Indonesia prime mall rents won't improve till 2022: JLL

Rents are expected to stabilise this year and start improving by 2022, driven by limited supply in the upcoming years.

F&B and beauty retailers remain quite active in Jakarta's retail scene. JLL reveals there were some new openings, including Sephora, which launched its 19th store in Grand Indonesia; a beauty e-commerce platform, Sociolla, which opened two stores, one each in Central Park and Gandaria City; and Bangkok-based online retail company, Pomelo, which opened its first physical store, also in Central Park.

Since October, gyms were allowed to operate at 25% capacity. Also, cinemas were allowed to reopen at 50% capacity with new regulations, including audience age restrictions, online ticket purchases, and no food or beverages allowed. However, other entertainment facilities, such as children’s playgrounds and amusement arcades, remained closed.

New prime malls openings delayed

No new prime malls were completed in 2020; hence, occupancy levels remained healthy in general. However, supporting retail within a mixed-use complex; namely, Ashta at District 8 (14,400 sqm NLA), entered Jakarta’s CBD in early November, where a fashion label from France, Maison Kitsuné, along with sister company, Café Kitsune, opened its first store.

Despite some closures, small to medium-size vacant spaces in prime malls tended to fill up relatively quickly. Department store and food court closures have caused landlords to consider options to improve mall performance with a nod toward F&B tenants and flexible-space operators, while also modifying some circulation adjustments.

Rents decrease slightly

Rents have decreased over the past two quarters due to the pandemic’s impact and continued to decline -0.7% q-o-q in 4Q20. Prime mall rents are expected to stabilise in 2021 and start improving by 2022, driven by limited supply in the upcoming years.

Some landlords have been giving retail tenants rent relief on a case-by-case basis in the wake of unprecedented disruption to retail. Many have provided their existing tenants with a discount of up to 50% on rents. This strategy preserves malls’ occupancy, making it relatively healthy during the social-restrictions period.

Outlook: Rents likely to begin to stabilise in 2021

The government has sharpened its focus on how to control the pandemic and boost economic recovery. This, along with the arrival of the vaccine, could improve consumer sentiment. With limited supply in the pipeline, the retail market is likely to recover gradually starting in 2021.

We anticipate 2021 vacancy rates to rise since 120,000 sqm of new supply has been carried forward from 2020. The robust demand still comes from F&B, followed by health and beauty tenants. Due to Jakarta’s unofficial moratorium, stand-alone mall developments are more likely to occur in the emerging Greater Jakarta area.

Note: Jakarta Retail refers to Jakarta's overall prime retail market.