Malls cut back on rent relief as crowds return

As shopping malls spring back to life with the easing of lockdown restrictions, Philippine landlords have started unwinding the hefty rental concessions earlier given to shop owners to help them survive the unprecedented disruptions caused by the pandemic.

With children and the elderly now allowed to go malling, the crowd at Ayala Malls is back to more than 70 percent of prepandemic levels on weekends and about 55-60 percent of prepandemic levels based on a seven-day trending average, Ayala Land Inc. (ALI) president Bernard Vincent Dy said in an investors forum organized last week by BPI Securities.

Real estate and retailing tycoon Manuel Villar Jr. said in a media chat on Friday that some of the malls in his group have also returned to prepandemic foot traffic. Shopping malls outside Metro Manila, however, have yet to catch up.

But starting in the fourth quarter of this year, his group has stopped extending rental concessions to tenants.

ALI, for its part, is slowly moving back to old rates.

“Given the reopening now, we started pulling back on some of those concessions,” Dy said, noting that ALI had reimposed a fixed rental rate of about 30 percent of old fees, plus some variable fees based on sales.

“As we track the sales, and if things just get better here on out, [we] will continue to move that back, and hopefully in the not so far distant future, we’ll be able to get back to the previous rental structure that we had,” Dy said.

When the pandemic erupted, ALI waived minimum guaranteed rental fees, depending on whether the tenant is in the food and beverage (F&B) business or not. The F&B sector was treated differently from other retailers as this segment had been allowed, at some point during the various lockdowns, to operate.

During the pandemic, ALI charged F&B tenants a variable rent equivalent to 5 percent of sales and non-F&B tenants at 3 percent of sales, eliminating the minimum rental. For tenants with fixed rental contracts, ALI gave at least 50-percent to as high as 75-percent discount.

ALI also gave discounts to the common area charges, such as those used to maintain open spaces and comfort rooms. “Today, there are no more discounts on the operating costs for the common area charges,” Dy said. INQ