landscape in Cebu, we encourage developers to exhibit a more interesting mix of F&B (food and beverage) and fast fashion brands to sustain visitor traffic," the Canadian property consultancy firm said.
Operators should use the pockets of vacancy in a number of malls as an opportunity to overhaul their tenant mix, Colliers added.
Colliers has recommended that developers look at emerging areas in Metro Cebu such as Consolacion that have the potential to become key hubs for neighborhood and district mall development.
"We see Cebu as among the key urban hubs outside of Metro Manila that will benefit from the government's goal of ushering in the 'golden age of infrastructure' in the country. To further attract investments, both local and national governments are proposing the development of a subway, railway, and bus rapid transit (BRT) system across Cebu. The completion of these crucial infrastructure projects should raise opportunities for transitoriented retail projects in the city," Colliers further said.
"We encourage mall operators to cash in on the retail segments that are very popular among the millennial-driven BPO workforce such as food and beverage (F&B) and fast fashion," it said, noting that mall operators should exhibit an interesting mix of F&B and fast fashion brands to sustain visitor traffic.
Colliers also cited that with the worsening traffic in Cebu and the rising disposable incomes of highly-mobile millennials and young entrepreneurs, it suggests that developers carve out co-working space in malls located within township communities.
Operators should also offer incentives for co-working office space occupants such as discounts in the mall's stores, gyms and restaurants.
As of the second quarter 2017, Cebu’s retail stock stood at about 1.01 million square meters (10.8 million sq ft).
From third quarter 2016 to second quarter 2017, only one retail project was completed – Island Central Mactan in Lapu-Lapu City, which opened in October 2016 and added some 18,400 sq m (198,056 sq ft) of GLA (gross leasable area) to Cebu’s retail stock.
Colliers noted the proposed US$340-million Lapu-Lapu Leisure Mactan integrated resort and casino by Udenna Corp will feature a high-end retail complex that should redefine Cebu’s retail sector. Details of the retail project have yet to be disclosed.
By 2019, it sees Cebu’s retail stock reaching 1.2 million sq m (12.9 million sq ft), almost a fifth higher than the current stock.
"Given an estimated 200,000 sq m (2.15 million sq ft) of GLA expected to be completed over the next 12 to 36 months, we see overall retail vacancy in Metro Cebu rising to 9 percent to 10 percent from 6.1 percent currently," Colliers said.
The significant amount of additional supply should be offset by sustained demand from retailers and stable regional economy, which fuels Cebuanos’ propensity to consume.