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How smarter consumerism fuels the real estate industry

by Nadine PacisPublished: January 30, 2015Updated: January 30, 2015

Nielsen recently reported that Filipinos are the second most confident consumers in the world, how does that help real estate?

The Philippine economy has been criticized for being mostly consumer-driven. Economists cite that a consumer-driven economy for the country is risky, unstable and unsustainable. With that being said, not everyone will be pleased to know that Filipinos are now the second most optimistic consumers in the world according to Nielsen’s latest report on global consumer confidence. However, the real estate industry will be taking this piece of news as a positive sign of better things to come.

Nielsen’s Global Survey of Consumer Confidence and Spending Intentions had 30,000 online respondents in 60 countries with 500 of the participants coming from the Philippines. The report showed that the Philippines’ consumer confidence score rose to 120 in the final quarter of 2014. It rose 5 points from 115 in Q3, gaining one of the largest quarterly increases globally.

“The spike in consumer optimism is a result of several key developments,” says Stuart Jamieson, managing director of Nielsen Philippines. “One of which is the continuous expansion of the business process outsource industry which provides the bright spot in the Philippine economy. Related to this, unemployment was also found to be at its lowest in 10 years as a result of a growing economy. Such factors are major influencers in further expanding the middle class or the new consumer class who spend on technology, real estate, consumer and retail goods, and travel.” 

The consumer confidence of Filipinos mostly benefits the retail sector of the real estate industry. Many will find that it is exactly this form of hyper-consumerism that helped bring about the real estate boom in previous years. SM built the largest malls in the world, Ayala expanded their retail areas at a rapid rate, and the Gokongweis followed suit. Makati, Taguig, and Quezon City looked like they were having a competition to see who had the largest retail areas. Suddenly, almost every city had an SM Mall, an Ayala Mall, or a Robinsons Mall. 

The past few years also saw the rise of mix-use developments with malls being the centerpiece. SM Aura, Glorietta, Megamall, and Robinsons Magnolia Town Center are examples of such developments. All these large commercial centers are being paired with residential and office spaces for convenience. While our western counterparts are abandoning the mall culture, our country boosts and reinforces it.

For 2015, many firms have predicted that the Philippines’ retail real estate sector will be experiencing a highly competitive and expansive year. The boost in consumer confidence will bolster and strengthen the sector even more. In fact, according to real estate consultancy firm Collier’s International, developers will be completing an estimated combined total of 180,000 square meters of retail space this year. These retail spaces will be built in emerging central business districts all around the country.

Bullish consumerism has also brought about international brands making their way in the country’s top retail areas. Many fashion brands, restaurants, and other retail stores based abroad have set up shop in the Philippines. Some of their openings were hotly anticipated by Filipino consumers. Every Filipino mall rat will never forget the opening of the first H&M store that had thousands of teens and young adults lining up to be the first to try the fashion brands’ products. We should be expecting more to come with the rapid expansion of malls, as well as the ASEAN integration which can bring about Asian brands to the country.    

However, while many may interpret the information as Filipinos being huge spenders, Nielsen also reported that Filipinos, along with our Southeast Asian Neighbors, are huge savers. Vietnam are the highest savers globally with 70% of their respondents claiming they prioritize saving, followed by Malaysia with 67%. The Philippines and Thailand follow closely with 63%. Philippine consumers (32%) are also focused on clearing their debts and loans.

“It is a positive indicator of financial health when you see consumers who are conscientiously planning their financial future,” says Stuart Jamieson. Indeed, as it points to Filipinos being smart consumers. This shows that while Filipinos spend, they are also planning for their long-term investments for the future. 

The residential real estate sector will find this as a good indicator as well. With predictions of a bullish residential real estate market coupled with concerns of a property bubble due to sky-rocketing prices and speculative investments, signs of Filipinos adjusting their budgets and saving up for their long term investments show that they are also seriously preparing for serious purchases, such as homes or condominium units.

From a Philippine real estate developer’s point of view, the Philippines’ consumerism has its good points.

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