Mon, 08 Aug 1994

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)