Malls are big business in the Philippines. Here’s a look at the newest ones

Malls are big business in the Philippines. Here’s a look at the newest ones

In Southeast Asia, new mall openings are coming thick and fast, and the Philippines is no exception. SM Prime, the country’s largest mall developer gave the country yet another shopping centre, SM City Tanza, on 14 October. Tanza is a city of approximately 310,000 on Manila Bay in the province of Cavite, a 90-minute drive south of downtown Manila. The mall is the company’s seventh effort in that province and its opening was typical of Philippine mall grand opening days, which is to say celeb

elebratory to the point of being boisterous. These people just love their malls.

SM City Tanza has a gross floor area (GFA) of nearly 60,000sqm — that includes not just retail shopping but a whole heap of dining options and entertainment, including five movie screens. On opening day, the centre was about 90 per cent leased.

There is more to come from SM Prime soon: next mall off the company’s production line, opening 28 October, is in Sorsogon, in the far southeast corner of Luzon island. That one will be somewhat smaller than than Tanza’s, with about 40,000sqm of GFA. Even then, SM Prime will not be done for the year: it has another mall, SM City Tuguegarao (63,000sqm of GFA) due to open before the end of the 2022 about 500 kilometres north of Manila.

SM Prime: Highly evolved

The ‘SM’ part of the company name is a holdover from the company’s very first foray into retail, a shoe store in Manila opened in 1958. Since then, it has evolved into what it characterises itself, not inaccurately, as an ‘integrated property developer’.

In the Philippines, an integrated property developer doesn’t just build and operates malls, it builds and operates mixed-use projects that are so large they are really small cities in their own right. Many of these kinds of planned megaprojects are possible because of public-private partnerships to redevelop huge swathes of land previously used as military bases by the US armed forces, of which the last closed was Subic Bay in 1992.

Around the same time, the government set up the Bases Conversion and Development Authority to work with private developers to repurpose these bases into communities. Companies like SM Prime, Ayala Land and Megaworld Corporation are key private players in this space.

Thus, SM Prime’s revenues are derived not just from its mall business (although this accounts for just over 50 per cent of its turnover) but also from residential (high-rise, medium-rise and freestanding, about 40 per cent of company revenues) and ‘other’ businesses, which include offices, hotels and convention centres (the remaining 10 per cent).

SM Prime calls its megaprojects ‘lifestyle cities’. It has 21 of them in all, with 10 in metro Manila and 11 in the larger provincial cities scattered around the country’s islands. It also has freestanding malls: in all, it has 80 malls in the Philippines and seven more in China, with a collective gross floor area (GFA) amounting to 11 million sqm (43 per cent of it in metro Manila). Its malls boast an average daily pedestrian count of 2.5 million people.

Just as it was for everyone else, 2020-21 were tough years for SM Prime and the Philippine retail property industry generally, with mall income rocked by periodic closures and partial restrictions on trade. Now, the company is moving past those hard times and sales are up dramatically. In the first half of the year, the company’s mall revenues were up by a whopping 73 per cent compared with the first six months of 2021. Its operating profit was up 166 per cent.

The look forward

SM Prime’s mall development focus is on expansion outside of Manila. This makes good sense in view of the fact that 100 million Filipinos live in the provinces.

From a retail development standpoint, the Philippines is therefore at a similar stage to neighbouring countries such as Thailand and Vietnam which also have dominant mall developers (e.g. Central in Thailand and Vincom in Vietnam) that have a significant foothold in their respective largest cities where the middle classes emerged earlier, and now plan substantially greater investments in growing secondary markets. Certainly, the wherewithal is there to carry it out: the company has a landbank of 57 sites for malls covering a land area of 338 hectares, of which 94 per cent are outside Manila. According to company documents, that will about do it for the next five to seven years.

Ayala Land and Megaworld Corporation, among others, are also players in the large integrated development space. Some of Ayala’s work is justly famous. For example, Greenbelt, a sprawling indoor/outdoor centre in Makati City (Manila’s financial district), is a superbly landscaped project with many unique features, including its alfresco dining, its gardens, and the fact that one of its ‘anchors’ is a church. The project is something of a masterpiece and has been awarded numerous prizes. 

Ayala is also the developer of Bonifacio Global City, another mixed-use behemoth constructed on a military site (Fort William McKinley), which features a whole range of formats including an open-air High Street, an enclosed mall and a wet market.

Overlooked and undervalued?

Despite the extraordinary quality of mixed-use development in the Philippines, it is often not part of the discussion when industry professionals hobnob together at the cocktail hour and trade stories of projects that they’ve seen and admired.

Malls in China, or Thailand, or Singapore hog the conversations. There is, of course, a reason for it: the Philippines is a nation of islands and sufficiently disconnected from mainland Southeast Asia to be ‘out of sight and out of mind’. This is a huge pity. Philippine developers like SM Prime and Ayala have done cutting-edge work and fully deserve the accolades they’ve received. Moreover, air connections between Southeast Asia and the Philippines are not too bad, and Manila itself is fairly well stocked with good hotels.

A while back, I spoke with the manager of one of Malaysia’s trophy malls, and was amazed that not only had he never been to the Philippines but he was completely unaware of the retail development there. It’s probably time that the word got out: this stuff is really worth the plane fare.