Philippines

The Philippines was one of the fastest growing economies in Asia Pacific in 2014, recording an average GDP growth rate of 6.1% on the back of solid domestic consumption.

Household consumption, which accounts for around 70% of the country’s GDP in the past five years, has been sustained by the robust growth of overseas Filipino (OF) remittances and the expansion of the offshoring and outsourcing (O&O) industry. These two sectors have been key employment generators, raising income levels, and fuelling spending of the young workforce and a significant number of middle-income households of the country.

ECONOMIC SUMMARY
ECONOMIC INDICATORS*20112012201320142015F2016F
GDP growth 366.87.26.16.56.3
Consumer spending 5.76.65.75.45.75.9
Manufacturing production 4.75.410.38.18.67.9
May 2016-2.010.811.98.67.77.4
Unemployment rate (%) 6.46.86.56.86.97.1
Inflation 4.63.23.04.22.73.9
PHP/€ (average) 60.654.456.854.247.745.5
PHP/US$ (average) 43.342.242.544.444.343.5
Interest short-term (%) 2.92.91.42.22.74.0
Interest rates 10-year (%) 6.35.24.04.34.54.6

NOTE: *annual % growth rate unless otherwise indicated. E estimate F forecast
Source: National Statistics Coordination Board (NSCB) and Bangko Sentral ng Pilipinas (BSP)

ECONOMIC BREAKDOWN
Population 92.3 million (2010)
GDPPHP 7,178 billion (2014)
Public sector balance 0.6% of GDP (4Q14)
Government Democratic
PresidentBenigno Aquino, Jr.
Vice PresidentJejomar Binay, Sr.
Election dateMay 2016
RETAIL SALES GROWTH:
% CHANGE ON PREVIOUS YEAR
PHILIPPINES20112012201320142015F
Retail Volume, bn. PHPVolume, bn. USD782.6844.8897.0946.1N/A
Retail Growth4.6%10.9%6.2%5.5%N/A

LARGEST CITIES (2010)
CITYPOPULATION
Quezon City*2.8 million
City of Manila*1.7 million
Caloocan City*1.5 million
Davao City1.4 million
Cebu City866,171
Zamboanga City807,129
Pasig City*669,773
Taguig City*644,473
*All located within Metro Manila
Source: National Statistics Office (NSO)

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Cushman & Wakefield, Inc. - Philippines: 12.879721, 121.774017



MAJOR Food and beverage (F&B) RETAILERS

Jollibee, McDonald’s, Max’s Restaurant, KFC, Chowking, Mang Inasal, Red Ribbon

MAJOR DOMESTIC non-F&B RETAILERS

Bench, Memo, Oxygen, Regatta, Penshoppe

INTERNATIONAL NON-F&B RETAILERS in PHILIPPINES (a selection)

H&M, Giordano, Nike

Food & Beverage Operators

Jollibee, McDonald’s, Burger King, Wagamama, Mang Inasal, Pizza Hut, Yellow Cab, Tokyo Tokyo, Teriyaki Boy, Jamba Juice, Happy Lemon

TYPICAL HOURS
MONDAY- FRIDAYSATURDAYSUNDAY
10.00 - 22.0010.00 - 22.0010.00 - 22.00

Retail Scene

The Philippine retail landscape has changed significantly in the past decade, more so in recent years which is reflective of the increasingly sophisticated consumer market. The younger demographic and higher disposable incomes has certainly helped drive this change.

Traditional retail formats such as mom-and-pop stores remain but we have seen more dynamism and considerable changes under modern retail formats. Shopping mall developments have evolved from traditional box type buildings and into open and expansive lifestyle centers. Mall developers, aside from expanding their retail offerings, are now incorporating leisure and entertainment components in their developments in efforts to increase footfall by improving the overall customer experience. More recently we have observed the emergence of community malls and the proliferation of convenience stores within and outside Metro Manila.

On the retailer side, we have seen at least 200 foreign brands entering the country since 2008. This growth was primarily led by the mid-tier retailers comprised of fast fashion brands and quick service restaurants. Nevertheless, we have also seen healthy interest from upscale and luxury brands. Select new foreign retailers in the country include Carven, Casadei, Cortefiel, Crate & Barrel, H&M Home, Hot Star, Joe’s Jeans, Joseph, Old Navy, Uno de 50, and Vero Moda, among others. A significant number of these new foreign retailers are fast fashion American and European brands but we have seen an increasing growth of food & beverage retailers from Asia. The majority of these foreign brands are concentrated within Metro Manila, particularly in Makati City, Mandaluyong City and Quezon City. This is due to the large volume of retail space and strong presence of middle- to high-income households in these cities.
Prospective foreign retailers may enter the country either through partnering with local distributors or by setting up a wholly owned entity in the country.

NEW ENTRANTS TO THE MARKET

H&MOLIVIERS & CO.POTTERY BARNCRATE & BARRELcasadei
VERO MODASANTONIPAUL & SHARKST. MARC CAFÉBROOKS BROTHERS

TOP SHOPPING CENTERS BY SIZE
NAMECITYSIZE (GLA SQM) YEAR OPENED
SM MegamallMandaluyong City 512,0001985
SM North EDSAQuezon City483,0002006
SM Mall of AsiaPasay City407,0001991
SM Cebu CityCebu City274,0001993
Robinsons Place ManilaCity of Manila240,0001997
Robinsons GalleriaQuezon City216,0001990
SM SouthmallLas Piñas205,0001995
Shangri-La Plaza Mandaluyong City197,0001991
TriNomaQuezon City195,0002007
SM City FairviewQuezon City182,7951997

KEY FEATURES OF LEASE
ITEMCOMMENT
Lease TermsTypical lease terms in the Philippines for retail outlets run from 1-3 years
Rental PaymentRents 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 remaining months. However, these terms are usually negotiable with the land lord and usually depend on the length of the lease contract and the size of the property.
Rent ReviewIt is rather difficult to track and index rent growth in the market as developers usually keep rents confidential. However, developers in recent years have been increasing rents by 5-10% annually.
Service Charges, Repairs and Insurance Service charges, or most commonly known as Common Use Service Area or CUSA fees in the Philippines, and 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 usually excluded from rent and is calculated on a per square meter basis. The landlord is responsible for the repair of external or structural 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 is usually charged back to the tenant. The tenant is usually responsible for internal insurance.
Property Taxes and other costs 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 is common for mall operators to take a percentage of the retail tenant’s gross monthly revenues. This normally runs at about 3-10%.
Disposal of a LeaseRetail landlords, particularly those in the malls are hesitant to allow subleasing and normally keep strict control of retail tenants in their facilities. 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.
Valuation MethodsShops are usually valued on a zoning basis. Shops located on the ground floor are usually charged higher rents compared to those shops on 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.
LegislationA mandatory standard form of lease does not exist and each mall operator will have their own template. In addition Documentary Stamps are payable on notarized lease contracts in order to register lease contracts.


Philippines Contacts

JANLO DE LOS REYES

Manager – Research & Consultancy, Philippines
L +63 (2) 554 2927 

Cushman & Wakefield Philippines, Inc. 
Unit 901 & 906, 9th Floor, Ecotower 
32nd Street corner 9th Avenue
Bonifacio Global City, Taguig City
Metro Manila, Philippines