Jakarta may face oversupply of retail space

JAKARTA (JP): With more shopping centers expected to open in the next three years, there is some concern that Jakarta will be oversupplied, property consultant First Pacific Davies Indonesia said yesterday.

Julian Rayner, the company's retail space specialist, said retail space supply would increase 18.06 percent to almost 1.3 million square meters next year.

This year alone supply is expected to increase 21.8 percent to 1.1 million square meters.

He said that because 358,000 square meters of retail space was expected to come on line in 1998, the market would be oversupplied for the next two to three years.

"But we believe it will only happen to certain types of retail space. International standard shopping centers with sound fundamentals, for example, should continue to perform well in spite of the growing supply," he said.

He said the fundamentals included a sufficient catchment population with an ability to spend, an accessible site, a good design, an appealing mix of tenants and capable management.

But many shopping centers now open or under construction are deficient in one or more of these areas, he said.

He said scarce construction finance and the high cost of international-standard retail space could prevent oversupply.

"The scarcity of construction finance is unlikely to ease in the near future and its effect will be to delay development proposals and thus defer future supply," he said.

Rayner said two areas in Jakarta were not immediately threatened by oversupply: the central business district and north-eastern Jakarta (Kelapa Gading) where several major retail projects are planned.

"If all planned projects proceed, then an oversupply situation is possible in both these areas. However, this situation will probably not materialize, mainly for funding reasons," he said.

He estimated the occupancy rate for this year and next year would be 90 percent.

On office space, First Davies Indonesia director Martin Steens noted that supply would reach almost 2.8 million square meters next year with an average occupancy rate of more than 91 percent, compared to 90 percent this year.

He said the rents for grade A office space -- around Jl. Thamrin, Jl. Sudirman, Jl. Gatot Subroto and Kuningan -- would increase slightly to between US$14 and $16 a square meter a month, compared to between $8 and $13 outside prime areas.

Steens said there was a trend for companies to move from prime areas to non-prime areas. But the growing relocations resulted more from life-style decisions than the worsening condition of traffic jams in prime areas, he said. (bnt)