How to Lease a Store in SM or Ayala Malls: Rent, Percentage Rent, Deposits and Fit-Out

How Do You Apply for a Store in an SM Mall?

Units in the large mall chains are allocated by the mall's own leasing team. Your task is to submit an application and pass their assessment, not to negotiate over a unit you found somewhere. SM and Ayala malls typically publish a leasing enquiry channel or leasing email, and also accept applications delivered to the mall Admin Office.

Leasing will normally want a complete application pack:

• Corporate documents. Registration certificates, tax registration, shareholder and officer details. If your company does not yet exist this is a hard gate — see registering a company in the Philippines, or for sole proprietors, sole proprietorship registration.
• Brand and concept deck. What you sell, target customer, price band, store visuals, photographs of existing outlets. What the mall cares about is not what rent you will pay but whether your category fits the mix on that floor and whether you will draw traffic.
• Financial capacity. Bank references, financial statements, parent-company support. New brands with no trading history have to work hardest here.
• Concept drawings with area, ceiling height, power and water requirements. Food and beverage must also state exhaust, grease trap and gas needs.
• Proposed trading hours and opening plan.

Once approved, the sequence is typically: leasing allocates a unit and issues a term sheet, both sides negotiate the rent structure and term, a letter of intent is signed with a reservation payment, the formal lease follows, fit-out drawings are submitted for approval, construction proceeds, and the store is inspected before opening. The cycle runs in months, not weeks.

Three common misjudgements:

• Assuming you can sign first and incorporate later. Most malls require the corporate entity to be in place at signing, and business permits before opening.
• Assuming a prime location can be bought with a higher offer. Anchor positions and prime circulation are reserved for brands that generate footfall; the highest bidder does not necessarily win.
• Shopping the same offer around. Different malls price differently and draw different customers. What you compare is the revenue a given location can produce for your specific category, not the headline rate.

How Is Mall Rent Calculated in the Philippines?

The standard structure is the higher of a minimum guaranteed rent or a percentage of sales — not one or the other. In weak months you pay the fixed rent; in strong months you top up to the percentage figure. Understanding this is the precondition for reading any Philippine mall lease.

The fixed component is normally a monthly rate per square metre multiplied by your unit area, quoted in pesos. What drives the rate, roughly in order:

• The mall's tier and footfall. Flagship centres and neighbourhood malls are worlds apart.
• Floor and position. Ground floor at a main entrance, beside escalators or next to an anchor commands the most; upper floors, dead ends and units by fire exits the least.
• Category. High sales-density categories such as jewellery, mobile and fast fashion typically carry higher rates than food or services.
• Size and shape. Larger units often carry a slightly lower unit rate, but irregular shapes and columns cut into usable area.
• Lease term and brand strength.

Nearly every lease also charges, separately:

• CUSA — the common use service area charge, covering cleaning, security, lighting, maintenance and administration of common areas. It is usually also billed monthly by area and is entirely separate from rent, and it is the item most often omitted from cost models.
• Air-conditioning. Central cooling in Philippine malls is a heavy electrical load, billed either separately or inside CUSA — establish which at signing.
• Marketing or promotions fund, supporting mall-wide campaigns, billed monthly or annually.
• Your own utilities, metered to the unit.

So the correct comparison across malls is: fixed rent plus CUSA plus air-conditioning plus marketing fund plus in-unit utilities, then overlay the potential percentage top-up — producing both a monthly floor cost and a cost at a given sales level. Comparing per-square-metre rent alone understates the real figure by a third or more.

How Does Percentage Rent Work in Philippine Malls?

Percentage rent applies an agreed rate to your monthly gross sales, then compares that figure with the fixed rent and charges the higher. The rate is set by category: higher-margin, higher-density categories carry higher percentages; thin-margin, low-ticket categories carry lower ones. The numbers are negotiated case by case and are not quoted here; your term sheet governs.

What actually needs nailing down are these six definitions:

• How gross sales is defined. Inclusive of VAT or not? Does it capture delivery-platform orders, online orders collected in store, staff purchases, gift card sales? Leave these vague and you will argue about it every month. Omnichannel brands should settle it in advance; related considerations are in cross-border e-commerce in the Philippines.
• Treatment of returns and discounts. Whether sales are computed net.
• Reporting and audit mechanics. Most malls require POS integration or daily reporting and reserve audit rights. Accepting audit is normal; agree the scope and frequency.
• Settlement cycle for the top-up. Monthly, quarterly or annually reconciled — a direct cash-flow question.
• Whether tiered percentages apply above certain sales thresholds.
• Escalation of the fixed rent. Many leases step the minimum rent up annually or index it. The escalation mechanism usually matters more to a three-year total than the first-year rate does.

A strategic point that gets missed: whether percentage rent helps or hurts depends on how volatile your category is. For seasonal brands and slow ramp-ups, the structure is actually protective — weak months cost only the floor. For a concept that trades hard from day one, the mall takes a real share of the upside. In negotiation, the prize is usually not shaving the percentage but lowering the floor, defining gross sales precisely, and containing the escalation.

Before modelling any of this, assess honestly whether your concept has genuine demand in the Philippine market rather than importing assumptions from home. Category thinking is in small business ideas in the Philippines, and hard-won lessons in why foreign businesses fail in the Philippines.

Deposits and Upfront Charges Before You Open

Between signing and opening, the mall collects several one-off amounts that together tie up meaningful cash — the most commonly underestimated line in a store budget. The usual items, with names varying slightly by mall:

• Security deposit. Typically equivalent to several months of rent and related charges, refunded at the end of the term once accounts are settled and restoration is complete. Establish the refund conditions, the refund timetable, whether it earns interest, and whether it can offset final months of rent (usually it cannot).
• Advance rent. Several months paid up front, normally applied to the first or last months. It is separate money from the security deposit; do not conflate them.
• Construction bond or fit-out deposit, securing against damage to mall facilities and against non-compliant works, refunded after inspection.
• Plan review and construction management fees, charged for the mall's drawing approval and site supervision process.
• Utility connection and power capacity application fees, which matter most for food, bakery and other high-load categories.
• Utility deposits, held separately.
• Initial marketing contribution, charged one-off before opening in some malls.

Four cash discipline rules:

• Budget the store in three separate blocks: one-off deposits and charges, fit-out and equipment, and at least six months of post-opening working capital including payroll. Payroll's true composition is in the real cost of employing someone in the Philippines.
• Take an official receipt for every deposit, naming the item, and reconcile item by item at refund.
• Clarify the restoration obligation. Exit usually requires returning the unit to its original condition, so the demolition cost belongs in your exit budget from day one.
• Plan equipment importation separately. Specialist equipment bought abroad has a customs cycle that directly moves your opening date — see Philippine import and customs clearance.

How the Fit-Out Period Works: Rent-Free Is Not Cost-Free

The fit-out period is construction time granted by the mall, usually free of fixed rent — but CUSA, air-conditioning and temporary power are still charged. Rent-free is not cost-free. This is the item new operators miscalculate most often.

Length depends on category complexity and mall policy: retail units are usually short, while food and beverage takes longer because of exhaust, grease traps, gas and fire requirements. What matters most is the start date — does the clock run from turnover of the unit, or from approval of your drawings? The difference can be weeks. Put it in the lease.

The standard fit-out sequence:

• 1. Turnover inspection. Confirm the delivered condition, real usable area, utility points, ceiling height and structural constraints, photographing everything.
• 2. Design. Drawings prepared to the mall's design guidelines, which govern shopfront, signage, materials, fire safety and accessibility.
• 3. Plan submission. Reviewed by the mall's technical team, often over several rounds. This is where schedules slip.
• 4. Contractor accreditation. Most malls require accredited contractors, or at minimum proof of insurance and licensing.
• 5. Construction. Within permitted hours — commonly overnight after trading — observing noise, hot-work and debris removal rules.
• 6. Completion inspection and clearance to open, from the mall and the relevant authorities.

Three practical rules: schedule backwards from drawing approval rather than lease signing; build in buffer, since night work is slower than daytime and malls often ban construction entirely during major sale periods; and tie the opening date and the rent commencement date together explicitly so rent does not start while you are still building. Food and beverage carries heavier engineering and permit requirements — see opening a restaurant in Manila.

Leasing in an Ayala Mall Versus an SM Mall: What Actually Differs

The material difference between the two groups is not the rate but the customer and the tenant mix — choosing the wrong network costs far more than a few percentage points on rent.

• Network reach. The SM network is larger and more widely distributed, from prime metropolitan sites down to provincial cities, with a broader, more everyday customer base. For volume categories and daily necessities, reach is itself the value.
• Positioning. Ayala centres skew more towards mid-to-upper and lifestyle positioning, with several sites forming mixed-use estates alongside offices, residences and hotels. Spending power is higher, and so are expectations of store design and brand presentation.
• Openness to new brands. Both groups run tiers from flagship to community centre. Getting a new brand into a flagship is hard, but entry into a community or secondary property in the same group is far more achievable — and expanding within the group afterwards becomes much easier. This route is badly underused.
• Where leverage sits. Standard lease texts on both sides are landlord-favourable. Movement is rarely on headline rate; it is on fit-out duration, rent commencement, first-year escalation, the definition of gross sales, exit and assignment provisions, and unit position.

There is also a third option people overlook: not every business belongs in a flagship mall. Community centres, transport-hub retail, office podiums and high street units around wet markets all have different cost structures and traffic logic. Survey the landscape before committing — see the guide to Philippine malls and retail districts. For pure storage or back-of-house needs, see warehouse leasing in Manila; if you only need a registered address for now, see virtual offices and registered addresses.

A pragmatic sequence: validate real local demand through one or two temporary formats — a pop-up, a kiosk, a consignment counter — before committing to a long lease in a flagship. Long mall leases in the Philippines are hard to exit mid-term, and validation costs far less than a three-year commitment signed on optimism.

Opening a Store in a Manila Mall: Timeline and Permits

From decision to opening usually runs into months, and the real bottlenecks are the corporate entity, drawing approval and business permits — not construction. Working backwards:

• Stage 1 — entity and eligibility. Decide the investment vehicle (local company, branch or representative office; the comparison is in branch versus subsidiary in the Philippines) and complete company and tax registration. Foreign equity limits and minimum capital depend on your activity and structure, and retail trade in the Philippines has its own entry requirements that must be confirmed before you choose a site, per the current rules of the relevant authority.
• Stage 2 — application and allocation. Submit the pack, be assessed, receive a term sheet, negotiate. Duration depends on your brand strength and unit availability.
• Stage 3 — signing and payment. Letter of intent with reservation payment, formal lease, security deposit and advance rent.
• Stage 4 — design approval and fit-out. Drawings, review, revisions, construction, inspection. The stage most likely to run long; keep buffer.
• Stage 5 — permits and pre-opening inspections. City or municipal business permit, fire safety, sanitary clearance for food handling, and whatever else your locality requires. Permits renew annually — see Philippine business permit renewal. Certain product categories also face registration requirements with the health authority, for example cosmetics registration in the Philippines.
• Stage 6 — hiring, stock and soft opening. Recruitment, training and statutory employment formalities should run in parallel with fit-out, not after inspection.

Three classic mistakes that push the whole schedule back: signing a lease before incorporation completes, so the signing entity is wrong; failing to align equipment and stock arrival with the construction schedule, leaving staff waiting on goods; and leaving business permits to the end, finishing a beautiful store you are not allowed to open.

Where Leverage Exists, Common Traps, and a Disclaimer

Spend your limited leverage on the terms that move the three-year total, not on shaving a few pesos off the first-year rate. In priority order:

• 1. Rent commencement date and fit-out duration. Real money, and the item landlords most often concede.
• 2. Annual escalation. Fixed percentage or indexed, and whether there is a cap. Over three years this dwarfs a first-year discount.
• 3. The definition of gross sales for percentage rent. Delivery, online, gift cards, staff purchases, returns and discounts — spelled out item by item.
• 4. Exit and assignment. Early termination rights, break costs, and whether the lease can be assigned to an affiliate or a buyer. The most neglected and most dangerous clause — long Philippine mall leases are hard to exit unilaterally.
• 5. Scope of restoration. How far you must strip out on exit, and whether fixtures can be left for the next tenant.
• 6. Exclusivity and category protection. Whether direct competitors can be placed on the same floor. Rarely granted, always worth asking.
• 7. Force majeure and closure provisions. How rent is treated during mall renovation, public health closures or construction disruption.

Five recurring traps: comparing per-square-metre rent while ignoring CUSA and air-conditioning, understating true cost by a third or more; treating gross area as usable area, when columns and irregular shapes really do bite; trusting unofficial channels claiming inside access to units, where sublease and middleman risk is severe; relying on verbal promises, when every agreed rent-free or fit-out concession must appear in the lease; and signing an English lease nobody has read line by line. In a dispute only the written text counts — see handling contract disputes for foreign companies in the Philippines.

This article is general information. Rent structures, rates, percentage rates, deposits and fit-out policies are set by each mall, vary widely and are revised annually; company formation, foreign equity, business permits and sector entry requirements are governed by the current issuances of the relevant Philippine authorities. No specific amounts or percentages are quoted here, and nothing above constitutes legal or investment advice — take professional advice on material decisions and rely on the lease text. If you are entering the Philippine mall channel and want help setting up the entity, approaching leasing, reading the lease clause by clause, and mapping construction and permits onto one schedule, contact the Yixing company setup team — we start from your category and budget, model the structure, and only then talk about locations.