Saturation point?

Many of us have been wondering when all this mall building frenzy will finally reach its saturation point. At last it is happening. Property consulting firm Colliers reports that vacancy rates are rising amid cutthroat competition in Metro Manila.

Colliers cited some numbers in a published report. I knew all is not well by sheer observation. One of the things I do daily is try to take 10,000 steps as measured in a FitBit device my son gave me so he can monitor my physical activity from California.  I do that in malls.

The mall is the perfect place for a senior citizen to get his daily dose of physical exercise. It is air conditioned and window shopping is always fun. Walking is not as boring as running on a treadmill. Walking in a mall is also a good way of getting a feel of the economy’s pulse.

There are new malls in the neighborhood closest to where I live. Ayala just opened a smaller than usual mall on Meralco Avenue called Ayala 30 and the Ortigas Company opened Estancia, an even smaller mall where the Rizal Provincial Capitol once was. Then there is Megaworld’s Eastwood Mall along C-5 in Libis. 

If I wake up earlier than usual, SM’s Megamall is best for walking because it is long… half a kilometer from end to end. But parking is tough so you have to get there as soon as it opens. Then there is Shangrila Mall with a new wing. On Sundays when traffic in light, I may venture to Megaworld’s Uptown Mall in BGC or Rockwell in Makati.

Other than SM’s Megamall and Rockwell Makati, the common denominator of all these malls is a worrying inventory of rentable space that’s still boarded up. Eastwood didn’t use to have that problem, but a huge space occupied by at least three tenants in the second floor is now empty.

Even SM’s high end mall at Conrad Hotel doesn’t seem to be doing well. In all the malls I regularly visit, it seems only the restaurants are doing good business.

Indeed, I rarely see a serious buyer at the various stores rented out by high end brands, even when they have big signs advertising sale prices of up to 75 percent discount. Something happened over the past year or so.

It wasn’t too long ago when Rustan’s Stores Specialists Inc had its IPO. I remember listening to Anton Huang, one of the young Tantocos, talk about how upbeat they are about their business.

Maybe the fast fashion retailers have eaten their lunch. SM did the right thing in bringing in the franchise of some of these global brands themselves.

But the high end brands of SSI seem to have been affected by an obvious downturn. Even the glossy magazines that depend on SSI advertising are having a tough time.

It seems the upward aspirations of SSI’s traditional middle class consumers evaporated. Or maybe the Lazadas and Zaloras are eating into the market of brick and mortar fashion stores in malls.

If you listen to many economists in and out of government, these malls should be flourishing.  The economy is supposed to be strong, powered by a still strong inflow of OFW dollars.  BPOs are still in a hiring frenzy. And the millennial call center agents are supposed to have a high propensity to spend.

The Bangko Sentral Consumer Confidence Survey is telling us that overall consumer confidence index is at a record high. But even if respondents say they are confident about the current quarter, they are less so about the next due to inflation worries.

Nevertheless the BSP survey shows consumers are optimistic about the next year. But then again, I have noticed through the years that Pinoys are always hopeful, always optimistic about next year.

One other thing I observed as I work on my FitBit steps quota for the day: malls have become boringly similar… with the same brands… Colliers research manager Joey Roi Bondoc noted in a briefing, as reported by Inquirer that shopping malls displayed “diminishing uniqueness” in having “practically the same retailer tenants.”

No wonder as Bondoc observed, vacancy rates are rising across all mall formats. They are now trying to mask the abandoned or unrented space by simulating an active tenant store in the wall paper covering. The East Wing of Shangrila Mall converted the space once occupied by a failed American Chinese restaurant franchise into a pocket indoor park.

I wonder if the trend in the US going against brick and mortar malls is starting to happen here. Big US shopping brands have folded up or greatly diminished their footprint. Some US malls are being repurposed into community centers and churches.

For sure SM and maybe Robinsons will be able to weather the transition. Smaller mall operators like Rockwell Land with a very definite upscale customer base, will continue to do good business.

Malls within self contained developments as in Eastwood should be able to survive. Their condo residents choose to avoid the inconvenience of confronting traffic jams even for short distances.

Maybe the hot pandesal mentality made the industry reach its saturation point quicker than expected. The problem for the late comers is that the big guys like SM have covered all market segments. Injap Sia may be a partner of SM in his mini malls, but he is still up against SM’s localized hypermarts.

And there is the digital disruption that can only shift more consumers from the brick and mortars. BSP Gov Nestor Espenilla had been talking of accelerating financial inclusion through the introduction of a digital system that will make it easy to do business on e-commerce sites.

Things are changing and the malls must reassess their role in our society.  I look at the very busy basement restaurant level of Rockwell’s Power Plant mall on a Sunday afternoon and the secret for survival is out. Rockwell’s vibrancy is the result of their conscious transformation of the area into a family-oriented community plaza.

Rockwell’s Power Plant Mall is small enough to be cozy… increasing the chances you will bump into someone you know and want to have a conversation with. It is not just a place to buy fashion, eat lunch or dinner or attend mass. There is even live music that engages people to join in. The pianist who performs at around 2 pm has a regular crowd of fans.

At the MegaMall, it is the skating rink, the bowling alley and the big buffet restaurants that get families together for a weekend experience. Maybe that’s what’s missing in the other malls whose managers are just applying old formulas that worked years ago.

The only way bricks and mortars can compete with digital is to offer what digital cannot: warm blooded human interaction. So far, only Rockwell’s Power Plant has seen the potential of human interaction.

Rockwell probably has the most digitally connected high end clientele there is but you can see them on Sundays taking time, a lot of time interacting with each other. We can choose to stay home and interact on Facebook.. But we should never forget we are still humans who want face to face interaction with other humans. Rockwell’s Tong Padilla didn’t forget.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco