Nine retail centers to enter overcrowd market

Dewi Santoso, The Jakarta Post, Jakarta

Nine additional retail centers are to open in Jakarta this year, creating even greater competition in the already-packed retail market here, said a property consultant.

As of March 2004, cumulative retail space in the capital totaled 1.69 million square meters (sqm). The incoming nine retail centers will add 350,000 sqm and raise the area of cumulative retail space to more than 2 million sqm by the end of this year.

Lini Djafar, a director at property consultant PT Procon Indah, said over the weekend that eight of the nine retail centers would be strata title trade centers and only one would be a shopping mall.

The planned centers include Cililitan Wholesale Market in East Jakarta, Roxy Square in West Jakarta and a shopping mall in Setiabudi, South Jakarta.

Around 30 percent of existing retail properties are international trade centers, or ITCs, and the remaining 70 percent are shopping malls that housed restaurants and entertainment facilities, Procon said.

"But ITCs are becoming more popular because they are able to break even faster than malls, as they can be sold immediately after they are constructed, while malls are available only to rent," said Lini.

In terms of occupancy rates, however, ITCs score lower at an average 70.1 percent occupancy, compared to malls at 85.4 percent.

She said the disparity was because unlike malls, many people bought space at ITCs for investment and not necessarily for operation.

"At ITCs, people buy single units and they can choose to use them, lease them or resell them. At malls, people can only rent one or more units under a specific contractual term," she explained.

High occupancy rates in turn caused the malls' monthly rent to increase by 15 percent to Rp 553,625 per square meter during the first quarter, compared to the same period last year.

According to Lini, growing demand in the retail property market was caused by the dominant force of private consumption, driven by strengthening buying power.

On average, private consumption contributes 70 percent of the gross domestic product (GDP).

Procon said in the meantime, retail properties that provide restaurants and entertainment facilities would continue to dominate the market.