Giggs was confirmed as the Red Devils' new assistant manager this afternoon, acting as number two to incoming boss Louis van Gaal, who will take over at Old Trafford after leading Netherlands in this summer's World Cup.
Giggs, who had a taste of management at the end of last season following the dismissal of David Moyes, announced his retirement from playing in order to focus on his new role, and Phelan believes that his "magnificent" career will help him succeed in the dugout.
"Ryan is Manchester United through and through, and today is a day of condolences as well because he has actually retired from playing at the ripe old age of 40," Phelan told BBC Radio 5 live.
"His career has been magnificent but he can now focus on the next phase of his career which is hopefully coaching and managing. He definitely has experience on his side and he has the name and the clout behind him because of who he is and what he has achieved.
"I think [Premier League management] is the natural progression for Ryan, and I think it will happen in the next two or three years."
Giggs spent 24 years as a player with Manchester United, making 963 appearances and retiring as the most decorated player in English football history.