Retailers challenged despite easing of lockdown

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DESPITE the easing of the lockdowns, retailers will continue to be challenged by slower demand, lower foot traffic  and restrictions on other retail formats, resulting to double-digit vacancy rate and a 5-percent drop in rents this year, property consultancy Colliers said.

Joey Bondoc, head of research at Colliers said retailers and mall operators should innovate and re-strategize to capture the market shifting to online purchases.

“Even with the partial lifting of the enhanced community quarantine (ECQ) , Metro Manila’s consumers are still likely to limit their expenditures to essentials such as groceries, medicines and food and beverage  for delivery. In addition, the implementation of physical distancing measures by the government is also likely to result in a gradual opening of retail spaces in the country’s capital. We also expect rising unemployment and slower remittance inflows to erode consumer purchasing power, and this should dampen the demand for retail spaces,”  Bondoc said.

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Colliers sees Metro Manila retail vacancy to rise to 12 percent this year from 9.8 percent in 2019.

Based on Colliers’ estimates, only about 50 percent of new leasable space due to be completed in the next 12 months is likely to be absorbed.

Retail segments with low exposure to this development include those in basic essentials like pharmacies, supermarkets, e-commerce merchants, and fast food.

Those with moderate exposure include coffee shops, cosmetics, and home furniture stores.

High exposure include cinemas, luxury goods, fitness gyms, and fast fashion and sportswear or leisure related retail where mass congregation cannot be avoided.

This would mean  a significant number of physical retail shops are likely to remain closed for additional time, Bondoc said.

According to Bondoc, retailers should be more aggressive with online sales and be more innovative with client engagement programs.

While the retail landscape has already seen brick-and-mortar retailers tapping the demand by expanding their online presence, Colliers expects more retailers to create their own e-commerce sites, utilize the existing sites of major mall operators, or use popular social media sites such as Facebook and Instagram.

Bondoc also recommends what he called are expanded online strategies, which are very targetted to specific consumers.

For higher-end brands, Bondoc said, retailers may tap personal shopping.

He said retailers should also now target the elderly, who are among the most vulnerable segment of the population during the pandemic but are now actively embracing online shopping.

Bondoc also cited the need for stronger partnerships with logistics firms.

“Mall operators and retailers should consider firming up partnerships with delivery companies that have modernized warehouses and efficient logistics systems to maximize their shift from brick-and-mortar to online selling.

But as of the first quarter, Metro Manila’s retail vacancy rose slightly to 10 percent as the smaller neighborhood malls (25,000 meters and below) that opened during the period were almost fully occupied.

Colliers projects a 5 percent decline in rents in 2020 as mall operators scramble to retain their current tenant mix and provide short-term relief measures to retailers affected by the Luzon lockdown.

“We see average rents declining 2 percent in 2021 before a slight recovery (1 percent) in 2022. An improving macroeconomic environment and consumer confidence by the end of 2021 should result in at least a minor rise in rental rates as mall operators and retailers re-capture pent-up retail demand,” it said.

Malls reopen

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Mall owners on May 16 started opening their doors to across the country, observing the health and safety protocols set by the Inter-Agency Task Force.

Ahead of the easing of the ECQ, mall operators have embraced online ordering for pick-up and delivery.

As they open, they have intensified their sanitation and safety protocols and introduced cashless or contactless payments.

Megaworld Lifestyle Malls said its malls are implementing shorter hours.

Retail stores, services and restaurants with takeout and delivery will resume operations at certain Megaworld Lifestyle Malls with the exception of places of worship, entertainment and leisure establishments, which will remain closed.

SM is taking its  #SafeMallingAtSM campaign up a notch by running COVID-19 antibody rapid testing for all its employees and agency frontliners, including janitors and security guards. SM tenant partners can avail of this test, at cost, for their respective staff.

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