Demand indicates growth amid the resilient economic situation

• Due to the resilient business environment and despite the impact of the Indonesian rupiah’s depreciation, retailers maintained a positive outlook but were cautious about expanding their businesses. Jakarta’s prime shopping mall net absorption totalled about 17,400 sqm compared to 7,500 sqm in 3Q22. The high net demand in the quarter was primarily due to new supply.
• F&B continued to generate most of the demand among specialty retailers in 4Q22. This category dominated the leasing market over the past two years as a “crowd-puller” component in prime shopping centres. F&B tenants also became the biggest demand generator in the new shopping mall, Senayan Park.

Senayan Park adds 28,000 sqm to the retail market

• Supply growth in the market had been limited over the past few years due to the unofficial moratorium on new mall development by the Jakarta Provincial Government. The pandemic situation has also had an impact on the development of new shopping malls. 
• One of the projects affected by the pandemic was Senayan Park. A relatively small shopping mall in the CBD, it was structurally finished and supposed to be delivered in 2020, but the opening was postponed due to the pandemic. This shopping mall is now open to the public with a healthy pre-commitment rate.

Rents continue to increase slowly but steadily

• Despite headwinds from the pandemic and the economic situation, rents have increased slowly but steadily in Jakarta. Limited new supply has meant that vacancy rates have remained in single-digit territory. As such, landlords of top-performing malls in good locations are in the enviable position of having waiting lists for prime units and some have been able to steadily increase rents.
• Jakarta’s large, growing population base and expanding middle class provide fundamental retail demand in Jakarta. With low vacancy and a solid demand base, many of the malls are already in place for strong growth in the prime retail sector. Rents crept up by 1.4% q-o-q (2.9% y-o-y).

Outlook: No new completions are expected in 2023

• After Senayan Park, there are no other new malls expected in the coming 12 months. For rental prices, there may be minor, single‑digit rental increments, although the dominance of the retail groups, and the fact that the tenants that are currently active are not necessarily the biggest payers, may limit rent growth despite high occupancy levels in the prime retail market.
• Demand is likely to remain strongest from the F&B segment, with entertainment playing a supporting role. Given the lack of supply, demand is expected to remain supply-driven and occupancy rates to remain healthy. Landlords that are able to adjust tenancy mix to match customer preferences are likely to be best placed to attract visitors.