This week, Colliers Research provides insights on increasing mall traffic in Metro Manila and its impact on retail real estate; how the easing of travel restriction is stirring up Filipinos’ travel plans; and OFW remittances growing for the eighth consecutive month, which is a boon for the residential real estate sector.
DTI estimates mall crowds at 50–80% of pre-pandemic levels
The Department of Trade and Industry (DTI) reported that malls and restaurants are recording consumer traffic of between 50% and 80% of pre-COVID levels following the easing of quarantine restrictions in the capital region. Metro Manila has downgraded its quarantine classification to Alert Level 2 since November 5. Under the new alert setting, restaurants, personal care establishments, fitness studios, cinemas, theme parks, libraries, museums, and other tourist attractions are now allowed to operate at 50% indoor capacity for fully vaccinated individuals.
In Q3 2021, retail vacancy reached 14.8% from 14% in Q1 2021. This is lower than our previous projection of a 16% vacancy by end-2021. Colliers believes that the easing of restrictions in Metro Manila will play a significant role in raising consumer traffic in malls for the remainder of 2021. In our view, recovery in the retail sector will hinge on the improvement in consumer confidence, growth in OFW remittances, and the ramped-up Covid-19 vaccine inoculation. Colliers recommends that mall operators explore alternative dining options such as Park-and-Dine, curbside pick-ups, and al fresco dining to maximize available space. Mall operators should also continue implementing strict health and safety protocols to ensure safe shopping experience for consumers.
Easing restrictions stir up travel plans among Pinoys
Filipinos have become optimistic in traveling again after the government eased mobility restrictions across the country. According to the Finder’s Traveler Index in October, travel plans rose as 28% of Filipino adults want to travel in the next 3 months, an improvement from 22% in September. However, this is still below pre-Covid-19 levels, which ranged from about 35% to 43%. Domestic travel plans increased to 20.4% from 15.1% the previous month. International travel plans also rose to 12.2% from 9.3%.
Data from the Department of Tourism (DOT) showed that tourist arrivals as of 5M 2021 reached 46,322, down 97% YOY due to travel restrictions imposed by the government. Meanwhile, hotel occupancies in Metro Manila reached 24% in H1 2021 from 20% in H2 2020 due to low foreign arrivals. While international travel restrictions remain in place, Colliers believes that the DOT will likely continue its domestic tourism push by promoting reopened local destinations in the country. Colliers is optimistic that revenge travel among local travelers should help push hotel occupancies of selected hotels across the country.
Overseas Filipino worker (OFW) remittances grew for the eighth consecutive month. Data from the Bangko Sentral ng Pilipinas (BSP) show that cash remittances in September 2021 reached USD2.7 billion, up 5.2% from USD2.6 billion a year ago. In 9M 2021, cash remittances reached USD23.1 billion, up 5.6% YOY. The United States accounted for 40% of total remittances followed by Singapore, Saudi Arabia, Japan, and the United Kingdom. The BSP raised its remittance growth projection in 2021 to 6% from 4%.
Colliers believes that OFW remittances will anchor growth in residential demand within and outside of Metro Manila. We have observed stable demand for house and lot units in key provinces outside the capital region including the CALABA region (Cavite, Laguna, Batangas), Bulacan, and Pampanga with take-up rates ranging from 89% to 95%. Based on our Q1 2021 Residential Survey, about 74% of respondents are likely to invest in house and lot, and lot-only units. Meanwhile, 36% chose Laguna as their top choice for residential investment, followed by Cavite (19%) and Batangas (18%). Colliers recommends that developers consider strategic land-banking in key provinces to meet growing demand for horizontal residential projects.