alls and Robinsons Land, strong sales growth for tenants in SM Prime’s malls is helping to lift rents. Revenue growth from the company’s properties grew by an impressive 21.2 per cent in 2023. That growth has resulted from a combination of stronger sales, improved occupancy and the opening of new malls, most recently SM Center San Pedro in Laguna Province, about 45 kilometers south of Manila, and SM City Santo Tomas, about 90 kilometers south of Manila in the province of Batangas. Both were opened last October and have now had time to get traction. SM Prime is not just a developer and operator of garden-variety malls: it develops whole ‘lifestyle cities’ with residential, office, hotel, convention and entertainment uses integrated with enclosed malls, markets and retail high streets. A number of these cities are located on former military bases that have been gradually restored to life thanks to partnerships between the company and Philippines government. The company’s retail property portfolio is now up to 85 in the Philippines and eight in China, and it generated just under 20 per cent of SM Investments’ total revenues, or 72.1 billion Philippine pesos (US$1.3 billion) in 2023. The booming retail business Aside from the retail properties, SM Investments also has a separate retail arm consisting of about 3850 department stores, supermarkets, hypermarkets and specialty stores. Some of these naturally occupy space in SM Prime’s malls. Same-store sales have been increasing at a rate above 6 per cent and twice that at its 74 department stores. The food part of the retail business encompasses more than 2000 stores under the Savemore, SM Supermarket, SM Hypermarket, Waltermart and Alphamart banners. That segment has been enjoying same-store sales growth of 3.9 per cent over the past year, although food inflation is having a say in that also. There could well be an awful lot of low-hanging fruit in the food business since the company believes that currently only about 30 per cent of food in the country is being sold in ‘modern’ retail formats. The wet market is still the supreme platform for food sales and is likely to remain so for the foreseeable future, but gradual shifts in buying behaviour as income per capita rises will shift a lot of sales to supermarkets. The specialty retail group, consisting of 1660 stores, has experienced a same-store sales increase of 6.0 per cent, led by fashion apparel and accessories, and health and beauty. Four out of every five new stores are now being opened outside metro Manila, following the pattern right across ASEAN in which provincial cities and towns are attracting a greater focus from retail chains and mall developers. Retail conglomerates such as Vincom in Vietnam and Central in Thailand are all fattening their portfolios of retail outlets and malls outside of the main cities. This is due to the interplay of several factors: governments are heavily invested in decentralising commercial activity away from the capital cities, which is raising incomes in provincial areas and drawing in more retail. In total, consolidated revenue for all of SM Investments’ business arms amounted to 616.3 billion Philippine pesos, or about US$10.8 billion, in 2023. That represents an improvement of 11.4 per cent on 2022. The Big 3 firing on all cylinders Robinsons Land and Ayala Malls, respectively numbers two and three in the Philippines mall industry have also turned in good results over the past year, mirroring SM Prime. All three are true conglomerates that operate in similar lines of business. Robinsons’ retail property interests include ownership of 54 malls in the Philippines that house 8300 tenants. It reported 24 per cent rental revenue growth in 2023. Malls now account for almost 40 per cent of Robinsons Land’s total revenue and 30 per cent of its earnings before interest and tax (EBIT). Like SM Prime, Robinsons Land has an eye for development outside of Manila to take advantage of opportunities in secondary locations: 46 of its malls are somewhere other than the Manila metropolitan area. Meanwhile, Ayala Land’s shopping center revenues rose more than 30 per cent: it reported higher occupancy (84 per cent) and rents at its portfolio of trophy malls and high street projects that account for 2.1 million square metres of gross leasable area. Ayala is also a distinguished developer of massive, complex, retail centers within mixed-use developments that were once US military installations. The company has a much-admired portfolio of timeless retail projects going all the way back to the superb, award-winning Greenbelt in Makati City, opened in 1988, which incorporates indoor and outdoor retail precincts in a12-hectare park. No wonder the Filipinos love their malls. The macroeconomy is chugging along nicely According to the Philippines Statistics Authority, the economy grew by 5.5 per cent in 2023 and now sits 8.6 per cent above the pre-pandemic level. Retail and wholesale trade have made key contributions to the improvement. The unemployment rate is a healthy 3.5 per cent and the CPI, though still uncomfortably high at 3.7 per cent growth, is nonetheless moderating. Most forecasters expect the Philippines to be among the top-performing economies in ASEAN this year, with perhaps only Vietnam growing faster. All in all, it’s good to be a mall operator in the Philippines right now. The economy is in good shape and consumers are dipping into their pockets. The country boasts some of the most sophisticated retail developments in Asia but it is often overlooked because of geography: a lot of retail professionals still don’t make the trip there. More should– there is a lot that can be learned from the country’s premier developers.