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)