Metro Manila retail market thrives with sustained activity

The consumer-led economy continued to lift Manila’s retail market.

June 25, 2024

Retail properties remains one of the most stable real estate asset classes in the Philippines, as the sector banks on consumption, which accounts for around 70.0% of the total Philippine GDP. The Philippine economy expanded by 5.7% in Q1 2024, slightly faster than 5.5% in Q4 2023, but slower than 6.4% a year ago in 2022. Meanwhile, household consumption stayed positive in Q1 2024, settling at 4.6%, albeit slower than 5.6% in the previous quarter. The steady consumption benefitted the retail market and drove continued store openings and expansion in shopping malls.

Store openings in scanned malls in Metro Manila surged by 70.2% in 2023 y-o-y, owing to continuous retail activity in 2023 coupled with constant high-mall foot traffic in retail malls. Despite the end of the holiday season, strong momentum carried over into Q1 2024. Subsequently, store openings increasing by 1.0% thanks to the spike in shop openings in newly opened malls in 2023. These new malls included One Ayala Mall in Makati City, Gateway Mall 2 in Quezon City and Parqal Mall in Paranaque City. Store closures also fell by 8.7% q-o-q in Q1 2024, reflecting a better and healthier retail market. Meanwhile, expansion is seen to continue, with significant upcoming stores from both foreign and domestic brands expected in the following quarters, despite the high number of store openings in Q1 2024. The food and beverage segment also continues to dominate the shopping mall landscape, followed by clothing and apparel.

As developers continue to expand, vacancy rates rose to 6.8% in 2023, up 171.9 bps y-o-y, due to the substantial supply that came online last year. The vacancy levels may increase further in 2024, owing to around 150,00 sqm of expected supply in the coming quarters. However, a consistent influx of lease volume may contribute to keep vacancy rates stable despite the anticipated high supply this year.

Major mall developers thriving in the upbeat retail market

The strong performance of the retail market is also apparent in the revenue of major mall developers in 2023, which was driven by the improvement of retail operations as well as increases in both tenant sales and rental income. The SM Supermalls generated PHP 71.9 billion in revenue in 2023, up by 30.0% a year ago. The Ayala Land’s revenue from its shopping centres increased by 31.0% to PHP 21.1 billion in 2023. Meanwhile, the Robinsons Malls’ revenue climbed by 24.0% to PHP 16.2 billion in 2023. The Megaworld’s mall revenue picked up by 54.0% to P5.3 billion in 2023. It is also worth noting that mall developers aim to continue to improve the shopping experience for consumers through ongoing renovations and expansion. Some of the malls that are undergoing notable developments are Glorietta, Greenbelt, Robinsons Manila and Mall of Asia.

The retail sector is seen to continue to drive the real estate market moving forward as developers expand and capitalise on the Philippines' consumption-driven economy, more mature retail market, and strong mall culture among Filipinos.