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Market Intelligence | Philippines March 14, 2022

Retail real estate, SM Supermalls, BPO, Business process outsourcing, Office real estate

This week, Colliers Research provides insights on the retail sector’s projected recovery beyond 2022, and the group representing the information technology and business process outsourcing (IT-BPO) sector calling on the next president to commit support for the industry.

SM Supermalls sees full recovery by 2023

SUMMARY

SM Supermalls is expecting full recovery by 2023, after recording a double-digit increase in consumer traffic for the first two months of 2022. SM Supermalls president Steven Tan said that occupancy rates of their malls remained stable between 85% and 90% despite mobility and operating capacity restrictions due to Covid-19. Tan added that  a number of new retailers opened even during the Covid-19 pandemic and are optimistic on the country’s economy despite the pandemic.

RESEARCH VIEW

Based on our Q3 2021 Retail Survey, about 46% of respondents are now confident to visit physical malls from 36% in our Q3 2020 survey. Colliers expects recovery in retail space absorption to be supported by an increase in consumer traffic in malls brought about by improved inoculation program, projected rise in business and consumer confidence, and relaxed mobility restrictions in the National Capital Region. In our view, the retail rent correction of about 5% in 2021 and 10% drop in 2020 should provide an opportunity for retailers to locate in prime mall locations in Metro Manila. We also believe that the amendments to the Retail Trade Liberalization Act should allow the entry of more foreign retailers in the market, which will likely influence the absorption of physical mall retail space and enable mall operators to diversify their offerings post-Covid-19.

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IT-BPO group wants more support from next administration
   

SUMMARY

The IT and Business Process Association of the Philippines (IBPAP) said the next administration should provide support to the local information technology and business process outsourcing (IT-BPO) sector. IBPAP stressed that the next president should strengthen the country’s digital infrastructure. The industry group is seeking the improvement of internet connectivity as major players continue to expand in the countryside. It is also asking the next administration to support the implementation of a permanent work-from-home (WFH) arrangement.

RESEARCH VIEW

Outsourcing firms continue to expand and occupy office space within and outside Metro Manila. In 2021, Colliers recorded about 170,200 square meters (1.8 million square feet) of transactions from outsourcing firms in the National Capital Region, up from 117,800 square meters (1.3 million square feet) closed in 2020. Meanwhile, provincial outsourcing deals reached 68,000 square meters (732,000 square feet) in 2021, up from 54,000 square meters (581,000 square feet) in 2020. Colliers expects office space absorption to pick up in 2022 as outsourcing and traditional firms execute their expansion and return-to-office plans. Colliers recommends that occupiers take advantage of the attractive rents and lock in space in newer buildings especially in central business districts such as Ortigas Center. In our view, occupants, landlords, and other stakeholders should constantly communicate with the government to further improve the business environment they are operating in.

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