Jakarta may be hit by oversupply of retail spaces
Jakarta may be hit by oversupply of retail spaces
JAKARTA (JP): An international property consultant warns that
an oversupply on certain types of retail spaces may hit the city
and only those with sound fundamentals will continue to perform
well.
In its latest report on the city's retail sector, PT First
Pacific Davies Indonesia, says the amount of retail space will
continue to increase so greatly in the next two to three years
that it may lead to an oversupply of retail spaces in the city.
"First Pacific Davies believes that this is partly true in
that there is likely to be an oversupply in certain types of
retail, but not all," it says.
It projects that by the end of this year, the total supply of
Jakarta's retail spaces will have reached 1.1 million square
meters. About 38 percent of this will be less than two years old
and just over 60 percent will have been completed in the last
five years.
"This means that the majority of Jakarta's retail property
stocks are relatively modern," the report says.
In 1996, the company predicts, the supply of new retail space
will amount to 213,195 square meters (sqm), including Mal Taman
Anggrek in West Jakarta with a net rentable area of 95,000 sqm,
Mega Mal Pluit in North Jakarta with 90,000 sqm, Mal Depok in
Bogor -- 25 kilometers south of Jakarta -- with 24,195 sqm and
Plaza Festival in South Jakarta with 4,000 sqm.
In 1997, another 145,000 sqm of retail spaces will enter the
market. They consist of Ambassador in South Jakarta with a net
rentable area of 15,000 sqm, Mal Pejaten in South Jakarta with
29,000 sqm, Plaza Depok with 8,000 sqm, Mal Puri Indah in West
Jakarta with 60,000 sqm and Mal Daan Mogot also in West Jakarta
with 33,000 sqm.
In 1998, there could be up to 200,000 sqm of new retail space,
including Senayan Square with a net rentable area of 20,000 sqm,
Mal Ciputra with 75,000 sqm, Plaza Sudirman with 35,000 sqm,
Plaza Kota BNI with 35,000 sqm, Plaza Kasablanca with 75,000 sqm
-- all in South Jakarta -- Cempaka Mas in East Jakarta with
65,000 sqm and Plaza Modern in North Jakarta with 13,000 sqm.
In addition to the above-mentioned projects, several other
developments are on the drawing board and may be completed in
1998 and 1999. However, owing to strategic, financial or
technical reasons, these are not definite or may be delayed
indefinitely, the report says.
"This situation is unlikely to ease in the near future. Its
effect will be to delay development proposals and thus deter
future supply," it adds.
Demand
On the whole, demand for space in most modern shopping centers
is high, the report said, adding that the strongest demand comes
from restaurants, snack and fast-food operators.
A larger contribution to overall demand is being made by new
retailers in almost all sectors, from books and electronics to
hardware and toys.
However, demand for fashion stores aimed at the middle-upper
and upper market segments may decrease in the future due to a
proposed legislation to protect local retailers from being
overcome by foreign ones and problems arising from under-
performing stores.
When demand from some sectors decreases and an oversupply of
retail space really occurs, First Pacific Davies predicts that
only modern shopping centers with sound fundamentals will
continue to perform well.
It defines such fundamentals as a proven need for modern
shopping facilities, a large enough catchment population with a
sufficiently high capability to spend, an accessible site, a good
design, an appealing mix of tenants and capable management.
First Pacific Davies believes that many of the centers
currently in operation or under construction are deficient in one
or more of these areas.
"Moreover, due to substandard management, they could quickly
become old-fashioned, unattractive and increasingly obsolete," it
said, adding that the number of modern shopping centers having
sound fundamentals remain fairly small.
Shopping centers with sound fundamentals will be able to offer
a high rate of rents. Plaza Indonesia in Central Jakarta, for
instance, commands more than US$150 per square meter per month
for its best units.
Meanwhile, prime rents for specialty units currently range
from $45 in new suburban shopping centers to $80 in new city
centers.
For department stores, rents are much lower, ranging from
around $6 per square meter per month up to $9.
Asking rents for new centers have been constant over the last
year and should remain at their current level for the foreseeable
future. Rents for newly-negotiated units in the existing centers,
however, have increased quite sharply in some cases, says First
Pacific Davies.
It states that occupancy levels in most modern shopping
centers are very high, averaging between 90 percent and 95
percent.
Because demand from specialty retailers is strong, malls which
are currently under construction are also achieving high levels
of precommitment, which can be as high as 85 percent for malls
due to open soon. (rid)