Cushman & Wakefield Global Cities Retail Guide The Philippines strong economic expansion affirmed its position as one of Asia Pacific’s frontrunners, with annual GDP growth rate registered at 6.2% in 2018.
The country’s economic growth is heavily led by the manufacturing and trade sectors, with 20% and 14% share of the GDP, respectively. The service sector, which is the fastest growing sector, is trailed closely by the industrial sector, particularly by the buoyant construction segment. The on-going massive infrastructure programs are seen to further augment the country’s attractiveness as an investment destination and deliver sizeable economic gains as they address the desperate need for better infrastructures. Factoring in the healthy domestic demand and investments, which are seen to counterpoise the global economic pressures, the country is expected to sustain its robust GDP growth trajectory.
PHILIPPINES OVERVIEW
Cushman & Wakefield | Philippines | 2019 1 PHILIPPINES ECONOMIC OVERVIEW
ECONOMIC SUMMARY ECONOMIC INDICATORS* 2018 2019F 2020F 2021F 2022F GDP growth 6.2 6.1 5.8 5.5 5.3 Consumer spending 5.6 5.8 5.5 5.3 5.3 Industrial production 4.9 7.9 5.5 5.3 5.2 Investment 14.0 8.9 8.2 5.0 4.9 Unemployment rate (%) 5.3 4.9 4.5 4.3 4.2 Inflation 5.2 3.4 3.5 3.9 3.9 Peso₱/€ (average) 62.2 60.1 61.5 62.3 61.6 Peso₱/US$ (average) 52.7 52.6 51.8 50.4 49.3 Interest rates Short Term (%) 3.6 4.5 4.3 4.4 4.7 Interest rates 10-year (%) 6.7 6.1 6.1 6.8 7.5
ECONOMIC BREAKDOWN RETAIL SALES GROWTH: % CHANGE ON PREVIOUS YEAR Population 108.3 Million (2019F) GDP (nominal) US$ 365.6 Billion (2019F) PHILIPPINES 2018F 2019F 2020F 2021F 2022F Public Sector Balance -3.0% of GDP (2019F) Retail Volume* 6.0 5.9 5.6 5.6 5.5 Public Sector Debt 40.1% of GDP (2019F) Current Account Balance -2.3% of GDP (2019F) Government Democratic President Rodrigo Duterte Vice President Leni Robredo Election Date May 2016
NOTE: *annual % growth rate unless otherwise indicated. Figures are based on local currency and real terms. E estimate F forecast. Cushman & Wakefield | Philippines | 2019 SOURCE: Oxford Economics Ltd. 2 POPULATION CITY (2015 Census) Quezon City, MM 2,919,657 City of Manila, MM 1,763,348 Davao City 1,622,427 Caloocan City, MM 1,581,025 Cebu City 910,678 Zamboanga City 855,418 Taguig City, MM 801,143 Antipolo City 774,734 Pasig City, MM 753,030 Parañaque City, MM 663,733
PHILIPPINES LARGEST CITIES
Cushman & Wakefield | Philippines | 2019 3 PHILIPPINES RETAIL OVERVIEW
MAJOR FOOD & BEVERAGE (F&B) RETAILERS
Jollibee, McDonald’s, Max’s Restaurant, KFC, Shakey’s, Goldilocks, Chowking, Mang Inasal, Greenwich, Starbucks
MAJOR DOMESTIC NON-F&B RETAILERS
Bench, Penshoppe, Kamiseta, Plains & Prints, Memo, Oxygen, Regatta, Bayo
INTERNATIONAL NON F&B RETAILERS IN THE PHILIPPINES
H&M, Uniqlo, Zara, Nike, Forever 21, Cotton On
TYPICAL HOURS MONDAY-FRIDAY SATURDAY SUNDAY 10.00 - 22.00 10.00 - 22.00 10.00 - 22.00
NEW ENTRANTS TO MARKET
John Lobb Innisfree Luk Fook Off-white Popeyes Little Caesars Bootmaker
Tiffany & Co. Mr. Diy Stefano Ricci Puma Select Shake Shack The Alley
Cushman & Wakefield | Philippines | 2019 4 PHILIPPINES RETAIL SCENE
The Philippines continue to diverge from The robust demand for retail spaces in the country is the global trend of dwindling traditional manifested by the healthy occupancy rate currently being retail activities as “brick and mortar” enjoyed by shopping malls and by the continuous expansions and new developments of retail stores continue to thrive and expand, establishments. With the Philippines being on track to driven by the sustained increase in per upper middle income status, the retail scene is expected capita income and purchasing power of to head towards sustained growth. the growing middle-class population. While e-commerce does not necessarily translate to a In 2018 up to mid-2019, the Philippines welcomed at least significant disturbance in the traditional retail situation, its 43 new foreign retail brands, of which 42% are in the Food 1% to 2% current share of the total retail value is and Beverage (F&B) segment, and 14% are in the projected to upsurge with Filipino consumers spending Clothing and Apparel segment. Notable retailers with F&B more time online and as retailers bet on the recent concepts include Popeyes, Shake Shack, Little Caesars evolution labelled as “bricks and clicks”, wherein physical and M Bakery. Joining the Clothing and Apparel segment presence is integrated with online presence in an attempt are Off-White, Puma Select, and Stefano Ricci. Moreover, to offer an improved shopping experience to customers. the surging consumer demand for the latest healthcare and beauty trends brought Innisfree and Freyja into the country’s retail scene. The entry of these foreign brands cemented Bonifacio Global City in Taguig City as a premier financial and lifestyle business district, and an attractive business destination, competing with Makati City in these aspects, with 40% of these retailers starting their operations in the area.
Cushman & Wakefield | Philippines | 2019 5 PHILIPPINES SHOPPING CENTERS
TOP SHOPPING CENTERS BY SIZE
SIZE* YEAR NAME CITY (GFA SQM) OPENED SM City North EDSA Quezon City 498,000 1985 SM Megamall Mandaluyong City 474,000 1991 SM Seaside City Cebu Cebu City 470,000 2015 SM Mall of Asia Pasay City 432,819 2006 SM City Fairview Quezon City 282,681 1997 SM City Cebu Cebu City 273,804 1993 SM Aura Premier Taguig City 249,862 2013 Robinsons Place Manila City of Manila 241,000 1997 Robinsons Galleria Quezon City 220,000 1990 TriNoma Quezon City 224,502 2007
*Does not include the GFA of ongoing and proposed expansion plans
Cushman & Wakefield | Philippines | 2019 6 PHILIPPINES KEY FEATURES OF LEASE STRUCTURE
SUBKEY -FEATURESHEADING OF LEASE
ITEM COMMENT
Lease Terms Typical lease terms for retail outlets in the Philippines run for 1-2 years. Anchor tenants may get a lease term of up to 5 years.
Rents are usually payable with a month’s deposit and a quarter advance payable on the start of the lease, followed by monthly payments for the Rental Payment remaining months. However, these terms are usually negotiable with the landlord and usually depend on the length of the lease contract and the size of the property.
It is rather difficult to track and index rent growth in the market as developers usually keep rents confidential. However, developers in recent Rent Review years have been increasing rents by 5-10% annually.
Service charges, or most commonly known as Common Use Service Area or CUSA fees in the Philippines, are usually payable in tenanted buildings which covers management fees, security, cleaning, repair and landscaping of common parts and areas of the development. This is Service Charges, Repairs and usually excluded from rent and is calculated on a per square meter basis. The landlord is responsible for the repair of external or structural Insurance matters in shopping centers and developments, while the tenants are responsible for internal repairs. Insurance for common parts of the shopping center is also paid by the landlord but it is usually charged back to the tenant. The tenant is usually responsible for internal insurance.
VAT of 12% is payable on lease rentals in the Philippines and landlords shoulder the annual property taxes. In addition to the monthly rental, it Property Taxes and other costs is common for mall operators to take a percentage of the retail tenant’s gross monthly revenues. This normally runs at about 3-10%.
Retail landlords, particularly those in the malls are hesitant to allow subleasing and normally keep strict control of retail tenants in their facilities. Disposal of a Lease In situations where suitable replacement tenants can be found then landlords will allow the lease to be assigned to the incoming tenants. In cases of pre-termination, penalties will apply.
Shops are usually valued on a zoning basis. Shops located on the ground floor are usually charged higher rents compared to those shops on Valuation Methods the upper floors. There will occasionally be local variations to these rates, which will also depend on the quality and functionality of the accommodation, relative to the market norm.
A mandatory standard form of lease does not exist and each mall operator will have their own template. In addition, Documentary Stamps are Legislation payable on notarized lease contracts in order to register lease contracts.
Cushman & Wakefield | Philippines | 2019 7 TETET CASTRO Director, Tenant Advisory Group Cushman & Wakefield Philippines, Inc. 9th Floor Ecotower 32nd Street corner 9th Avenue Bonifacio Global City, Taguig City Metro Manila, Philippines
Tel: +63 2 554-2927 Email: [email protected]
No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and the same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. © 2019 Cushman & Wakefield LLP. All rights reserved.