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Retail space leasing still strong

Published on Thursday, 21 February 2013 00:00
Written by ALBERT CASTRO
Malaya Business News Online - Philippine Business News | Online News Philippines
SM Prime Holdings, the country’s leading retail space lessor, recently reported that profit for last year reached P9.1 billion, 16 percent higher than the previous year. Consolidated revenues reached P30.73 billion, 14 percent higher than last year’s P26.9 billion.
“We are very pleased to end 2012 with excellent results. We are confident that the Philippine growth story, which we saw unfold last year, will continue in 2013.  In line with this, we will proceed with our aggressive expansion plans and continue to pursue new opportunities for growth,.” SM Prime President Hans T. Sy said.
Sy’ statement is an indication  that the business of leasing spaces to retail businesses in the Philippines continues to be profitable.
According to property consultancy firm Colliers International, the retail space segment of the property market in the Philippines continues to be resilient amidst a growing spending power of the public.
“This year,  we expect new supply stocks of 284,000 square meters (sq.m.),” said Karlo Pobre, a research analyst at Colliers International (Philippines).
“But we might see vacancy rate slightly increase this year at 10 percent,” he added.
Despite this uptick in vacancy, Pobre said  prospects of the market remain entrenched with long-term trend of vacancy still on a downward direction, and the expected upward shift is offset by the confidence on the Philippines’ consumer segment, resulting to more businesses preferring to put up retail operations in the Philippines.
“With consumer spending still in an upward trend, the increase will taper off because of it,” said Pobre, who noted that much of the new supply for this year is seen to come from five retail developments in Metro Manila.
Among these projects are the Century City Mall of Century Properties Group, Inc.  in Makati City, the retail component of the Belle Grande Manila Bay of SM Investments Corp., and Melco Crown Entertainment Ltd.,. in Pasay City, SM Prime Holdings, Inc.’s SM Megamall phase 2 expansion, Ayala Land’s Fairview Terraces in Quezon City, and Megworld Corp.’s Venice phase 2 expansion in Taguig City.
Jaime Ysmael, Ayala Land chief finance officer, said the company is  planning to double its existing retails space in the next five years.
In 2010, Ayala Land also set a goal of doubling its leasable space, both retail and office, for a similar period of time, with the end-2009 space at 760,006 sqm.
In end-December, the company’s retails space was at 996,959 sqm with an additional 380,000 sqm under construction. Another 143,000 sqm  retail space is needed to reach the target.
Colliers has pegged the occupancy rate in the current stock of  5.2 million sq.m. retail space in Metro Manila at 97.4 percent for the last quarter of last year, a paltry 0.6 percent upward increment from the previous year. Colliers noted that the reported growth in occupancy was lower by 1.5 percent compared to the prior year’s similar period.
Rental rates for these spaces, however, have  been growing in line with inflation, noted Pobre, at an average of between 4 and 6 percent.
Pobre said this  bodes well for future growth of the retail space business in the country.
“Rent only grows alongside the economy, so it’s inflation plus-plus. Meaning it hasn’t grown by the extreme,” said Pobre.
“If rent is going up on a high inflation, this will loosen up occupancy a bit,” he said.
Pobre said that given the great prospects of the retail space segment, it is easy to fill up vacancies.
“In retail ,  it’s easy to lease a certain space. Even if  a lessee leaves a space, it is easily taken by another tenant,” Pobre said.
“The occupancy rates being high and rents being steady mean (these are )  on  manageable levels,” he added.
Jones Lang LaSalle, another property consultancy firm, has categorized the Philippine retail space market among the “growth” segment of the global retail space market.
The Philippines is among those markets which are “dynamic” and have “significant forward momentum, underpinned by young populations, fasttrack urbanization, rapidly-rising middle classes and higher retail sales growth.”
“These markets are a key target for international retailiers, who are now expanding their footprints beyond the familiar prime gateway cities,” it said.
Jones Lang LaSalle has placed the Philippines at the 19th place of the top 20 countries with the best retail growth momentum.
Phillip Anonuevo, JLLL associate director for Markets, said prospects for the office space and retail space remain good “at least going to be for the next three years.”
On the part of SM Prime,  this means additional retail space construction. This year, it aims to hit 6.7 million sq.m. in gross floor area, including its five malls in China.
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