Spotlight Retail OY Jakarta Jan uary 2020...Spotlight OY Retail January 2020 savills.co.id/research...

Spotlight

Retail ● Jakarta January 2020

Savills World Research

Indonesia

Spotlight ● Retail January 2020

Spotlight

Retail ● Jakarta

savills.co.id/research 1

Economy

2019 has been a tough period for the global

economy with trade tension between US

and China and recessions in some countries.

World GDP growth recorded its weakest

pace since GFC a decade ago, reflecting

common influences across regions and

country-specific factors.

While economy this year is predicted to

grow moderately, many expect that the

bottom has passed. Yet, downside risks

remain with US-Iran conflict, surmounting

debts worldwide and unfinished trade talks

– these may hamper global recovery.

As part of the open market, Indonesia

cannot escape from various global issues.

In order to achieve economic target, the

country should quickly response and put a

balance between sustaining growth

momentum and maintaining

macroeconomic and financial stability.

Indonesia has so far sustained a solid

growth on the back of strong domestic

consumption, fiscal expansion and export

growth. The government massive spending

on infrastructure is expected to continue

while development on human capital -

through education and health is

anticipated to improve. Furthermore,

structural reforms have been widely

implemented in many aspects, including

laws and regulations. For instance,

government had proposed to the

parliament Omnibus bill to amend around

74 laws in efforts to cut red tapes.

Indonesia’s economic growth for 2020 is

projected to increase modestly. The

government is targeting GDP growth at

5.3% – higher than 2019 (estimated)

growth rate of 5.0%.

TABLE 1

Key Figures – Indonesian Economy, 2011-2019

2011 2012 2013 2014 2015 2016 2017 2018

2019

GDP Growth (%) 6.50 6.23 5.78 5.09 4.79 5.02 5.07 5.17 5.02**

Interest Rate (%) 6.00 5.75 7.50 7.75 7.50 4.75 4.25 6.00 5.00

Inflation Rate (%) 5.38 4.28 6.97 6.45 6.38 3.02 3.61 3.13 2.72

Exchange Rate (USD/IDR) 9,068 9,670 12,189 12,440 13,795 13,436 13,548 14,481 13,091

Unemployment Rate (%) 6.56 6.07 6.17 5.94 6.18 5.61 5.50 5.34 5.28

Source: BPS. BI, MoF *) government target, unless other mentioned **) latest data available

CHART 1

National GDP Growth, 2006-2020F

Source: BPS *) Government target

**) Estimate

Indonesia has so far sustained a solid progress on the back of strong domestic consumption,

fiscal expansion and export growth. The government massive spending on

infrastructure is expected to continue while human capital development program through

education and health is anticipated to improve.



To anticipate the sluggish economy,

Indonesian government has implemented

some policies to ensure domestic stability

and resiliency. In line with global trends

among central banks in cutting off interest

rates, Bank Indonesia also trimmed the

benchmark interest rate four times in 2019

– which now stood at 5.0%.

The move had some positive impacts to

support low inflation and relatively stable

rupiah. By end 2019, inflation rate stood at

2.7% which still within the target range of

2.5%-4.5%. As for 2020, the government

targets the inflation rate at 3.0±1%.

Meanwhile, rupiah exchange rate against US

dollar have been relatively stable in 2019 and

it was closed at IDR 13,900 by end-Dec. Solid

foreign reserves (approx. USD 129 billion)

helped to maintain the rupiah.

Furthermore, the government recently

announced to lower oil and gas prices in early

2020. If realized, this will help to reduce

household’s gasoline expenditures that in

turn would boost spending in other sectors

including in the property sector.

Aside from the above, the government

continues their efforts to cut red tapes and

providing more tax provisions to spur

investments. Compared to other countries in

the region, Indonesia with much bigger

economy and healthier GDP growth should

be able to attract international and foreign

companies to do business here. Interests in

the last few years remained high with energy

and trading sectors became investors’ focus.

With more acceleration in economic growth

and better policies in place, we expect to see

gradual improvements in spending power as

well as better wealth distribution. As such,

we expect inquiry from both end-users and

investors to gradually strengthen, while more

corporate expansion would translate into

more demand in sectors like office, logistics

and hotel accommodations.

However, we also believe that developers

should wisely manage their expectation

particularly on their pricing to make it more

attractive in order to win the competition

during a tough market condition.

CHART 2

Interest Rate & Inflation, 2015-2019

Source: BPS, BI

CHART 3

Rupiah Exchange Rate (USD/IDR), 2014-2019

Source: BI CHART 4

IDX Composite & Property Index, 2014-2019

Source: BEI



Jakarta Retail

The retail market had witnessed some

positive growth in 2019 compared to the

previous year with net take-up picked-up

strongly and mall occupancies rebounded

to healthier levels.

Three small shopping centers with total

leasable area of around 24,000 sqm were

completed in 2019. The new projects are

all categorized as middle-up lifestyle malls

with focus on leisure and F&B tenants.

They are located in Central Jakarta, South

Jakarta and West Jakarta. With the

additional inventory, total retail supply

(for lease) rose to approx. 3.1 million sqm

as of end-2019.

By grade, the largest proportion in the

existing stock came from middle-up

shopping centers, accounting for 41% of

the overall stock. The second largest stock

came from upper grade segment with

around 33% of the total. Meanwhile high-

end and middle-low retail centers -

accounted for 13.5% and 12.5%,

respectively.

By location, about 38% of total stock was

located in South Jakarta then followed by

North Jakarta at 20%. West Jakarta and

Central Jakarta constituted about 19% and

15% of the entire stock, respectively.

Meanwhile, East Jakarta as the largest

population in the capital city has the

smallest retail stock instead.

Some renovation works and upgrades in

a number of shopping centers were

eventually finished in 2019 which also

bring in new tenants to that centers. For

example, large vacant areas previously

occupied by department stores had

been modified and converted to smaller

spaces for mini anchors or some

specialty tenants.

With a number of openings especially

from new local F&B players, retail take-

up in 2019 rose quite significantly

compared to previous year. Combined

with expansions from existing stores,

net take-up totalled at around 75,000

sqm in 2019, quite a big jump from 2018

when net take-up were almost non-

existent.

TABLE 2

Market Indicators – Rental Shopping Malls | Jakarta

2H19 1H19 2H18 Change (%)

HoH YoY

Existing Stock (sqm) 3,164,139 3,159,139 3,086,566 0.2% 2.5%

High-end 427,466 427,466 427,466 0.0% 0.0%

Upper 1,038,450 1,034,150 1,034,150 0.0% 0.4%

Middle-up 1,298,242 1,293,242 1,274,069 0.4% 1.9%

Middle-low 399,981 399,981 399,981 0.0% 0.0%

Avg. Rent (/sqm /mth) 346,200 346,200 348,430 0.0% -0.6%

High-end 773,571 773,571 773,571 0.0% 0.0%

Upper 505,556 505,556 502,222 0.0% 0.7%

Middle-up 289,326 289,326 291,568 0.0% -0.8%

Middle-low 211,042 211,042 213,333 0.0% -1.1%

Source: Savills Research & Consultancy

CHART 5

Supply, Demand & Occupancy, 2010-2019


Retail enquiries grew positively in 2019. Renovations and design renewal/

positioning works as seen in a number of shopping malls had

successfully lure more traffic thus attracted retailers to expand

their outlets.



In general, the retail property sector in

Jakarta remained attractive amid ongoing

competitions from online shopping. With

growing affluent class and thriving youth

segment, the market in Jakarta continued

to attract international retailers, particularly

F&B and fashion sector.

Some new foreign entrants in 2019 include

Eben (Hong Kong), Karuizawa (Japan), Nars

(USA), Pizza Maru (South Korea), Yogurtland

(USA), Ben Gong’s Tea (China), Harrits

Donuts & Coffee (Japan), Maki-san

(Singapore), Gram (Japan) and Hai Di Lao

China). Meanwhile, bubble tea craze is

currently a hit in Jakarta as evidenced by

many boba store openings in town. Tiger

Sugar, Xing Fu Tang and Diagon Alley (all

from Taiwan) are some prominent players

that made their debut in 2019. They

aggressively expanded not only in Jakarta,

but also in other big cities like Medan,

Surabaya, Bali, Bandung and Semarang.

Meanwhile, existing studio chain Cinemaxx

had rebranded as Cinepolis with official

announcement in early December 2019.

Cinepolis entered a partnership with Lippo

Group, the owner of Cinemaxx, by acquiring

40% of its stake. That move was taken as an

effort to heighten moviegoers’ experience

through innovation from the Cinepolis.

Also, fast fashion retailers like H&M and

Uniqlo continued to penetrate the market

with more stores targeting primarily youth

customers and young professionals.

Overall, increasing demand led to a lower

vacancy from 12.1% in 2018 to 10.4% by

end-2019. This also had reflected in entire

mall segments: in high-end malls vacancy

down to 4.5%, 5.9% in upper grade malls,

16.7% in middle-up and in middle-low

shopping centers vacancy down to 8.0%

Amid the decline in vacancy, retail rents

were basically unchanged as landlords

continued to focus on retaining their

tenants and trying to lure new ones. The

overall average rent in Jakarta stood at IDR

346,000 per sqm per month as of December

2019. In Jakarta’s high-end malls, rents for

typical specialty stores in prime floors are

offered at the average of IDR 773,571 per

sqm per month.

CHART 6

Net Take-Up by Grade, 2010-2019


CHART 7

Vacancy by Grade, 2010-2019


CHART 8

Rental Index by Grade, 2010-2019 (2010 = 100)




What is the outlook?

Between 2020 and 2022, around 450,000

sqm of retail space from 18 projects is

scheduled for completion and will add to

the supply in Jakarta.

In terms of grade, most of the upcoming

supply is categorized as middle-up malls,

representing 60% of the future supply while

the rest is upper grade malls. By location,

the concentration of future supply will be in

North Jakarta (28%), South Jakarta (27%)

and Central Jakarta (26%). West Jakarta and

East Jakarta accounted for 12% and 7%

respectively.

Some projects previously scheduled for

completion in the last quarter of 2019 had

delayed their openings – mostly due to slow

construction works. Those centers are

anticipated to open for trade in early 2020.

If completed, soon there will be two new

centers in the SCBD area (D8 and Elysee)

and one new mall in Senayan area (Spark).

The upcoming centers will be a fresh

addition to the CBD retail supply which had

seen no new developments in the last few

years. In response to the current trends, the

developers adopted lifestyle concept in their

malls with significant contents on F&B and

leisure retailers. With more lifestyle centers,

the CBD will be perceived as the most hip

and trendy location in the capital city.

CHART 9

Annual Supply, 2010-2019


CHART 10

Supply, Demand & Occupancy Forecast, 2020-2022


TABLE 3

Future Supply – Rental Shopping Mall | Jakarta

2020 2021 2022

Future Supply (sqm) 184,366 114,276 154,910

High-end - - -

Upper 154,366 16,000 11,910

Middle-up 30,000 98,276 143,000

Middle-low - - -

Central Jakarta 32,979 63,276 24,910

South Jakarta 124,887 - -

North Jakarta - 25,000 100,000

West Jakarta 26,500 26,000 -

East Jakarta - - 30,000




With big population base and rising middle

consumers, Indonesia continues to attract

offshore investors. Growing investors’

appetite to acquire malls in Indonesia

garnered a buzz in 2019. Notable deals

include NWP Retail (Nirvana Wastu

Pratama), Indonesia’s largest independent

retail shopping mall platform backed by

Warburg Pincus, taking over malls from

Lippo group. NWP entered into conditional

sale and purchase agreements to buy five

malls located across the country in end-

2019 for a reportedly IDR 1.8 trillion. The

deal marked growing participation of

international operators in Indonesia’s

retail market – following the expansion of

Korean and Japanese retail developers.

Meanwhile, successful upgrades in a

number of malls have brought positive

impacts to their performances, which

inspire other landlords to refresh their

centers in order to attract more tenants and

visitors. Some landlords that plan to

renovate their malls include Melawai Plaza

and Gajah Mada Plaza.

Going ahead, we expect Jakarta future retail

scene will be more dynamic and innovative

as retail brands evolving to create unique

value and experience to their customers.

Furthermore, F&B sector is projected to

remain popular and have strong growth;

more investors and international players

are seen to expand to Indonesia like Taco

Bell (USA), Go Noodle (Malaysia) and %

Arabica (Japan) will open their stores soon

here. Meanwhile local coffee chain Kopi

Kenangan, with strong back-up from from a

global investor continues to expand and

targeting to add over 1,000 new outlets

over the next 2 years.

Along with the anticipated growth in

demand, retail rents are projected to pick

up gradually. Based on our moderate

scenario, we expect the hike at around

3%-4% hike per annum over the next two

to three years.

CHART 11

Rental Index Forecast, 2020-2022 Moderate Scenario


Boba Craze Outlet expansion

(major brands)

0 50 100 150 200 250

Xing Fu TangFat StrawGulu Gulu

Happy LemonBen Gong's Tea

Forever TeaDabobaKoi TheOneZo

KokumiHeycha

ChatimeFat BubbleKamu TeaDirty Milk

IN TeaHeiHei

Tiger SugarDiagon Alley

HopHopQuickly

Bubble tea (or pearl milk tea,

bubble milk tea called boba) is a

tea-based drink invented in

Taiwan in the 1980s.

The first boba drink in Indonesia

was launched in 2000 – with

‘Quickly’ as the pioneer.

Later in 2001, Hop Hop opened

targeting lower segment.

In the past couple of years,

Indonesia has experienced an

influx of boba outlets from local

and international alike.

# of outlets



Glossary

• The Jakarta retail market covers the administrative region of DKI Jakarta,

which is defined based on municipality i.e.: Central Jakarta, South Jakarta, East Jakarta, West Jakarta and North Jakarta

• Demand as defined by net absorption (net take-up) refers to the net increase in occupied retail space within a particular period.

• High-end malls refer to shopping centers located in prime CBD areas with international standard features and rated as the highest rank in terms of building size, quality, tenancy mix and profile, facilities, maintenance etc.

• Upper-grade malls refer to shopping centers located in strategic areas with excellent quality and rated as the second highest rank in terms of building size, quality, tenancy mix and profile, facilities, maintenance etc.

• Middle-up malls refer to shopping centers located in good areas with good quality and rated as the third highest rank in terms of building size and quality, tenancy mix and profile, facilities, maintenance etc.

• Middle-low malls refer to shopping centers located in decentralized areas with standard quality and rated as the lowest rank in terms of building size and quality, tenancy mix and profile, facilities, maintenance etc.

• Vacancy rate refers to the ratio of vacant available retail space to the total stock in the market.

• Gross rent refers to the total rental payable by tenants. This is equivalent to the sum of base rent plus service charges.

• Base rent is the standard minimum rental payable for a retail space without taking into account any add-ons such as service charge and after-hours utility costs that make up the total occupancy costs.

• Service charge is the collective name for the cost of air-conditioning, electricity and other services in public area as well as management charges passed on to occupiers.

Forecasting Methodology

• Optimistic Scenario

Based on assumptions that the general economic conditions to improve significantly (i.e. better GDP growth and positive macro environment) which will lead to a more robust purchasing power and consumer spending, thus generate significant retailer expansion, which would be reflected in significant take-up increase.

• Moderate Scenario

Based on assumptions that the general economic conditions to grow moderately (i.e. stable GDP growth and neutral macro environment) which will provide a foundation for steady consumer spending and positive retailer expansion.

• Pessimistic Scenario

Based on assumptions that the general economic conditions to weaken (i.e. lower GDP growth and negative macro environment) with lack of retailer expansion and weak consumer spending.

Please contact us for further information

Savills Indonesia Savills Research

Jeffrey Hong President Director Savills Indonesia +62 21 293 293 80 [email protected]

Anton Sitorus Director, Research Consultancy +62 21 293 293 80 [email protected]

Simon Smith Senior Director Asia Pacific +852 2842 4573 [email protected]

Savills plc Savills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 700 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.

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