Manila Mallified

I wrote this 15 years ago, on April 1996.

It was published in The Sunday Times, then under Jo-Anne Q. Maglipon. At that time, few people took notice of the piece,  but now I think people will realize how prophetic it really was. I think the only person who appreciated this piece at that time was the editor who copy edited it, Chit Estella.

Note that the figures are circa-1996, so the money spent to build a mall has likely doubled and the money earned  from having a mall may have quadrupled, thanks to shrewd Marketing, Ad & Promo and other mall departments. What has definitely gone down are actual wages and the actual purchasing power of the peso. 

WE CALL IT “MALLING,” and we urban dwellers do it every weekend, sometimes even more often.  Yet little do we know the extent to which we are being “mallified.”

In the last decade, shopping malls have spread so rapidly throughout the entire metropolis; they have sprung up, it seems, in every nook and cranny, in every available piece of what was once talahiban.

Today, there are some 60 or so shopping malls in the city.

Ayala Land, Inc. has 38 hectares of shopping centers in Makati alone.  SM Prime Holdings, the country’s largest owner-operator of shopping malls, owns four centers whose combined gross floor area—which covers only the area inside the mall—is 840 square meters.  Robinson’s Land Corporation, the property arm of JG Summit Holdings, Inc., operates two shopping malls, including its showcase mall, Robinson’s Galleria.

All three companies have immediate plans to expand their kingdoms: they are scrambling to build more malls in the city, and even in places like Cavite, Iloilo, Davao, Bacolod, Baguio, Cabanatuan and other growing cities outside Metro Manila.

Then, that’s speaking only of the malls developed by the “big ones.”

Riding the current boom in the property sector are hundreds of new firms out to put up their own malls in Manila and many other parts of the country.

At the rate developers are scrambling to erect malls, property development consultant—like Norberto de Jesus, President of AseaStar Management & Development Corporation—predict that there could be 200 to 300 in the country within the next three years.

[NOTES:

  • Today, Ayala Land, Inc. has Ayala Malls 9 malls — Glorietta, Greenbelt, Market!Market!, TriNoMa, Ayala Center Cebu, Bonifacio High Street/Serendra, Alabang Town Center, Marquee Mall, Abreeza.
  • SM Prime Holdings has a whopping 43 operating malls totalling a gross floor area of 4.5 million square metres located in Metro Manila,Olongapo City, Batangas, Bulacan, Cavite, Laguna, Pampanga, Tarlac, Lucena City, Pangasinan, Rizal, Angeles City, Bacolod City, Baguio City, Cagayan de Oro City, Cebu City, Metro Davao, Iloilo City and Naga City.
  • Robinson’s Land Corp’s Commercial Center Division has 28 shopping malls all over the country and generate more than 120 million visitors annually. In 2010, revenue from malls accounted for 39 percent of the company’s revenues.]

The “mallification” of the country, indeed.  But what does this mean? What does it indicate?

SM City Cagayan de Oro

SM City Cagayan de Oro (Photo credit: Wikipedia)

ECONOMISTS  would say that growth in our economy these last few years has given birth to an expanded middle class with more money to spend.  (Note, this was before the 1997 Asian crisis and the 2008 Great Recession.)

Growth has also led to the surge in the property development sector, and an upturn in business activities, creating a higher demand for office spaces, residential properties and commercial centers—or malls.  This, coupled with what sociologist may see as an emerging, exciting “mall culture” further spurs the demand for more malls.

But to what extent have mall developers created this demand? To what extent have they “mallified (read: mollified) us? Perhaps mall figures will show—

Shopping malls are asset bases that beautify the balance sheet,” explains Maricris A. Martinez, head of Landco Asset Management Inc.’s Commercial Centers Division—the firm that runs the Sta. Lucia East Grand Mall and Tutuban Center Mall.

Martinezexplains: “Land, first of all, is an asset that never depreciates.  Second, when you build a mall on a piece of land, this makes good business sense, since malls are strong asset bases with recurring and increasing cash flows,” she adds.

In short, the malls, themselves, can be used as collateral to loan the capital a developer might need for new ventures.  At the same time, operating malls—if done carefully—can be very lucrative.

EVERY BUSINESSMAN knows that to earn, you have to spend.

For developers of large shopping complexes and malls, the figures can be astounding.

For construction costs alone, a developer would have to spend some P10,000.00 to P15,000.00 for every square meter of the mall: these are the standard estimates of three top men involved in the construction of some of Manila’s bigger malls: Robinson’s Land Corp.’s Frederick Go, Sta. Lucia & Development Corporation’s Project Engineers Ricardo R. Santos and Mayon Consolidated Builders proprietor George Cham, who is involved in the construction of Baguio’s first mall, the Baguio Center Mall.

For a three-hectare gross floor area mall—a mall half the size of SM City’s (North Edsa in its 1996 size) main building—that comes to a whopping P600 million.  Smaller warehouse-types could go for P7,000.00 to P10,000.00 per square meter, while Robinson’s Place-Manila: 1 billion.

Apart from initial investments, the costs of running a mall are equally staggering: A 15-hectare mall (a mall as large as Sta. Lucia East Grand Mall) will have to spend at least P2.5 million every month to keep its common areas—or the areas outside of the shops of the mall—in tip-top condition.  The main money-eater would be light, electricity and water costs—since most malls are air-conditioned for 12 hours or more a day.  AseaStar’s De Jesus estimates that any mall—regardless of size—will have to spend some P70.00/square meter a month on air-conditioning alone.

Housekeeping costs follow, then security, then the cost of maintaining equipment.

Malls with special entertainment attractions—like SM Megamall and Sta. Lucia East Grand Mall with their ice-skating rinks—spend a whole lot more on their overhead costs. “Imagine the costs of keeping the ice-skating rink frozen day-in, day-out,” notes Landco’sMartinez, who is on top of the operations of the Sta. Lucia mall.  This is why developers are going into novel ways of cost-cutting: the Alabang Mall is built like an outdoor park to keep airconditioning costs down.

Staffing costs are also tremendous.  Like most malls, SM City has at least seven different departments: Leasing—charged to bring in and maintain tenants or shops, Operations for Maintenance (Engineering), Security and Janitorial Services, Administration, Personnel, Finance and Ad & Promo. The anchors—or establishments like the Supermarket, Amusement, Bowling, Theaters and Department Store that are known to draw-in shoppers—are all separate departments, too.

To keep the mall as clean and well guarded as malls go, at least two guards are needed for every entrance, plus two or three roving ones.  Almost the same number of janitors is needed.  The maintenance section is staffed with electrical, mechanical and structural engineers standing by and ever-ready to do structural and other repairs.  All together, a mall needs at least 500 people to run it. “This is roughly the same for small and large malls,” says AseaStar’s De Jesus, “because you need the same group of people to run a successful mall.”  A large mall like SM Megamall will have at l,000 people running it.

DESPITE THE huge costs of running and keeping a mall, developers still make bucks.

Malls make the bulk of their money from leasing out their spaces to shops.  While shops may pay a fixed monthly rent, the standard is to charge tenants on a percentage lease scheme.  This means that when a shop—say, Giordano—leases out a space in Greenbelt Mall, it pays a fixed rent, plus a percentage of its gross sales.

On top of this, Giordano will have to pay Greenbelt a sum of money for what is called CUSA or common usage area.  This sum covers part of the expenses to keep common areas clean, fixed, guarded, well-lit and air-conditioned.  In effect, malls actually charge part (or all) of the costs of running the mall to their tenants.  The shops in a mall, too, pay for the electricity, water and other utilities that they consume in their areas.   Shop owners also have to pay for their own renovations.

Lease rates vary according to category of shops—whether shops are: Sit-down Fast Foods (SDFFs) like Jollibee or McDonald’s, Fine Dines like Saisaki, Night Spots like Friday’s or Hard Rock Café, Clothing Shops like Bench or Levi’s, Shoe and Leather shops like Manel’s, Textiles, Optical, or Novelty shops.  Rent is much lower for services like banks, ATM centers, couriers like DHL, phone, mail, cellular phones or pagers shops.

Anchors—the amusement, drugstore, theaters, bookstores and supermarket are generally given much lower rates for the bigger spaces they take up.  Rates can also vary according to floor: mall consultants who study market habits claim that Filipinos are known to shop “horizontally”—most prefer to shop on the ground floor—so the rates on spaces on that floor are higher.

Despite all these differences, there are standard rates: in Manila, this is P400.00 to P500.00 per usage meter for shops on the ground floor, plus five percent for a food shop, or three percent for a clothing shop.  Rates on the higher floors are lower.  So, too, are rates in provincial malls.

In real figures, (based on an actual sampling) this monthly rent generally comes to something like (NOTE: Again, 1996 figures)

  • P 155,000.00 for a bakeshop
  • P 207,000.00 for a popular fast-food outlet
  • P 39,000.00 for a food kiosk
  • P 78,000.00 for a clothes shop
  • P 21,000.00 for a shoes & leather shop
  • P 51,000.00 for textile shop
  • P 20,000.00 for an optical shop
  • P 68,000.00 for a home appliance shop or music bar
  • P 88,000.00 for a bookstore
  • P 38,000.00 for a jewelry shop
  • P 20,000.00 for a bank or ATM center
  • and P7,000.00 for services.

For mall owners, that translates to P3.3 million a month gross income for a small mall, or some P10 million for a mall as big as SM City (245,000 square meters).  Rental rates are increased by 10 percent, too, every four years.

Leasing is not the only way for the malls to earn.  A large part of the income of malls comes from operating its anchors—the movie theaters, the supermarket, the amusement centers, bowling and other entertainment centers.  The theaters and supermarkets bring in the big bucks.  But for even for an amusement center like KC Wonderland, average monthly sales could range from a low of 750,000.00 to a high of over a million pesos.

For the retail giants that own SM Prime Holdings, the figures would be astronomical.  “SM has a structure where each department—the SM Department Store, the SM Supermarket, SM Food Court profits.  Even the Ad & Promo department is a profit center,” he notes.

There are still other ways for mall owners to secure their profits.

“There’s a lot of other income from malls, like sponsorship and advertising,” says De Jesus.

“We maximize the use of our space (at Sta. Lucia East Grand mall) by holding shows and tiangges,” explains Martinez.

INDEED, the maximization of space, of land— or turning land and space into money — is what malls are all about.  Big developers, particularly, seem to hold that key.

In 1995,AyalaLand’s consolidated revenue was P10.13 billion, leaping some 26 percent from its 1994 revenue.  Rentals of office and commercial centers wereAyalaLand’s third-highest revenue-earner: 16 percent of the revenues came from this sector.  Its income from malls was P 1.35 billion, a 23 percent growth from the last year.

That same year, Robinson’s Land Corp.’s gross revenues reached P965.6 million increasing 44 percent over 1994’s 671.63 million.  Shopping center revenues grew from P500 million to nearby P1 billion.

With money like that, it’s easy for developers—even small ones—to regain their investments. Most of those in the mall industry will say that a developer can regain his or her investment in anywhere from five to eight years: “In financials, five to seven years is what shows, but in actual operations, this (investment) is recovered in three to five years, “says De Jesus.

AND WHAT do the  mall developers do with the big bucks?

“Mallify” us even more.

Is this girl better off in a mall -- bombarded by images that make her overly conscious about her body shape -- or running in a park or a public playground?

Malls are very market-oriented.  To put up a mall, intensive researches are done to determine the population of the areas within a five-kilometer radius of the mall.  This is the targeted primary market, and it is studied very closely—what people eat, how much they earn, their culture, there buying habits.

Even before a mall begins to be constructed, developers know what the people in that area might want, what would tickle their fancy, what wants they could create.

Landco’s Martinez recounts this of operating a new mall in an area where malls were unknown: “At first people were scared to ride escalators, the elevators.  But now they see malls as a way of life.” 

Today “malling” is the cheapest—if not the only widely accessible—form of entertainment in the city.  Today, too, malls are touted as “family entertainment centers,” and not only as the “one-stop shop centers” that they used to be.

Any which way we look, there is no way we can escape the “mallification” of the city.  A key element of our urban society, they help small business grow: some of the bigger restaurants like Casa Ilongga began as stalls renting space from a mall’s food court.

Often, they kill off small retailers when they open shop: Baguio City market vendors are protesting plans of Uniwide Sales and Realty Resources Corp. to turn the area into a mixed-market-mall. They fear losing their businesses once Uniwide begins operating. [Note, that was never built, but Baguio retailers also protested against the entry of SM Baguio in the early noughties.]

The manpower needs of malls also provide much-needed employment for people in their vicinities.  They also cause traffic jams, despite the extensive traffic studies done before construction.

Some state-of-the-art forms of entertainment are found in malls: the interactive science museums, great bowling facilities.  Yet everything has to be paid for.

Increasing purchasing power and the expansion of the middle class cause a demand for malls, yes.  But to a larger extent, it is the good business sense of mall developers, their sharp marketing skills and the large sums of money that they pour in to Ad & Promo that have changed our lifestyles and sadly—our ways of looking at leisure.

As city dwellers we now look for the consumerist entertainment provided by our hundreds of malls.  But do we have a choice? We have been mallified

Make going to the park fashionable again.