Surabaya's retail property market oversupplied

Surabaya's retail property market oversupplied

JAKARTA (JP): The property market in the retail sector in
Surabaya, Indonesia's second largest city in East Java, is
oversupplied as a result of overbuilding during the economic boom
in the mid-1980s and poor shopping center management.

"The situation is aggravated by the propensity of wealthy
Surabayans to shop in Jakarta and in other Asian capitals. So we
don't anticipate an upturn in retail demand in the immediate
future," said Trevor Peach, the managing director of PT Colliers
Jardine Indonesia, in a six-month Asia-Pacific property report
sent to The Jakarta Post over the weekend.

Peach said the current retail stock in the central business
district is about 110,500 square meters spanning six shopping
centers, two of which -- Tunjungan Plaza I and Tunjungan Plaza II
at the heart of Surabaya -- are very successful.

"They enjoy occupancies of between 95 and 100 percent and
command annual rents from US$348 to $444 per square meter," he
said, adding that other shopping centers are poorly managed with
only 40 or 50 percent occupied.

Colliers Jardine is a leading multinational property
consultant which has 29 offices in 11 countries, particularly in
the Asia-Pacific region.

For comparison, Colliers Jardine reported that the occupancy
for prime retail facilities in Jakarta's central business
district has remained steady at 98 percent, while the annual rate
of rents is between $420 and $720 per square meter.

Supporting Peach's prediction, an executive of PT Procon Indah
-- another leading property consultant, -- earlier said that the
retail business in Jakarta is growing steadily following the
growing buying power of middle-class people.

A number of retail places will soon be completed in Jakarta,
which include Sunter Mall and Metro Sunter Plaza, both in North
Jakarta, as well as the expansion of Arion Plaza in East Jakarta.

Peach said that developers are currently constructing a number
of high-rise buildings in Surabaya, which include Tunjungan Plaza
III and some suburban centers in east and west Surabaya.

Industrial sector

Unlike the retail sector, the demand for industrial places in
Surabaya is expected to grow between six and seven percent over
the next year, Peach said.

"Demand is shifting northward in anticipation of the December
1994 completion of the Gresik toll road, with at least five more
industrial estates planned for adjacent areas," he said.

Colliers Jardine revealed that the majority of the factories,
however, are located outside industrial estates due to lower land
costs.

In the industrial estate of PT Surabaya Industrial Estate
Rungkut, which is almost totally filled, land prices are $100 per
square meter.

Peach said other industrial estates are only one-tenth
occupied.

Industrial estate developers in Surabaya have repeatedly
called on industrialists to build their factories inside
industrial estates but this request has been largely ignored.

In a related development, Collier Jardine noted that Coca Cola
had recently bought 9,600 square meters of land near the Tanjung
Perak port area at $70 per square meter.

It said the plot will be Surabaya's first combined office-cum-
distribution warehouse complex.

Fast food

Collier Jardine also said that fast food franchises are
showing tremendous growth potential, with a range of
international chains positioning themselves to cater for
Jakarta's changing lifestyle.

"Pizza Hut plans to spend $9.5 million over the next two years
on 20 new restaurants, while Domino's Pizza has signed an
agreement with a Jakarta-based firm for 40 franchise outlets,"
Peach said.

He said that PT Sejahtera Pioneerindo, the license holder of
California Fried Chicken which has already managed 124 outlets
throughout the country, plans to have 40 more outlets in Jakarta,
Bandung and Medan.

As the result of the booming fast food industry, Peach said
that Collier Jardine expects the capital values of prime central
business districts in Jakarta to increase slightly from $2,200-
$2,900 to $2,300-$3,000 a square meter by June 1995. (09)