Jakarta to see over 373,000sqm of new retail supply till 2023
There are no high-end retail projects in the pipeline.
Luxury retail rents in Jakarta stood at IDR886,424 per sq m per month as of 2H/2021. According to a Savills report, luxury retail rents saw the deepest correction, down 43.7%, during the pandemic compared to other retail assets amid the devastating drop in tourist spending combined with a weak local economy. Though this heavy reliance could also mean a speedier recovery once demand returns in earnest.
“Domestically, local consumption of luxury goods increased due to the travel restrictions, as most wealthy Indonesians’ travelling expenses were allocated to shopping in local outlets. However, after Singapore reopened its border for vaccinated travellers in April 2022 veteran luxury shoppers have been eager to do some shopping abroad, leading to a mild drop in luxury sales in Q2/2022 in the range of 5% to 10%,” the report said.
Here’s more from Savills:
Pacific Place, Plaza Indonesia, Senayan City, and Plaza Senayan remain the dominant shopping centres in Jakarta, and all of them have shown resilience in sales and continued to draw in luxury tenants. The few brands which expanded their portfolios during the pandemic, were big global fashion houses, namely Dior Homme in Plaza Indonesia and Louis Vuitton in Pacific Place, while Faure le Page will open their first store in the country at Plaza Indonesia.
The supply of luxury retail space remains limited. Of Jakarta’s total retail stock, middle-up grade shopping malls dominate the market, accounting for 40% of the total supply, while high-end malls account for about 12% to 13%. Looking ahead, a total of approximately 373,000 sq m of new supply is scheduled across the entire Jakarta retail market between 2021 and 2023 and yet none of the new projects in the pipeline is high-end.
Given support from improving demand and tightly capped supply, we believe that luxury rents will gain some ground in the near term before eventually climbing back to pre-covid levels by 2023. We remain optimistic about the outlook of the luxury retail market in Indonesia.
Many luxury labels currently only have one representative store located in Jakarta, leaving a large pool of consumers underserved in this fast-growing country. With its 272 million population, Indonesia has the largest domestic market in the ASEAN region, accounting for about 36% of the ASEAN total.
According to McKinsey, if Indonesia can quickly return to its pre-pandemic growth rates, the country may become the world’s seventh-largest economy by 2030, making it an attractive and important consumer market within the SEA.