Manila malls find novel uses for vacant space amid slump

MANILA • Property developers in the Philippines are considering novel alternative uses for malls as people stay home and prefer to buy things online.

SM Prime Holdings, the nation's biggest landlord, is leasing out some of its parking spaces for longer-term car storage, while a unit of Ayala Land plans to convert areas in its shopping centres to e-commerce back-end facilities and medical clinics.

The Philippines' coronavirus outbreak, the worst in South-east Asia, has made Filipinos fearful of going about their daily business as they seek to avoid high-traffic spots.

That is putting extra pressure on retail landlords already weathering a slump in demand and a recession.

The Philippines is home to some of Asia's biggest malls - capital Manila and its surroundings boast total retail space of 7.3 million sq m, according to Colliers International Group research manager Joey Bondoc. That is more than twice the size of New York's Central Park.

Retail vacancy rates in Manila are forecast to climb to 12 per cent this year, while rents will drop for the first time since the global financial crisis, forcing shopping centres to either "innovate or evaporate", said Mr Bondoc.

AyalaLand Logistics Holdings is studying turning parts of its malls into last-mile fulfilment facilities, according to a document seen by Bloomberg.

"We continue to explore opportunities," said Mr Francis Montojo, the unit's chief finance officer, adding that other commercial areas may be converted into healthcare clinics or office space.

Meanwhile, SM Prime has leased out a floor in the carpark of a mall to a bank, as well as another floor in an office tower, president Jeffrey Lim said in a text message.

AyalaLand Logistics shares fell as much as 2.3 per cent in Manila trading yesterday, heading for a three-day losing streak. The benchmark Philippine Stock Exchange Index rose 0.8 per cent.

"Retail developers must look at possible areas to pivot and repurpose space," said Mr Kash Salvador, an associate director at property services company Santos Knight Frank. "We see an opportunity in storage and warehousing given higher logistics demand as shoppers go online."

Mr Bondoc said mall owners should also consider leasing vacant space to co-working companies as businesses seek smaller offices in various locations.

BLOOMBERG