SM Prime Holdings Inc., the Philippines’ largest integrated property developer, is signaling a more cautious approach to its expansion plans as geopolitical volatility in the Middle East threatens to disrupt the domestic economy.

In a briefing, Jeffrey C. Lim, SM Prime president and chief executive officer, said the company may scale back its ₱100 billion capital expenditure program for 2026, shifting several mall developments and redevelopment projects to next year to preserve its balance sheet.

Lim said that while first-quarter results showed resilience, the company is preparing for potential headwinds if the conflict involving Iran persists.

The SM Prime executive noted that the company is conducting a fluid review of its pipeline, focusing on the rising costs facing tenants, suppliers, and contractors.

“Hopefully in the second, third, and fourth quarter of the year, malls will be able to continue to deliver the recurring business because, on the residential side, we expect that it will be a bit weak even in the next two, three quarters,” Lim said.

SM Prime’s net income for the first quarter remained largely flat at ₱11.66 billion, compared with ₱11.65 billion in the same period last year.

Total revenues saw a modest two percent increase to ₱33.3 billion from ₱32.8 billion, as the strength of the company’s recurring income streams—primarily from its shopping centers—was offset by a double-digit decline in residential sales.

The mall segment continues to serve as the group’s primary engine, accounting for 61 percent of total revenue. Mall-related income rose eight percent to ₱20.4 billion, supported by high occupancy rates and robust consumer spending.

Steven Tan, SM Supermalls president noted that foot traffic has remained steady year-on-year, while tenant sales grew by nearly double digits, exceeding internal expectations despite the macroeconomic backdrop.

In contrast, the residential division, SM Development Corp., saw revenues slide 16 percent to ₱7.8 billion from ₱9.2 billion. The decline was attributed to moderated revenue recognition from prior years and an uptick in cancellations.

Lim indicated that the residential market is expected to remain weak for the next two to three quarters, prompting the company to rely more heavily on its recurring income from malls and offices.

The developer’s office segment posted a 10 percent revenue gain to ₱2.5 billion, while the hotels and convention centers unit grew eight percent to ₱2.2 billion.

Despite the topline growth in these areas, overall profitability was tempered by a three percent rise in costs and expenses, which reached ₱16.6 billion due to higher depreciation and fixed overhead.

As the company moves further into 2026, SM Prime said it will prioritize cost discipline and occupancy levels to insulate the firm from further market volatility.