Research & Research Forecast Report & Forecast Report 2H 2013 Retail 2nd Half 2013 Retail Market Report Accelerating success.
Contents Supply 3 Performance 5 Asking Rental Rates 6 Concluding Thoughts 7 2 Research & Forecast Report 2H 2013 Retail Colliers International
Supply By Ferry Salanto Associate Director Research Ferry.Salanto@colliers.com There was no new supply in the retail market in throughout 2013 and thus, the cumulative supply remains unchanged at 957,088 sq m. This condition will likely continue in 2014. Additional shopping space scheduled to be completed in 2015 and 2016, to include both new retail centers and the extension of existing projects. It is projected that there will be 284,950 sq m of new retail space added during this time. The average asking rental rate for retail center space in remained at IDR375,076/sq m/month in 2H 2013 which was only higher by 10.2% y-o-y. - Ferry Salanto Colliers International The state of no new supply highlighted the retail market in throughout 2013. With no new retail centers, the cumulative supply remains unchanged since early 2013 and is recorded at 957,088 sq m. This condition will likely continue in 2014. According to APPBI, an association of shopping center owners and managers, there has no confirmation on development schedule of new shopping centers in. At the present time, it becomes quite challenging to develop a new shopping center in. A continuous increase in land price issue in would probably one factor that hinder shopping center development. For example, land price along MERR (Middle East Ring Road) in East was initially offered at around IDR2 million/sq m. In line with the existence of MERR, the potential growth of the surrounding become high and land prices have jumped in the range of IDR17-20 million/ sq m within two years. It is also indicated that development permit is somewhat slow to process. All in all, the lack of supply during 2014 is mainly due to the development schedule from developers, evidenced that in the subsequent year new retail developments are already in the pipeline. For the last two years mall developers is less aggressive in developing shopping centers given the fact that mall performance grew on average. Shopping center new supply in will resume in 2015 and 2016 which includes both new retail centers and the extension of existing projects. It is projected that there will be 284,950 sq m of new retail space during those periods. In addition to the list of developments mentioned in the previous report, it is indicated that some new retail projects will be built in in 2015. Mostly these under-planning projects are small retail centers with size below 10,000 sq m. Generally, these retail centers are part of integrated development and will support the existence of other property component, mainly apartment project. Thus far, none of these projects has commenced the construction works as monitored at the end of 2013. New under-planning retail centers belong to Maspion and Lippo Group are indicated to start the construction works in 2014. Maspion will build new development namely Maspion City. This future extension retail center later on will be part of the whole development and designed with lifestyle mall concept. is a leader in global real estate services, defined by our spirit of enterprise. Through a culture of service excellence and collaboration, we integrate the resources of real estate specialists worldwide to accelerate the success of our partners. We represent property investors, developers and occupiers in local and global markets. Our expertise spans all property sectors office, industrial, retail, residential, rural & agribusiness, healthcare & retirement living, hotels & leisure. 3 Research & Forecast Report 2H 2013 Retail Colliers International
Retail Cumulative Supply in 1,000,000 800,000 600,000 Distribution of Existing and Future Retail Supply up to 2016 Based on Area in North 14% East 16% 400,000 200,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F South 25% Central 30% Existing Supply Annual Supply Based on area, retail projects are mainly located in the downtown of (Central ). The Central area in continues to be the magnet for commercial activities. In the next two years, again, the Central remains as the primary location for retail development. On the other front, the East and West area will continue to grow as more retail centers will be built in these areas including the expansion of Galaxy Mall and Supermal Pakuwon extension. Distribution of Existing Retail Supply Based on Area in West 15% In the next three years, no strata-title center being built in. Total supply of strata title retail remains at 368,567 sq m or 38.5% of the total retail supply in contributed by 14 retail centers. Cumulative Supply Based on Marketing Scheme 1,000,000 800,000 North 14% East 13% 600,000 400,000 200,000 South 27% Central 33% 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F For Lease For Strata-Title West 13% 4 Research & Forecast Report 2H 2013 Retail Colliers International
New Supply Pipeline retail centers projects name region NLA (sq m) Marketing scheme development status 2015 Lippo Mal Gubeng Central 6,000 For Lease Under Planning Hampton Square East 8,000 For Lease Under Planning JX Mall South 9,200 For Lease Under Planning 2016 Mall @Praxis Superblock Central 22,750 For Lease Under Planning Marvell City East 15,000 For Lease Under Planning Mall @A. Yani South 30,000 For Lease Under Planning Ciputra World 2 Central 34,000 For Lease Under Planning Supermall Pakuwon 2 West 60,000 For Lease Under Planning Maspion Square 2 South 30,000 For Lease Under Planning One Galaxy Mall East 60,000 For Lease Under Planning Puncak CBD Jajar West 30,000 For Lease Under Planning Performance In general, having tenants occupying a mall is not the main concerns for mall developers. On average the occupancy performance seems relatively high. However, in some cases, the challenging part for the mall operator is to maintain adequate visitors to come and to shop in the mall. To keep tenants paying the rent, mall operator has to make sure number of visitors. The overall occupancy rate for all retail centers (both retail for lease/mall and strata-title retail /trade center) in ai 83.8% as at the second semester (2H 2013). This level is 2.9% higher than the last semester s figure. The occupancy level of some shopping centers located in South posed a significant increase during the reviewed semester. During 2H 2013, a shopping center located around Gubeng area recorded significant physical occupancy with only a few committed tenants has not opened the stores. The occupancy performance of shopping centers for lease (mall) is 85.1% as at the end of 2013. Meanwhile the occupancy level of strata-title shopping centers climbed by 4.7% compared to the previous semester reaching 78.7%. Based on region, except for West, the other regions in achieved good occupancy performance in the range of 80% to 91% in 2H 2013. Some prominent shopping centers located in Central even recorded the occupancy level of above 95%. Meanwhile, the average occupancy in West recorded the lowest of below 70% as at the end of 2013. Number of retail center in West is limited, however one shopping center in this area experienced high vacancy which dropped the overall shopping center performance. The Average Occupancy Level in Each Region of During 1H - 2H 2013 100% 90% 80% 70% 60% 50% 1H 2013 2H 2013 East West North Central South Actually as the second largest metropolitan city after Jakarta becomes the target of retailers. The retailers mainly from branded fashion industry both local and foreign are aiming to. Moreover fashion trend in is currently undergoing a significant phase due to growing mode in today. 5 Research & Forecast Report 2H 2013 Retail Colliers International
Number of Operating Department Stores in Grand Palace Cahaya Ramayana Metro Centro SOGO Matahari 0 1 2 3 4 5 6 7 Number of Operating Hypermarkets in Giant Asking Rental Rates and Service Charges Adjusting asking base rental does not become the priority for developers today. Therefore, the average asking rental rate for retail center in remains at IDR375,076/sq m/month in 2H 2013. The asking rental rate was only recorded higher by 10.2% y-o-y. Asking Rental Rates Based on Region 600,000 500,000 400,000 300,000 200,000 100,000 0 East Central West South North Carrefour Hypermart Thus far the increase in the regional minimum wage and in the basic electricity tariff as well inflation rate have not been responded immediately by all retail center in. Notwithstanding, with mounting operational cost of retail centers, it is projected that the average service charges will be adjusted in near time. Currently, the average service charge was recorded at IDR66,556/sq m/month, a minor increase of 1.8% over the same period of 2012. 0 1 2 3 4 5 6 7 6 Research & Forecast Report 2H 2013 Retail Colliers International
Average Asking Price (/sq m) of Apartment in Jakarta IDR 400,000 IDR 300,000 IDR 200,000 IDR 100,000 IDR 0 2011 2012 2013 Rental Rates Service Charges Concluding Thoughts The major challenge of retail market in is to push visitors to enliven the shopping centers. Although this is not a general condition as quite a few shopping centers maintain their loyal customer and have a descent level of visitors to maintain the operation of the existing tenants, however some shopping centers still underwent limited number of visitors. Even certain malls have low vacancy with many stores opened it does not sufficient to lift the overall performance of the mall because of low traffic within the mall. A number of shopping centers opt to maintain the current rental tariff because they want to keep the occupancy level. During 2013, even the good performing shopping centers continued to charge the same rental tariff. The overall rental cost adjustment was only applied for operational component i.e. the services charge. Rental rates are expected to rise once the number of visiting and buying shoppers increases. 7 Research & Forecast Report 2H 2013 Retail Colliers International
482 offices in 62 countries on 6 continents United States: 140 Canada: 42 Latin America: 20 Asia Pacific: 195 EMEA: 85 Primary Authors: Ferry Salanto Associate Director Jakarta 62 21 521 1400 ext 134 Ferry.Salanto@colliers.com $2 billion in annual revenue 104 million square feet under management Colliers International Indonesia World Trade Centre 10th & 14th floor Jalan Jenderal Sudirman Kav. 29-31 Jakarta 12920 Indonesia TEL 62 21 521 1400 13,500 professionals and staff About Colliers International Colliers International is a global leader in commercial real estate services, with over 13,500 professionals operating out of more than 482 offices in 62 countries. A subsidiary of FirstService Corporation, Colliers International delivers a full range of services to real estate users, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and insightful research. The latest annual survey by the Lipsey Company ranked Colliers International as the secondmost recognized commercial real estate firm in the world. colliers.com Copyright 2013 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Accelerating success.