Project delays leave Jakarta’s total retail space stuck at 2.84sqm

Three malls are slated to open sometime this year.

Mall constructions are still progressing, but at a slower pace. The postponement of mall completions is still anticipated in 2021. Nevertheless, Colliers says total retail space will increase by around 700,000 sq m up to 2024, with about 60% located in the greater Jakarta area.

In Jakarta, total retail space stayed at around 4.83 million sq m, with no mall projects being completed 1Q 2021. Some mall projects are actually in the final stages of construction, with some committed tenants at the fit-out stage, but landlords have decided to delay openings, waiting for the right moment to capture bigger crowds during grand openings.

Here’s more from Colliers:

Three new mall projects are close to being completed. The opening of Aeon Mall Tanjung Barat, at Southgate complex, Pondok Indah Mall 3 (these two malls were previously scheduled to open in 2020) and Lippo Mall East Side (at Holland Village) will take total retail space to 4.93 million sq m by the end of 2021.

In the greater Jakarta area, total retail space was stuck at 2.84 sq m in Q1 2021. Three malls are planned to open sometime in 2021, including Green Walk Mall (at Grand Dhika City in Bekasi), Paradise Walk (in Serpong, Tangerang) and the extension of Margo City mall (in Depok). This influx will bring total retail space to nearly 3 million sq m by the end of 2021, up by about 4% YOY.

According to Indonesian Shopping Center Management Association (APPBI), average traffic to malls is currently registered at about 30%-40% of normal visitations, a modest improvement on the 20%-30% when the pandemic was first announced. With less than half of the visitors coming back to the mall, impact to the retail business has been quite significant. On the other front, some prospective retailers are looking to postpone opening businesses in malls, waiting for the traffic to be back to normal.

The closure of stores puts more pressure on occupancy performance. Some large grocery and department stores have closed. Retailers are focusing on only maintaining profitable outlets. We note that some committed tenants have yet to open at malls that were completed in 2020, and this caused a drop in occupancy performance in Jakarta and the greater Jakarta area of about 8% and 9%, respectively, on a YOY basis.

The overall mall occupancy rate was recorded at 73.1% in Q1 2021, with more stores likely to close. Indications are that some destination malls planned to open this year have secured a relatively high number of tenants, which will help fuel a slight rise in overall occupancy in the remainder of 2021. In the greater Jakarta area, the occupancy level was 71.2% in Q1 2021. This should continue to rise in 2021, albeit moderately.

Occupancy cost still in pause mode

The effects of the pandemic have created more room for rent negotiations. With minimum three-year lease periods, some incentives are still being applied, including rent-free periods and service charge discounts, with specific treatments for each tenant.

The average offering rent for retail space in Jakarta was IDR545,079, and this has been relatively stable over the past six months. The overall rent up to the end of 2021 might see a slight adjustment when a new high-end mall comes on to the market. In the greater Jakarta area, the average rent was recorded at IDR396,586; this will likely stay relatively stable up to the end of 2021.

Nothing has changed with respect to service charges since 2Q 2020, however, considering an increase in the minimum wage level and the price of some supporting goods such as toiletries, it is possible landlords will look to increase service charges in early 2022. A fair increase in the average service charge tariff for both Jakarta and the greater Jakarta area is projected, with it being lower than in previous years.

In general, the anticipated increase in service charge is mainly because of new malls with higher maintenance tariffs being added to the overall calculation. However, the overall market will keep to the current tariff at least until end of 2021. Compared to last quarter, average service charges in Jakarta and the greater Jakarta area were relatively stable at IDR145,691 and IDR120,349, respectively.


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