Mall vacancy is projected to return to pre-pandemic levels this year as foreign retail brands strive to capture the interest of a populace that still prefers shopping inside physical malls, according to a report by property advisory firm Colliers.

In its first quarter Metro Manila retail report, Colliers said the establishment of new foreign brands has resulted in lower retail vacancy and recovery in lease rates across the capital region.

Based on Colliers’ data, 250,000 square meters (sqm) of new retail space were added within the period beginning the third quarter of 2024 to the first three months of 2025, with the completion of the SM Mall of Asia Expansion in the Bay Area in Manila.

The redevelopment of SM Megamall in Mandaluyong is expected to complete 270,000 sqm of additional space this year.

Colliers projects an annual delivery of 158,300 sqm beginning this year until 2027, through the likely completion of Ayala Malls Parklinks, Ayala Malls Arca South, and Filinvest Mall Cubao and the redevelopment of Glorietta and Greenbelt.

The firm noted that more retail space is expected as major developers, such as SM Prime Holdings and Ayala Malls, have allocated some of their capital expenditures for new malls and redevelopment of existing facilities. The former has allotted ₱21 billion, while the latter with ₱13 billion.

“More malls have been lined up for completion beyond 2025 and these will also be located in thriving localities outside of Metro Manila,” it said.

In the first quarter of the year, Colliers said retail vacancy improved to 13.1 percent from 15.1 percent in the third quarter of 2024 amid substantial take-up of space in recently opened malls.

Colliers pointed out that this is the lowest vacancy recorded since the 13.8 percent in the first quarter of 2021. 

Foreign retailers, particularly those from the home and furnishing and clothing and footwear segments, have been aggressive in leading physical mall spaces.

Over the past 12 months, some of the retailers that took up space include: Gashapon Bandai Official, KKV, HLA, Flying Tiger, Nitori, and Matcha Tokyo.

The likes of SM and Ayala have also captured the interest of IKEA, Anko, Flying Tiger, and Nitori, among others.

“Colliers believes that there’s tremendous opportunities for these brands to expand within and outside Metro Manila given the rising retail footfall, growing purchasing power of Filipinos even in Areas Outside the National Capital Region (AONCR), and redevelopment plans in the more established business hubs including Makati CBD,” the report read.

The firm said mall operators should assess the viability of opening foreign retail brands and concepts in AONCR to confirm whether regional markets are ready to absorb such brands.

“Colliers data proves that property firms have been expanding their residential footprint outside of Metro Manila and in our opinion, developers should complement these projects with the ideal size of retail component,” it said.

According to Colliers, developers report that consumer traffic in malls is “now greater” than pre-pandemic levels.

This rise in traffic could strengthen demand in the retail sector, especially with the potential for additional interest rate cuts and the easing of inflation.

Over the next 12 months, the food and beverage sector is anticipated to cover about 45 percent of new retailers that will occupy new mall space in Metro Manila.