Low retail rents, rising incomes to attract int’l brands to PH – JLL

By Catherine Talavera.

January 11, 2017

RETAIL rents in the country remain affordable compared to others in the region and this should attract more international brands into the country, further fueling the growth of the local retail property market this year, a property analyst said.

In an interview on Tuesday, Jones Lang LaSalle Philippines (JLL) regional director and head of project leasing markets Shiela Lobien told The Manila Times that while rental rates for ground floor retail in the Philippines are rising due to the high market demand, when compared to the regional landscape, retail rent in the country is still the cheapest.

"If you look at the rental rates in Asia Pacific, Manila is the cheapest. Hong Kong is the most expensive, Singapore maybe in the middle and even Kuala Lumpur is one point or two times higher than us," Lobien explained.

"So the Philippines is still the cheapest, though the rental is already increasing for the ground floor space. If you look at it on a macro level, it's still very low."

Based on figures from JLL, as of 2015, Manila continues to offer the most affordable shopping centers in the region at $555 per square meter per annum. In contrast, Hong Kong commands the most expensive retail rents at $15,661 per square meter per annum.

With retail rates in the country relatively lower compared to neighboring countries, Lobien noted that more international retail brands are expected to enter the Philippine retail market.

In addition, the rising income of Filipinos is also attracting international brands to set up shop in the country.

"Almost all the big brands that are in Singapore, Hong Kong and even in the US are now here. We see H&M, Forever21 and all the other big brands, they're here. Even the brands as prestigious as Apple, they're looking at the Philippines now, to have their flagship store because they don't have one yet. So it's going to grow because of the rising incomes of the Filipinos," Lobien explained.

According to Jones Lang Lasalle's Global Cross Border Retailer Attractiveness Index 2016, Manila is classified as a growth retail city, as it ranks 29th on the list of top 50 attractive cities for retail.

Growth cities are those that have displayed significant growth of the retail sector, according to JLL.
"Strong retail sales growth is driven by an expanding population, rapidly rising middle classes and fast track urbanization," JLL said.

Lobien also noted that the Filipino consumer market is becoming more "sophisticated" and is being more exposed to what is happening abroad, as travelling cost has become less expensive.

"Before, we don't know those brands. Nowadays, we are familiar with all the international brands and we're looking for that in the Philippines," Lobien said.

Some of the new international brands that have recently entered the Philippines, according to JLL, are Vera Wang, Tokyo Milk Cheese Factory, Fatburger, Sugar Factory, and Morganfield's, among others.

In order to enter the Philippine market, these foreign brands would have to partner with the big local retail players, and almost all the big local players are willing to partner with the popular brands, she said.

"Like SM, they partnered with Forever21, H&M etc. There are a lot of others like the Bench Group, they have their international brands also," Lobien said.