F&B and Entertainment boost retail property
Posted on November 2, 2007
Filed Under Retail
In early 2000, when many developers in Jakarta built modern shopping centers and malls, F&B and entertainment retailers were seen as the complementary. However, in the last few years, their role has become more significant. In fact, their significance starts to catch up with anchor tenants like department stores and fashion retailers.
Managing Director of PT Procon Indah, Siswanto Widjaja said that recent facts in the market show that the position of food & beverage (F&B) and entertainment retailers is not as supporting or complementary to a mall. They are becoming as important as fashion retailers and department stores.
“Shopping center developers should monitor this new trend. They should start thinking about innovation or a new concept to house F&B and entertainment retailers in their retail centers,” he said.
According to Siswanto, F&B and entertainment retailers seem very active in opening new outlets in the shopping centers, due to high demand.
“Increase in supply of new retail spaces makes competition tighter. Thus, shopping center managers should direct their business well to attract consumers. This is the key to survival.”
Head of Research of Jones Lang LaSalle Indonesia Anton Sitorus added that higher retail space absorption was triggered by higher demand from the urban middle class. “They are still willing to spend a lot of money to support their lifestyle,” he said, adding that developers planning to start new projects in the Greater Jakarta area should see this as an opportunity.
Increasing Supply
In the meantime, the retail supply capacity in Jakarta, Bogor, Depok, Tangerang, and Bekasi (the Greater Jakarta area) increased by 2.8% in June 2007 to 3.64 million m2 compared to previous period. The rise, according to the Procon Indah Research analysis, was supported by the completion of three new shopping center projects in Jakarta and five similar ones in Bogor, Depok, Tangerang, and Bekasi.
The new shopping centers in Jakarta, including Grand Indonesia (Seibu Department Store, Food Hall, and Blitzmegaplex), the enlargement of Hypermart at the Plaza Daan Mogot and the upgrading of Pusat Grosir Jatinegara, contributed to new space supply of 72,000 m2. In Bogor, Depok, Tangerang and Bekasi, the new supply came from rent shopping center Summarecon Mal Serpong (SMS), projected to be one of icons in Tangerang after BSD Plaza and Supermal Lippo Karawaci, and strata title retails like Mahkota Trade Center, Plaza Ujung Menteng, Sentra Bisnis Harapan Indah and e-Center at Supermal Lippo Karawaci.
By 2008, supply of new retail spaces is expected to reach 0.99 million m2 . 57.4% of the new retail supply is projected to come from rent retail centers and 89.1% from new retail centers in Jakarta and the remainder from outside Jakarta. If the supply meets expectation, then the total of cumulative supply will reach 4.6 million m2 by the end of 2008.
Regarding rent activities of shopping centers in the second quarter of 2007, the transactions seemed quite active after some anchor tenants have opened outlets at the new shopping centers.
The average absorption rate in the Greater Jakarta area in June 2007 was 78.9%, with untenanted space of approximately 767,777 m2. The occupancy rate in Jakarta rose slightly by 1% to 80.6% with unoccupied space of 496,719 m2. By subsectors, the occupancy rate of rent retail centers was 87.9%, while the occupancy rate of strata-titled retail centers is predicted to jump from 55% in the first quarter of 2007 to 73.6% in the second quarter of 2008.
A Jones Lang LaSalle research found that during the third quarter of 2007 the demand for upper-class retails rose, clearly indicating that retailers were highly confident to expand. However, the vast majority of demand was still dominated by new retail property projects.
Overall, the absorption rate of retail space, particularly the upper-class shopping malls in Jakarta during the third quarter of 2007, reached 10,791 m2 or rose by 500% compared to the second quarter of the year. In the absence of new supply during the third quarter of 2007, following the delay in the completion of Grand Indonesia, Mal Kelapa Gading (the fifth phase), and Pacific Place due in the fourth quarter of 2007, the rentable vacant space rate of upper-class retail space declined from 8.2% to 7.1%, leaving rentable unoccupied space of 67,000 m2.
By the end of 2007, the completion of the three retail projects [Grand Indonesia, Mal Kelapa Gading (the fifth phase), and Pacific Place] the total retail space in Jakarta rose by 160,000 m2. Meanwhile, in the period 2008-2009, it is expected to increase 260,000 m2 if the plan to build five new shopping centers goes as scheduled.
Jakarta Periphery
In the Jakarta periphery, the retail market activities have been vigorous. The Bekasi Square is being built, while few months ago PT Summarecon Agung Tbk, that was successful in building Mal Kelapa Gading, was in the first phase of building SMS. Summarecon admitted to have offered very competitive rates to attract tenants to SMS, which has been operated for about four months. .
“In short term we will not take profits from SMS. We will adjust the rent rate gradually after observing the progress here,” PT Summarecon Agung Tbk CEO Johanes Mardjuki said.
Competitive rent rates seem to benefit not only tenants renting new retail space, but also those renting old retail space. Competition is very tight. Even since the second quarter of 2007 the building owners have lowered the retail space rent rates of 4,92% in average, compared to the first quarter of 2007. This downward trend is predicted to continue until the third quarter of 2007.
Developers appear to be watchful in developing the retail property. The new trend shows that developers tend to build the retail property as a facility and attraction for residential properties on the sales lists. ***
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