Spreading rapidly even in bad times

Spreading rapidly even in bad times

Unlike other business sectors, the retail market has continued
to record brisk growth over the last four years, with modern
malls spreading rapidly in the country's major cities.

In 1999, when most of the country's business sectors were
struggling hard to emerge from the crisis, the retail sector was
already reporting positive growth.

According to the PSPI property research center, at least 110
new shopping malls were built in Jakarta and in the country's
other major cities during the period between 1999 and 2003.

Some of the shopping malls cover an area of over 100,000
square meters. They include ITC Cempaka Mas and Plaza Semanggi,
both in Central Jakarta, WTC Mangga Dua in West Jakarta, Kelapa
Gading Square in North Jakarta, Mega Bekasi Trade Center in
Bekasi, GTC Mall in Makassar, Supermall Pakuwon Trade Center in
Surabaya and Sun Plaza in Medan.

This rapid growth continues this year, with new shopping malls
mushrooming not only in Jakarta's main business areas but also
spreading to the outskirts of the capital, such as in Bekasi and
Tangerang.

The mostly recently opened mall is Plaza Indonesia eX, an
expansion of Plaza Indonesia in Central Jakarta. The new mall
comprises mainly food and beverage (F&B), and entertainment
facilities.

The opening of Plaza Indonesia eX added 13,800 square meters
to the Jakarta retail stock, bringing the total to 1.69 million
square meters as of March 2004, Procon property research center
said in its First Quarter-2004 Property Market Report.

New trade centers due to commence operations in the second
quarter of this year include Pasar Grosir Cililitan in East
Jakarta, Roxy Square in Central Jakarta and the conversion of the
Setiabudi Office Building II to a retail/entertainment facility.

According to Procon, the retail space supply will further
increase by 679,300 sq meters during the next two years. About 65
percent of which will come from strata-title retail centers.

"If all the proposed shopping centers meet their completion
schedules, then Jakarta space is estimated to reach 2.37 million
sq meters by the end of 2005," it said.

Leasing transactions in existing malls have been relatively
active with the opening of new F&B outlets. As in the previous
quarter, both foreign and local F&B retailers such as Bread
Talk, Tamani Cafe, Glosis, Platinum and Crystal Jade continued to
dominate leasing activities, opening new stores in retail centers
such as Mal Kelapa Gading, Plaza Indonesia eX, Megamal Pluit and
Mal Ciputra.

Procon said that during the January to March period of this
year, retail activities in strata-title centers were slower than
those in rental centers. Many strata-title centers are now facing
low occupancy levels as purchasers of kiosks continue to delay
the opening of their premises for business due to the low leasing
activities at these centers.

"Developers of strata-title centers are making efforts to
compete with the rental centers, however, by securing major
retailers as anchor tenants such as Giant, McDonald's KFC,
Matahari, Superindo or Club Store," Procon said.

The occupancy rate of the Jakarta retail market showed a
slight decline of 0.7 percent to 85.4 percent during the January
to March period, leaving approximately 246,800 sq meters of
vacant space. The majority of the vacancies are within strata-
title retail centers, which have an average occupancy rate of
70.07 percent, compared to rental retail centers where occupancy
is healthier at 89.90 percent.

The quarterly take-up in the market during the first quarter
of this year was 15,700 sq meters, a decrease of some 11,300 sq
meters from the previous quarter.

On rental rates, Procon said average base rents and service
charges for premium ground floor retail space also showed a
slight increase during the three-month period.

"In contrast to 2003, where landlords remained cautious in
increasing base rentals, in 2004 most landlords have begun to
increase US dollar-based rentals since the beginning of the year,
with an average growth rate of 2.3 percent recorded during the
first quarter," Procon said.

Service charges have also showed an increase of an average of
2.7 percent from the last quarter of 2003. The increase in rent
and service charges occurred largely within major retail centers,
which have enjoyed higher occupancy rates over the last year,
with many potential tenants currently still on waiting lists.
---The Jakarta Post