Retail market books positive growth

Retail market books positive growth

JAKARTA (JP): The retail market in Jakarta recorded positive
growth in the first quarter of this year, indicating that the
crisis in this property subsector has bottomed out, according to
property consultant Procon Indah/Jones Lang LaSalle.

Nevertheless, Procon Indah projected overall demand for retail
space for the whole year of 1999 would continue to decline due to
lingering political uncertainties centering around the general
election next month and presidential election in November.

Procon Indah's research head Bayu Utomo said on Thursday that
occupancy rates in Jakarta's prime and secondary retail spaces
grew by 2.5 percentage points to 82.8 percent in the first
quarter of 1999.

The main driver of the increasing demand for retail space in
the quarter was the stabilizing rupiah, which boosted consumer
confidence, Bayu said.

Stores in popular shopping centers recorded a 10 percent to 15
percent increase in sales in the first quarter, from the last
quarter in 1998, he said.

"The stabilizing rupiah plays an important role in driving
consumer confidence. Once the rupiah drops again, the retail
market will also drop."

The rupiah has been stable at around 8,500 against the U.S.
dollar in the first quarter of 1998. Currently the rupiah is
trading at 8,000 to the dollar.

Demand for retail space in Jakarta's prime and secondary areas
grew by 27,800 square meters in the first quarter, after
declining by 157,000 square meters through the whole year of
1998.

The growth in demand was somewhat misleading, however, as the
opening of Hypermarket Continent at MegaMall Pluit in March
contributed more than 50 percent of retail take-up in the first
quarter.

Rental rates for retail space remained stable in the quarter,
averaging US$48.80 per square meter per month for space in prime
locations and $35.00 for space in secondary locations.

Nevertheless, some owners of shopping centers in prime
locations increased their dollar-rupiah conversion rate from
between Rp 2,700 and Rp 3,000 per U.S. dollar to Rp 3,500 per
dollar.

However, Procon Indah projected that owners would be forced to
cut back rates or even the rental rates in the coming quarters
due to major political events, which would force tenants to
temporary close or even relocate their shops.

Procon Indah predicted that retail space occupancy rates would
drop again to 78 percent by the end of 1998.

Demand for retail space would rebound again in 2000 after a
new government is in place.

Occupancy rates are projected to improve when economic
recovery proceeds under the new government. (rid)