MALL OPERATORS are expected to end the year with the highest vacancy rates in retail leasing since the Asian Financial Crisis (AFC), with rents expected to continue declining until 2021.
In a virtual briefing Thursday, Colliers International Philippines said the retail segment has been struggling to pick up despite the easing of coronavirus-related quarantine rules.
Vacancies in Metro Manila retail grew to 12.5% in the third quarter, after a 30-50% drop in mall foot traffic. Colliers said it expects this vacancy rate to hit 14% by the end of 2020.
This would mark the highest vacancy levels in Metro Manila retail leasing since the 14% posted in 1999 during the Asian Financial Crisis, which eventually rose to 19% in 2001 as the impact of the crisis dragged on.
“A lot of retailers are going online, and we don’t expect them to expand their bricks and mortar space in the near term,” said Joey Roi H. Bondoc, Colliers Philippines head of research.
“Consumer confidence is at a low point, and as a result, we are likely to see a correction in lease rates,” he added.
Colliers expects retail rents to fall 10% by the end of 2020, continuing until next year, until a possible recovery in 2022.
“We are not likely to see a recovery in mall lease rates for the remainder of 2020, or over the next 12 or 15 months. In fact, that recovery will likely happen in 2022,” Mr. Bondoc said.
Citing data from the central bank, Mr. Bondoc said consumer confidence has hit a record low in the third quarter, pushing tenants to close shop either temporarily or for good.
The most affected retail segments are cinemas, fitness centers, food courts, luxury footwear and clothing and family entertainment centers. The moderately affected ones are hardware stores, cosmetics, coffee shops and pet supplies.
Somewhat more resilient among the tenants are pharmacies, supermarkets, fast food outlets, banks, remittance centers and in-mall clinics.
To adapt to the challenges that concessionnaires are experiencing, mall operators have rolled out accommodative strategies such as grace periods and rent discounts.
New trends in retail are also emerging, such as virtual mall tours, selling through Facebook Live, door-to-door shopping and rolling stores.
Mr. Bondoc said mall operators can expect the profile of upcoming tenants to be heavy on medical-related stores, specialty shops, home furnishing stores and groceries. — Denise A. Valdez