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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