PROPERTY management firm Colliers sees greater retail space absorption in Mandurriao, Iloilo City, especially in the Iloilo Business Park, as it benefits from office towers and hotels in the business district.
Colliers sees many opportunities for Iloilo retail and to maximize returns from these opportunities, it urged developers to:
-differentiate offerings of new malls;
-explore alternative sites for smaller retail formats;
-build neighbourhood malls in townships; and
-use pockets of vacancy to improve tenancy.
Meanwhile, tenants should look for space in malls located in major business districts such as Mandurriao and near residential communities where there is sustained consumer traffic.
Smaller malls in the pipeline
In 2018, about 70,000 sq metres (753,000 sq feet) of new retail space was completed, raising the city’s retail stock to nearly 325,000 sq metres (3.5 million sq feet).
New retail projects continue to gravitate towards Mandurriao, accounting for close to 60% of new supply. Among the new retail outlets in the business district are the Festival Walk Mall Annex and Festival Walk Parade Phase 2.
Colliers also recorded new retail space in Pavia, following the completion of GT Town Centre Pavia, CityMall Pavia, and Robinsons Place Pavia, the largest mall that opened in 2018 offering about 24,000 sq metres (258,000 sq feet) of new retail space.
From 2019 to 2021, Colliers expects the completion of about 25,000 sq metres (269,000 sq ft) of new retail space. This should raise the city’s stock to about 349,100 sq metres (3.7 million sq feet) by the end of 2021.
Colliers sees four neighbourhood malls delivering the additional retail space in 2019. These are The Grid, Two Lorton, Vista Mall Iloilo, and The Galleria Atria.
Lower vacancy in 2019-2021
In 2018, Colliers recorded vacancy of 7.9%, slightly higher than the 7% in 2017 despite the completion of 70,000 sq metres (753,000 sq feet) of new retail space. We recorded strong take-up especially among the new malls of Megaworld in Iloilo Business Park and Robinsons Land in Pavia.
Similar to malls in key business hubs in the Visayas region, such as Bacolod and Cebu, about 50% of new retail space in Iloilo was taken up by a mix of local and foreign F&B brands. Among these retailers are Coffee Bean & Tea Leaf, Starbucks, McDonald’s, Jollibee, Belgian Waffles, La Lola and homegrown brand Ted’s, popular for its noodle soup. Other upcoming F&B tenants are Max’s and Chili’s.
Meanwhile, a food court occupies a significant portion of the second floor of Festival Walk Mall located in Megaworld’s Iloilo Business Park which opened in 2018. The Marketplace, a supermarket that caters to more affluent customers, also took up space in Festival Walk Mall Annex.
Foreign clothing line Uniqlo is also planning to occupy a substantial space in Festival Walk Mall.
Major BPO companies such as WNS, iQor, and Reed Elsevier are among the drivers of retail spending in Iloilo Business Park, enticing retailers to occupy space in the business hub’s new leasable spaces. Other retail spending drivers in the business park are hotel guests and attendees of events in ICC.
Colliers sees average annual vacancy dropping to 6.5% over the next three years as we expect smaller malls to record strong occupancy during the period. It also expects a more aggressive absorption of pockets of vacancies in larger malls in Pavia and other parts of Mandurriao.
Rents to grow 5%
From 2019 to 2021, Colliers sees retail rents in Iloilo growing by 5% per year. This is faster than the 3% growth recorded per annum from 2016 to 2018. We attribute this to the sustained demand for retail space especially within the Mandurriao and Pavia areas coupled by limited new supply.
In Collier’s opinion, retailers are enticed to occupy space as are they are encouraged by Iloilo residents and workers’ rising purchasing power. The city has about 23,000 outsourcing employees, mainly employed within Mandurriao area.
Iloilo City is part of the Western Visayas region which saw its economy grow by 8.4% in 2017, faster than the Philippine economic growth of 6.7%, based on latest data from Philippine Statistics Authority (PSA). According to the PSA, the region is among the top sources of Overseas Filipino Workers, whose remittances keep the region’s economy afloat.
Colliers believes that the continued efforts to promote Iloilo City as a major MICE destination outside Manila should also complement the healthy retail demand in the city.
Differentiation in new malls
Colliers recommends that mall developers continue to improve their tenancy mixes to differentiate and sustain consumer traffic. This should include the development of interesting structures and spaces that encourage consumers to visit brick-and-mortar malls. Megaworld’s opening of a contemporary art museum in the Iloilo Business Park is a step in the right direction as it attracts more mall-goers. In our opinion, malls within Mandurriao should feature foreign F&B and clothing brands to cater to the needs of millennial outsourcing workers, who drive retail spending in the business district.
Explore alternative sites for smaller retail formats
Colliers recommends that developers explore other viable areas outside of Mandurriao for retail projects. Colliers encourages developers to look at other second-class municipalities such as Pavia and Jaro which are becoming popular sites for district and neighbourhood mall developments due to households’ rising incomes derived from outsourcing and overseas employment.
Build neighbourhood malls in townships
Colliers sees the completion of new residential towers, offices, and universities within major developers’ integrated communities over the next two to three years. In our opinion, developers should explore the viability of building smaller retail formats such as neighbourhood malls in these townships.
Pockets of vacancy to improve tenancy
Colliers believes that mall operators should maximize the pockets of vacancies in malls outside of Iloilo Business Park to improve tenancy mixes. While offering a mix of local and foreign F&B is a practical route given Iloilo residents and workers’ fondness for food, Colliers believes that inviting interesting tenants such as foreign clothing and footwear and personal accessory shops from Japan and Korea should also be explored.
Developers should also consider inviting more government agencies especially those holding offices in older buildings to raise consumer traffic in their malls.