Leaders of the country’s largest shopping mall operator delivered a sober reality check on the impact of the Middle East conflict—notable not just for its candor but for the concrete steps the real estate giant is taking to navigate the slowdown.
“The spillover effects of the Middle East conflict have been swift, broad and severe. Only two months after it began, its economic and systemic impacts are already being felt across the world,” Jeffrey C. Lim told stockholders on Tuesday.
“We recognize the gravity of the challenges ahead and are responding with appropriate caution,” he added.
All hands on deck
That stance has drawn in leadership across the group, led by chair Henry T. Sy Jr. and Hans T. Sy, the Philippines’ supermalls pioneer who stepped down as SM Prime president a decade ago to lead its executive committee.
“The executive committee, led by Mr. Hans T. Sy, is closely monitoring the situation to assess risks in real time and ensure timely, coordinated responses within the organization,” Lim said.
“The board, together with our advisers, is also providing active oversight and guidance to ensure our strategy and capital allocation remain aligned with evolving conditions,” he added.
2026 budget reset
Because of evolving conditions overseas, Lim said SM Prime is set to cut capital spending in 2026 that was previously estimated at about P100 billion.
This marks a stark contrast to SM Prime’s 2025 annual report, likely prepared during an earlier stage of the Middle East war, which carried a more upbeat tone.
In the report, Lim discussed a five-year program to open up to 20 flagship and lifestyle malls and redevelop 16 malls by 2030.
SM Prime, which operates 90 malls across the Philippines and nine shopping centers in China, has yet to finalize the new spending budget for 2026.
“There are certain locations that we decided probably maybe we should not pursue yet and move it to next year,” Lim said on Tuesday.
“There are also those that are supposedly for redevelopment that we think can be deferred,” he added.
Property slowdown
Meanwhile, rising costs and higher interest rates could further dampen real estate sales, which slumped 16 percent to P7.8 billion in the first quarter.
This means SM Prime will lean harder on its mall business, whose revenues grew 8 percent to P20.4 billion and accounted for about 60 percent of topline in the first quarter of 2026.
Volatile conditions are prompting investors to step back, with SM Prime's stock price shedding nearly 15 percent since the start of 2026. The stock slipped about 1 percent to P19.40 each on Tuesday.
Mall resilience
During the briefing, SM Supermalls president Steven Tan said the mall business stayed resilient in the first quarter, although the outlook remains clouded as the US-Iran conflict has yet to be resolved.
“The foot traffic did not drop at all. We’re able to sustain the same foot traffic as first quarter last year. It’s exactly the same,” Tan said during a media briefing on Tuesday.
“Even March, as late as March, and even April, it has not dropped,” he said, adding that sales were also better than expected.
Hotels and offices hold
Lim also struck a more cautious tone on the hotel sector, saying the war could hurt spending on discretionary services as households focus on essentials.
During the first quarter, SM Hotels & Convention Center (SMHCC) grew 8 percent to P2.2 billion thanks to improved occupancy, higher rates and an uptick in meetings and conventions.
SMHCC executive vice president Peggy E. Angeles said local tourism could benefit as fewer people travel overseas, mirroring the behavior of Filipinos during the pandemic when strict lockdowns were lifted.
“We’re not really dependent on foreign tourists. We’re very dependent on the domestic market. And with people looking at their budgets, they’re not necessarily going to be traveling out of the country,” she said on Tuesday.
Another key component of SM Prime’s portfolio is offices, which also grew 7 percent to P2.5 billion and is expected to stay resilient this year, said Antonio Felix Ortiga, who heads the company’s commercial business.
Cost discipline
Lim said another priority of the firm is keeping costs controlled alongside cutting capital spending. One recent initiative is reducing mall operating hours to save on operating costs.
“Our confidence is grounded in our recurring income streams, strong balance sheet, broad customer base and integrated ecosystem. Together, these give us stability through uncertainty and help sustain performance,” Lim said on Tuesday.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
