By Jomark Angelo M. Corpuz, Special Features and Content Writer
With over 70% of the country's economy originating in domestic consumption, many consider the Philippines to be a consumer-driven economy. This fact is enhanced by the approximately 1,000 malls present in the country, which only shows the reverence that Filipinos have for shopping and eating out because they do it to relax and cannot live without it. For decades, malls in the Philippines have been a social hub and a refuge from the country's scorching heat, as well as an indicator of progress in its manufacturing sector.
However, these traditional malls that were once defined primarily by department stores, fashion boutiques and food courts are gradually being phased out by developers in favor of multi-functional commercial centres.
“A traditional mall is primarily retail or shopping-driven, anchored by a supermarket or department store with fashion concepts and some food-and-beverage (F&B) establishments and specialty stores. It also typically has an enclosed box-type format,” explained Christine T. Coqueiro, vice president of retail development for Rockwell Land Corp. businessworld In an email. “While a multi-functional commercial center highlights the idea of blending work and play. These are developments that combine shopping, dining, living and working together. The aim is to give customers a unique experience.”
Even though the pandemic has accelerated this growth, experts predict this phenomenon will continue to occur. While data is scarce for Philippine malls in the region, retailers in the United States are expected to close 80,000 stores by 2028, according to financial services firm UBS Global. Perhaps more worryingly, data from Capital One Shopping Research predicts that 87% of large shopping malls will close over the next decade.
This trend can be attributed to several factors, the most important of which is the rise of online shopping. For some people, online shopping is more convenient than going to a traditional mall, especially if one is looking for a particularly elusive item. It is usually easier to find similar products through online stores without the hassle of spending money on gas or being stuck in a large crowd, rather than wandering around a mall for hours.
Online shopping is also gradually integrating the social features of traditional malls. It's true that friends and family can still meet up, go to food courts and watch movies together in traditional malls. But, due to the younger generation's preference to connect through social media and online games, the mall has somehow been set aside as the primary place to socialize. Today, social media platforms have become the center of digital socialization, and social selling has emerged as a popular online shopping experience.
Another factor in this change is the rising cost of operating brick-and-mortar stores compared to e-commerce sites. Running a business in a brick-and-mortar store involves significant expenses, including rent, utilities, staffing, and day-to-day maintenance. Thus, the rising costs of operating physical retail locations are leading many brands to abandon malls and shift towards e-commerce platforms instead.
This has led malls to redefine themselves into commercial spaces or mixed-use developments that cater to different needs of the market.
“We have already begun to move away from traditional box-type mall formats,” Ms. Coqueiro said. “With tough competition, there is a need to be creative and differentiate yourself from the rest. Although it was the pandemic that accelerated e-commerce, its end gave rise to more experience-driven shopping concepts – thus giving rise to more multi-functional commercial centres. A great example of this would be Proscenium which is home to an office building, a performing arts theatre, residential units, a fashion school and restaurants and bars. The area feels alive and vibrant from early morning till late evening.”
According to a study conducted by the International Economic Development Council (IEDC), due to these factors, mall owners are adopting strategies to evolve along with the retail environment. Traditional malls still have strong fundamentals that make them attractive to developers, such as their location in mature markets, minimal direct competition, and access to strong regional transportation networks, including state and local highways.
Ms Coqueiro also said that the focus, format and key performance indicators of the two concepts are completely different, as they have different objectives. Malls focus primarily on revenue and traffic, while commercial centers are more experience-driven.
“[Mixed-use developments] Are great for retail/F&B establishments as there is a captive market with office workers and residents in the immediate catchment area. And it's a market that has a strong attraction to retail and the sector in general because there's a sense of ownership and belonging. The three elements present – live, work and play – contribute to the profitability of this format,'' he explained.
This difference in focus and purpose highlights the increasing emphasis on experience-driven environments, setting the stage for a deeper consideration of how these spaces prioritize lifestyle over mere transactions.
“It's all about the unique lifestyle experience that these spaces bring to customers, rather than the more transactional environment that a traditional mall format provides,” Ms. Coqueiro said.
Furthermore, IEDC's analysis of nearly 400 malls that closed since 1980 showed that none ever reopened in their original form. Instead, developers have been forced to rethink and repurpose these vast properties. About a third were renovated and extensively re-tenanted, although with mixed results. About 18% were demolished and replaced with new retail formats, which were usually big-box power centers. Another 11% were integrated with other uses to improve occupancy levels, essentially making them mixed-use developments.
Ms Coqueiro commented, “One of the biggest challenges is to make sure you know exactly what your immediate market wants so that all the elements you put in place in the commercial center promote each other and create an energetic and engaged environment.”
As developers continue to re-imagine these spaces rather than abandon them altogether, the question has now become not whether traditional malls will survive, but how they will adapt within an increasingly experience-driven retail landscape.
“I don’t think traditional malls will disappear completely, especially in the Philippines where we have a strong mall culture. However, malls will definitely evolve to include spaces or pockets that encourage the same social environment that commercial centers provide,” Ms. Coqueiro concluded.