FOR MARKETING PERSPECTIVE -- JUNE 15

Malls spreading rapidly even in bad times

Unlike other business sectors, the retail market has continued to record brisk growth over the last four years, with modern malls spreading rapidly in the country's major cities.

In 1999, when most of the country's business sectors were struggling hard to emerge from the crisis, the retail sector was already reporting positive growth.

According to the PSPI property research center, at least 110 new shopping malls were built in Jakarta and in the country's other major cities during the period between 1999 and 2003.

Some of the shopping malls cover an area of over 100,000 square meters. They include ITC Cempaka Mas and Plaza Semanggi, both in Central Jakarta, WTC Mangga Dua in West Jakarta, Kelapa Gading Square in North Jakarta, Mega Bekasi Trade Center in Bekasi, GTC Mall in Makassar, Supermall Pakuwon Trade Center in Surabaya and Sun Plaza in Medan.

This rapid growth continues this year, with new shopping malls mushrooming not only in Jakarta's main business areas but also spreading to the outskirts of the capital, such as in Bekasi and Tangerang.

The mostly recently opened mall is Plaza Indonesia eX, an expansion of Plaza Indonesia in Central Jakarta. The new mall comprises mainly food and beverage (F&B), and entertainment facilities.

The opening of Plaza Indonesia eX added 13,800 square meters to the Jakarta retail stock, bringing the total to 1.69 million square meters as of March 2004, Procon property research center said in its First Quarter-2004 Property Market Report.

New trade centers due to commence operations in the second quarter of this year include Pasar Grosir Cililitan in East Jakarta, Roxy Square in Central Jakarta and the conversion of the Setiabudi Office Building II to a retail/entertainment facility.

According to Procon, the retail space supply will further increase by 679,300 sq meters during the next two years. About 65 percent of which will come from strata-title retail centers.

"If all the proposed shopping centers meet their completion schedules, then Jakarta space is estimated to reach 2.37 million sq meters by the end of 2005," it said.

Leasing transactions in existing malls have been relatively active with the opening of new F&B outlets. As in the previous quarter, both foreign and local F&B retailers such as Bread Talk, Tamani Cafe, Glosis, Platinum and Crystal Jade continued to dominate leasing activities, opening new stores in retail centers such as Mal Kelapa Gading, Plaza Indonesia eX, Megamal Pluit and Mal Ciputra.

Procon said that during the January to March period of this year, retail activities in strata-title centers were slower than those in rental centers. Many strata-title centers are now facing low occupancy levels as purchasers of kiosks continue to delay the opening of their premises for business due to the low leasing activities at these centers.

"Developers of strata-title centers are making efforts to compete with the rental centers, however, by securing major retailers as anchor tenants such as Giant, McDonald's KFC, Matahari, Superindo or Club Store," Procon said.

The occupancy rate of the Jakarta retail market showed a slight decline of 0.7 percent to 85.4 percent during the January to March period, leaving approximately 246,800 sq meters of vacant space. The majority of the vacancies are within strata- title retail centers, which have an average occupancy rate of 70.07 percent, compared to rental retail centers where occupancy is healthier at 89.90 percent.

The quarterly take-up in the market during the first quarter of this year was 15,700 sq meters, a decrease of some 11,300 sq meters from the previous quarter.

On rental rates, Procon said average base rents and service charges for premium ground floor retail space also showed a slight increase during the three-month period.

"In contrast to 2003, where landlords remained cautious in increasing base rentals, in 2004 most landlords have begun to increase US dollar-based rentals since the beginning of the year, with an average growth rate of 2.3 percent recorded during the first quarter," Procon said.

Service charges have also showed an increase of an average of 2.7 percent from the last quarter of 2003. The increase in rent and service charges occurred largely within major retail centers, which have enjoyed higher occupancy rates over the last year, with many potential tenants currently still on waiting lists. --- The Jakarta Post