THE provincial retail property market is facing an oversupply of malls mainly due to the lack of spending power in some areas, a real estate consultant said.
Leechiu Property Consultants (LPC) chief executive officer David Leechiu told The Manila Times in a recent interview that the country’s property sector had a “fantastic” year in 2016 as most of the major developers opened new malls in new sites.
“So retail has had an incredible expansion in route. So you look at SM, Robinsons, Ayala, DoubleDragon, Puregold, Villar, Filinvest, they all opened in new sites, new malls. And if you add all of that, it’s unprecedented also,” Leechiu said.
Based on figures from Colliers International Philippines, an estimated 118,000 square meters of retail space was added to Metro Manila’s retail stock in the third quarter of 2016, bringing the total stock to 6.32 million square meters.
For Metro Manila alone, total retail stock is forecast to rise by 7.0 percent to 6.76 million square meters by the third quarter of this year, according to Colliers.
Despite new supply entering the market, retail vacancy levels remained low in Metro Manila at just 0.57 percent.
However, Leechiu noted that it was a different story for the provincial retail market.
“We’ve had a fantastic run in retail, but I think the rents are softening because some areas might be over-malled now,” Leechiu said, adding that this was mainly due to the lack of purchasing power in some areas.
“Because the purchasing power is not there yet,” he said.
He did not mention the specific areas which are deemed “over-malled” but noted that these were areas outside
Metro Manila. In particular, he said these are malls that cater to the middle-income market.
But Leechiu believes this will be a very temporary situation.
“In two, three years, that’s going to change and improve,” the property analyst said.
He expressed optimism over the growing spending power, which is a main driver of the country’s retail sector.
“The purchasing power continues to grow. I mean, we are converting so many people to the middle class, which we did not have before,” Leechiu said.