Philippine shopping mall vacancies may rise this year, keeping rents from growing as Ayala Land Inc., SM Prime Holdings Inc. and other commercial center operators add more retail space in Manila, a local builder said. 

Mall vacancies in metro Manila, made up of the capital and its neighboring cities and towns, will probably reach 15 percent this year as the region is expected to add 10 to 15 percent more retail space, said Rex Drilon, chief operating officer of Ortigas & Co.

‘When there’s plenty of supply don’t expect rates to go up,” said Drilon, who runs Manila-based Greenhills Shopping Center, which is popular with bargain-hunters. ”It will be imprudent to increase when there is a lot of supply coming in.

”Philippine mall operators are on a building spree, betting rising inflows from Filipinos working overseas and declining interest rates will boost consumer spending. This year’s expansion will increase retail space in metro Manila to about 5 million square meters (53.8 million square feet) from 4.5 million square meters in 2006, Drilon said.

‘We favor a moratorium in building new malls because it’s the retailers who are really paying for the cost of this build-up,” Drilon said. ‘Retailers are essentially paying for the same pie that isn’t growing very much.” Drilon said vacancies in metro Manila’s shopping malls reached 12 percent last year, compared with a peak of 19 percent in 2002.

Although rentals rose about 3 percent to 5 percent in 2006, the rates ‘haven’t really moved up in the past four years” because of the new retail space being added, he said. Ayala Land, the third-largest Philippine shopping mall operator, said vacancy isn’t a problem in its TriNoMa project, its biggest commercial center with 200,000 square meters of gross leasable space. The mall, scheduled to open later this year, is already 90 percent leased, Ayala Land Chief Financial Officer Jaime Ysmael said.

‘There are corridors in metro Manila that are a bit over-malled and the players in those areas are competing for a limited customer base,” Ysmael said. TriNoMa is in one of the ‘few areas that can still absorb big mall developments.”

Ayala Land is also expanding this year its Greenbelt Mall in Makati, the nation’s main financial district, after adding shops and restaurants in its neighboring Fort Bonifacio development. ‘The inventory is there and the name of the game is how to increase your market share,” Ysmael said.

‘We do that by being a niche player and offering a different shopping experience.” SM Prime is expanding its two shopping malls in Manila including Mall of Asia, one of Asia’s five biggest shopping centers.

SM Prime is the nation’s largest shopping-mall operator. Robinsons Land Corp., the second largest, is also expanding at least one of its malls in Manila. ‘Retailers, before, are fighting for space,” said Manuel Siggaoat, owner of Manels, a chain of shops that sells leather bags, shoes and belts, and former chairman of the Philippine Retailers Association. ‘They aren’t anymore.”