Retail stock seen expanding along with real estate boom

Colliers International sees Cebu’s retail stock expanding by about 200,000 square meters (sq m) over the next two to three years, with the new supply coming in the market.

Colliers said the new supply will be delivered by both national and local developers such as Filinvest, Ayala, Aboitiz, and Elin Land.

"By 2019, we see Cebu's retail stock reaching 1.2 million sq m (12.9 million sq ft) of gross leasable area (GLA), a fifth higher from its current stock," the property consultancy firm said in a recent report on Cebu's retail scene.

Both local and national developers have lined up retail outlets that are projected to be completed over the next 12 to 36 months.

Among those expected to be delivered this year are Filinvest’s Il Corso mall at City di Mare and NorthDrive Complex of the local developer Elin Land.

The projects, once completed, will add about 45,000 sq m (484,400 sq ft) of leasable space to Cebu’s retail stock.

Other retail projects in the pipeline are Ayala Land’s Ayala Mall at Central Bloc located in Cebu IT Park as well as Ayala Land and Aboitiz Land’s Ayala Mall at Gatewalk Central in Mandaue City.

The former will offer about 42,000 sq m (452,100 sq ft) of leasable retail space while the latter, a super-regional mall, will have more than 110,000 sq m (1.18 million sq ft) of leasable area.

The Gatewalk central mall will be anchored by a Landmark department store. Among the CityMall outlets expected to open next year is the Bacalso branch.

As of second quarter 2017, overall retail vacancy in Cebu was 6.1 percent, a significant decline from 14.7 percent posted in end-2015 following the opening of SM Seaside City Cebu and Robinsons Galleria Cebu.

Vacancy in regional malls was stable at 5.5 percent while the smaller district and neighborhood malls such as the Gaisano and CityMall outlets posted an average vacancy of 3.4 percent.

Despite the completion of about 200,000 sq m (2.15 million sq ft) of retail space by 2019, Colliers sees Metro Cebu’s vacancy rising to about 9 percent to 10 percent due to sustained demand from retailers and a stable macroeconomic backdrop that drives household consumption.

Colliers also sees rental rates growing by a slower 2 percent to 3 percent annually over the next two to three years from about 4 percent to 5 percent rise in the past two years due to the significant amount of upcoming supply.

"We see retail demand in Cebu being fuelled by the sustained growth of its outsourcing sector, deployment of migrant workers, and influx of local and foreign tourists. Food and Beverage (F&B) and fast fashion businesses will continue to occupy Metro Cebu’s retail space," the real estate consulting agency said.