Malls are expected to fuel the retail growth in the Philippines but an expert in homegrown franchising said landlords prefer established brands in their tenant mix. 
 
Rommel Juan, former president of the Association of Filipino Franchises Inc., citing a report from global real estate advisor Savills World Research, said the country’s top three retailers and mall operators – Ayala Land Inc., SM Prime Holdings Inc. and Robinsons Land Corp. – are expected to launch more shopping malls and account for the bulk of the new retail space this year through 2018 to cater to rising demand.
 
Juan said Savills in its Asian Cities Report on Manila Retail in the first half of 2015 estimated that by 2018, total pipeline for the retail industry will be at 600,000 square meters.
 
“Sales growth is expected to put upward pressure on rents by at least five to ten percent”,  the report said as quoted by Juan.
 
Savills said other retailers including Cosco Capital Inc. and DoubleDragon Properties Corp. which are aggressively expanding outside Metro Manila, will put up more malls. 
 
Juan said while up and coming brands aspire for mall space as a measure of success, malls need established brands like Jollibee Foods Corp., to bring in the crowd of shoppers. Established brands are really well suited for malls and are oftentimes preferred by the mall operators, he added.
 
Citing Euromonitor International’s country report released in 2015, Juan said various franchisees remain the largest presence in fast food in 2014 with a combined value share of 34 percent. 
 
Among the owners of chained brands, Jollibee Foods Corp. maintained its lead in 2014 with a value share of 31 percent. Jollibee’s leadership stems from its wide brand portfolio composed of Jollibee, Mang Inasal, Chowking, Greenwich, Red Ribbon and Burger King.
 
In that report, Juan said, Euromonitor projected that fast food was to increase in value at a compounded annual growth rate (CAGR) of 3 percent at constant 2014 prices in 2015, which is a slower rate of growth than the value CAGR of 5 percent recorded at constant 2014 prices over the review period. The slowdown in growth is indicative of the category’s maturity, which limits its prospects for sustained increases in growth rates.
 
Juan quoted Euromonitor as saying that the Philippines’ growing middle class are likely to trade up to affordable full-service restaurants at the expense of fast food.
 
Sales per outlet, however, are expected to improve, rising at a marginally positive CAGR at constant 2014 prices. Although low, this is better than the -1 percent CAGR recorded in this measure or over the review period. This improvement is set to be driven partly by the entry of foreign brands.
 
“Stiffer competition, meanwhile, is likely to result in the creation of more premium offerings, which is also set to boost sales per outlet in fast food over the forecast period,”Euromonitor said as quoted by Juan.
 
“Malls are always on the lookout for established brands that have name recall, a successful following and an established system,” Juan said. “This ensures the mall operator of higher success rates for their store spaces and at the same time, they entice more mall visitors not just to window shop but to really shop,” he added.
 
Juan quoted several mall operator officials in a statement.
 
Danny Chavez of SM Malls cited the advantages for the mall operator of leasing out a space to an established concept.
 
“For one, an established concept brings in prestige thus good branding to the mall. An established concept also attracts more shoppers compared to the regular or not-so-well established concepts thus foot traffic will increase. At the end of the day, an established concept brings value to the mall, thus floor space occupancy rate will increase due to more businesses wanting to take advantage of the increased foot traffic volume,” Chavez said.
 
CJ Jesena, a leasing professional, said merchant mix of shopping centers should always remain relevant to the needs of its target and niche markets.
 
“A brand-name tenant is definitely a big draw as it provides instant exposure, increased awareness and desirability. Furthermore, having a reputable established brand name for a tenant is key to attracting more businesses and makes a distinctive contribution to the image of the shopping center or mall. Brand equity and a good track record convey product and service reliability that translates to customer loyalty,” Jesena said.
 
However, Jesena clarified tenant mix is neither a fixed nor permanent setup. “The retail market changes over time, as do the customer preferences and shopping trends. Therefore, shopping centers must consistently provide its customers with a variety of emerging brands that would satisfy the shoppers’ needs and provide excitement and new shopping experiences. With the success of an emerging brand comes a well-established brand, and the retail life cycle goes on,” he added.
 
AC Ocampo of Ayala Land, for his part, said established brands are better suited in malls because they benefit from the foot traffic and the numerous and varied brands mix. “It is more convenient for the customers to just go to one place for all their shopping needs, and that is basically the advantage in a mall setup,”Ocampo said.