SM Prime mulls ASEAN mall options

With the Philippines’ shopping centre ranks nearing capacity – for now – SM Prime looks set to exploit opportunities in ASEAN. But where can it go?

SM Prime chairman Henry Sy Jr is now on record saying the company will look at opportunities in the ASEAN region, having previously focused its offshore expansion only in China. 

“Yes, we’re looking [for opportunities outside of the Philippines],” Sy said in a recent interview. “[Our moves] will have to encompass the Asean region.”

But where? The largest developing market in ASEAN is probably Thailand, but that country is also reaching near capacity for malls, with strong local developers, led by Central Group, dominating the regions as well as suburban Bangkok, and holding a stake in many of the major retail groups new developers to the market, such as SM Prime, might target for its centres.

Furthermore, arguably the most successful Asian shopping centre developer in terms of offshore expansion is Aeon. The Japanese company already has a retail presence in Thailand through its MaxValue supermarkets and convenience stores and has opened the first shopping centre in rural Chonburi, a couple of hours from Bangkok. 

Jeffrey Lim, SM Prime executive vice president and board member, is under no illusion any offshore foray would be a long-term investment given the time taken to achieve a return. Mall operators in Asia need portfolios of properties to attract tenants, offer economies of scale and amortise set-up costs entering a new market. 

“If we go out of the Philippine market, we have to look for a joint-venture partner because it’s going to be difficult for us to go in without the local knowledge of [that] market,” Lim said. 

“In the shopping-mall development, you need retail so the anchor tenant component is very crucial. I don’t think we’re going to any country without having a good partner that can help us for the retail side.”

Lim nominated Thailand, despite the obvious challenges of finding locations not currently served well – or for that matter a local partner. He also mentioned Lao PDR and Myanmar – but added that those markets had high land costs.

“If you go to Myanmar, the land is more expensive than in Makati. So I think we just have to be disciplined,” Lim said. “We just have to wait and see first.”

Cambodia is slowly developing an organised retail industry, with Aeon currently enjoying first-mover advantage in the capital city of Phnom Penh. Vietnam is another potential, with local developers way behind foreign companies in terms of mall design and tenant mix: Aeon has three malls trading already and a long-term expansion pipeline, its properties are working to date because it took time to understand the local market and bring Japanese retail tenants with it. Aeon incentivises tenants with longer rent concessions if they complete their store fitouts prior to the centres’ grand openings and offers innovative lease terms such as turnover-based rents to encourage local operators nervous about overheads. 


In the Philippines, SM Prime is the nation’s largest property developer with 56 malls and a total retail space of 7.3 million sqm. Its small portfolio of five malls in second- and third-tier cities in Mainland China totals about 900,000 sqm of retail space; there are plans to add four more by 2018.

Indonesia may provide the greatest opportunity for SM Asia in ASEAN: it has a huge population with a growing middle class, and outside Jakarta has few quality shopping malls. But the down side is a regulatory environment, which discourages foreign investment, unpredictable government policy and a highly immature infrastructure outside the major cities.

Wherever it decides to head, SM Prime has the cash reserves – and borrowing power – to build a critical mass over a five year-plus term. It will no doubt look to limit the number of markets it enters, and its strategy of partnering with a local developer with local knowledge is a smart approach. 

Shareholders and retailers alike will be waiting with baited breath to see just where in ASEAN SM Asia chooses to stake its reputation. 

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