Metro Cebu retailers to rake in profits after 2-year slump

CEBU, Philippines —  Metro Cebu retailers are seen to rake in profits after a two-year slump, boosted by the “revenge spending” which has started following the easing of health protocol restrictions.

“Metro Cebu will benefit from the retail sector’s recovery as it is the largest metropolitan hub outside Metro Manila,” revealed Colliers Philippines latest outlook.

According to Colliers, the expansion of its consumer base, supported by Colliers’ projected growth in office and residential supply, should sustain retail buoyancy post-2022.

In first quarter 2022, vacancy across malls in Metro Cebu reached 6.4 percent higher than the 2.6 percent recorded in 2018.

The Covid-19-induced disruptions have resulted in the closure of some brick-and-mortar shops especially in regional and super-regional (50,000 square meters and above of leasable area) malls.

As the Philippine economy surges by 8.3 percent in first three months of 2022, leading diversified professional services and investment management company Colliers, said this will benefit the retail sector as the domestic economy is mainly consumption-driven.

Colliers projected that food and beverage to lead take-up, while vacancy to drop in 2022.

Colliers estimates that about 60 percent of upcoming retailers in Cebu are likely to come from food and beverage (F&B) retailers followed by clothing and footwear at 17 percent. This is similar to what was observed in Metro Manila in first quarter 2022, where F&B accounted for 42 percent of new retailers followed by clothing at 17 percent.

Some of the new and upcoming retailers in Cebu include Nature Republic, New York Fries & Dips, Sumo Niku, Lantaw Seafood and Grill, and Nanyang. Skechers recently opened its biggest branch in Cebu.

By the end of 2022, Colliers sees vacancy dropping to about 5.5 percent as Colliers projects retail space absorption to pick up amid limited new supply.

The enactment of stimulus measures, such as the Foreign Investments Act and Retail Trade Liberalization Act, should also facilitate the entry of foreign retailers and contribute to greater retail space take-up beyond 2022.

Colliers recommended that major mall operators in Cebu should be proactive in tapping foreign retailers’ retail space demand.

The Inter-Agency Task Force for the Management of Emerging Infectious Diseases (IATF) also further relaxed Covid-19 restrictions in areas under Alert Level 1 by allowing all establishments (indoor and outdoor) to operate at full capacity. However, Presidential Spokesperson Martin Andanar said that “proof of full vaccination must be presented prior participation in mass gatherings and entry to indoor establishments.”

With this, Cebu mall operators as well as retailers are urged brace for revenge shopping and dining, and be ready for higher mall traffic as the economy reopens.

However, Colliers warned that amid the positive projection, retailers also have to prepare for the possible headwinds such as the rising inflation, which is likely to clip consumers’ purchasing power.

Data from the BSP showed that the country’s inflation reached 5.4 percent in May 2022, the highest since November 2018.

The central bank projects average inflation to reach between 5.0 percent and 5.8 percent by the end of 2022.

According to Colliers, some of the headwinds that are also likely to affect the retail segment are the spread of new Covid-19 variants, higher oil prices, and global supply chain disruptions.

Colliers believes that the stronger-than-expected economic growth is likely to support the country’s retail sector. This optimism is likely to be seen in major economic centers including Metro Manila and Cebu.

It also sees greater potential for the retail sector of Metro Cebu as the leisure sector starts to recover after more than two years of plunge.

The IATF allows all establishments under Alert Level 1 to operate at 100 percent capacity.