With an oversupply of spaces in Greater Jakarta's shopping malls, developers are likely to cut leasing prices by 30 percent over the next two years in order to survive stiff competition in the sector, a property consultant says.
"It's not easy to predict the (reduction) amount, but the price could drop by 30 percent. Several developers are even eager to give spaces free -- as long as their shopping centers are occupied," said Indah Utami, a senior manager at consulting firm Procon Indah.
Utami said the cost of a lease in a Jakarta shopping center was around Rp 660,000 (US$70) per square meter (sqm) per month in the fourth quarter last year, while in Greater Jakarta the same space could cost Rp320,000 per sqm per month.
She said the prices could even dip lower with a general election in 2009, which usually discourage people from starting out new businesses.
Higher inflation, which would undermine people's purchasing power, would also drive the prices down, she added.
Procon's quarterly report shows an abundant supply of retail spaces during the fourth quarter of last year in Greater Jakarta.
Cumulative supply reached 2.85 million sqm, up from 2.7 million sqm in the third quarter last year, while cumulative demand only grew from 2.1 million to 2.2 million sqm.
Procon estimates some 582,000 sqm in new shopping center spaces would enter the market over the next two years, and more than 82 percent of this space is located in Jakarta -- less than 18 percent is in the Greater Jakarta area.
Utami said several malls would be built including Mall of Indonesia in Kelapa Gading, North Jakarta, and the Pluit Junction and Emporium Pluit malls in Pluit, North Jakarta.
In South Jakarta, the Rasuna Epicentrum in Kuningan will also hit the market before the end of 2009.
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