Malls and retailers are considering a moratorium in building malls in the metropolis, claiming a ‘glut’ in mall spaces. The ‘over-supply’ in retail spaces has been driving prices of mall spaces down, putting pressure on expansion plans and bottom lines. 

Rex C. Drilon II, Ortigas and Company Partnership Ltd. chief operating officer, said retail space vacancy has gone up to 15% in 2006 from 12% in the previous year.  In the past, retailers fought for floor space, said Manuel Siggaoat, vice-chairman of the Philippine Retailers Association.

‘Today, that’s not the case anymore. Some rental rates are even decreasing,’ he said.  As of the end of 2005, leasable space in Metro Manila reached 3.3 million square meters, property reports said.

Last year, SM Prime Holdings opened the third largest mall in the world, the Mall of Asia, which is about 400,000 square meters.  Because of the excess retail spaces, rental rates have been flat for the past few years, Mr. Drilon said.

‘When you have a lot of supply, you don’t have much increase in rates,’ he said.  In a report last year, property consultant Colliers International said effective rates at the Ayala Center in Makati remained the same, averaging at P1,185 per square meter a month as of end-June.

The average in Pasig’s Ortigas Center, was unchanged at P935 per square meter a month.  Recent years saw a boom in mall construction, fueled by Filipinos’ increased consumption power, thanks to remittances from overseas workers and high-paying jobs from business process outsourcing.

Elections in May will mean bigger public spending, Mr. Drilon said.  Mr. Drilon’s company runs the Greenhills Shopping Center in San Juan, as well as Tiendesitas, which caters to small and medium merchants in Pasig. 

The industry expects more floor space this year, with Ayala Land Inc. completing the expansion of its Greenbelt mall and the construction of the Triangle North of Manila retail complex. The Sys are building more SM branches within and outside the metropolis. 

Ricardo Z. Cuna, president of the Association of Filipino Franchisers Inc., said the mall construction boom brought negative effects to retailers.  People shift easily to the newest mall, and if a retailer does not have a presence there, customers might forget about that store, he said. ‘Clients shift to different malls.

We need to do more research and more homework,’ Mr. Cuna said.  Branches in adjacent malls, meanwhile, eat up income. While more stores may be good for the company’s gross sales, it also means reduced income because of added operation costs, Mr. Cuna said.  Mr. Drilon said he favors the regulation of mall construction to curb the increase in retail spaces in Metro Manila.

‘I am personally in favor of a moratorium in building malls,’ he noted. ‘There is continuing liquidity and purchasing power… We are bullish about this year. There is growth, but you have to know where to go,’ Mr. Drilon said.  For SM Prime Holdings, the Metro Manila market is not yet saturated. A company official said the occupancy rate in the Sy-owned malls is still at the ‘average 97%.’ 

‘A lot of retailers still apply,’ the source said.  The Metro Manila market, the source said, may be getting too crowded, but there is still plenty of room to grow, especially on the city’s periphery and in the provinces. SM is set to open new malls in Muntinlupa, Marikina, and Taytay, Rizal. It will also expand its Fairview mall.