Retail industry to gain more strength in 2020

CEBU, Philippines —  While Cebu’s retail sector is seen to gain more strength in 2020, homegrown brands particularly restaurants are warned to keep on their toes, as outsiders are closely looking at Cebu for aggressive expansion.

Leasing broker for commercial spaces Eppie Acusar said Manila-based and global brands have been keeping an eye on Cebu as potential expansion area.

Acusar, who founded the iBuild Management Services Inc., said while the Cebu food and restaurant business shows promising future for entrepreneurs, expansions however are being on hold due to lack of leasable spaces for commissary facilities.

This should provide opportunity for homegrown players to take advantage of their home-ground to be more competitive, improve services and quality of products.

Warehouses Demand

According to Acusar, aside from commissary facilities, the expanding retail sector is also facing problems such as availability of warehouses.

“We have not been able to address the need for warehousing in Cebu. Most warehousing facilities in Mandaue for instance are now converted into residential, commercial developments,” said Acusar.

Acusar, whose business is into helping developers position their projects and creating concepts based on market pulse and trends, discovered that with focus given too much in taking advantage of the vibrant residential and commercial developments, building warehouses supposed to support the growing trade and commerce in Cebu have been overlooked by developers, causing the warehouse rent to spike to record highs.

Because of this, she said the next big thing in Cebu is in the business of warehousing and logistics where need is high, and supply is thinning.

Growth Continues

“There is no stopping the growth in retail,” said Philippine Retailers Association (PRA-Cebu) president Robert Go.

For 2020, Go anticipated the positive effects of government’s Build-Build-Build program to retail, as well as the robust real estate sector which provides more employment and money making activities to Cebuanos.

Rise of the middle-class will strengthen in the year of the Rat—2020, as expansion programs of high value outsourcing firms are in place, providing more expansive monthly salaries for the Cebuano workforce.

Cebu’s promising tourism industry will push the retail business further, as spending of tourists adds up to brisk local spending.

“Tourists from China and Korea seem ‘nonstop’. We expect more tourists to come and spend their money here with our new and bigger international airport, and increasing availability of foreign direct flights,” added Go, who owns and operates the Prince Hypermart chain.

New Retail Concepts

Aside from the continuous expansions of traditional shopping mall concepts, Cebu will see newer retail approaches in 2020.

Colliers International Philippines projected that the rise of resort malls, specialty retail hubs in townships will magnify this year.

The global real estate services and investment management company, Colliers also urged local or homegrown retailers to cope with the constantly evolving preferences of consumers and must recalibrate their offerings if they are to stay in the game.

“The difficulty of filling vacant space persists especially in certain regional malls,” Colliers retail outlook for Cebu stated.

The company believes that operators should be more discerning in selecting retailers and aspire for a more interesting tenant mix that would sustain visitor traffic.

“We think that the property firms should consider the heavy traffic along the city's main roads as an opportunity to develop smaller retail outlets in alternative locations,” said Joey Roi Bondoc, senior research manager at Colliers International Philippines.

Moreover, Colliers believes that the improvement of Cebu's infrastructure network should result in more transit- and resort-oriented retail projects.

“We also encourage operators and retailers to explore opportunities in future reclamation projects,” added Bondoc.

Top Performers

Food remains to be the top performing segment in Cebu’s retail industry in 2020.

“Food and Beverage (F&B), fast fashion and home furnishing businesses will be the major occupiers of Metro Cebu’s retail space over the next two to three years,” Bondoc noted.

The demand is being sustained by the growth of Cebu’s outsourcing sector, deployment of migrant workers, and influx of local and foreign tourists.

“We see malls within integrated communities benefitting from the completion of adjacent office and residential towers,” added Bondoc.

Sustained Vacancy Rate

Colliers sees a significant rise in vacancy over the next 12 months despite the opening of IL Corso mall at City di Mare and Ayala Malls Central Bloc.

“Between 2020 and 2021, we expect overall vacancy to hover between seven percent and nine percent per year,” the company forecasted.

Also, Colliers sees rental rates rising by three percent to four percent annually over the next two to three years.

Colliers projects faster acceleration of rents in malls within business districts but this should partly be offset by slower increase in stand-alone malls.

From 2020 to 2021, we see developers adding an average of 60,000 square meters of new retail space per annum.