MANILA (BLOOMBERG) - 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 lots for longer-term car storage, while a unit of Ayala Land plans to convert areas in its shopping centres to e-commerce backend facilities and medical clinics.
South-east Asia's worst coronavirus outbreak has made Filipinos fearful of going about their daily business and they're seeking to avoid high-traffic spots. That's putting extra pressure on retail landlords already weathering slump in demand and a recession.
The Philippines is home to some of Asia's biggest malls; capital Manila and surrounds boast total retail space of 7.3 million square metres, according to Joey Bondoc, a research manager at Colliers International Group. That's 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", Mr Bondoc said.
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 Francis Montojo, the unit's chief finance officer. He added that other commercial areas may be converted to healthcare clinics or office space.
SM Prime, meanwhile, has leased out a floor in the car park of a mall to a bank, as well as leased 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 on Thursday, 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 re-purpose space," said 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."
Mall owners should also consider leasing vacant space to co-working companies as businesses seek smaller offices in various locations, Colliers' Mr Bondoc said.