JAKARTA & GREATER JAKARTA RETAIL MARKET

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1 COLLIERS QUARTERLY RETAIL JAKARTA Q OCTOBER 2018 JAKARTA & GREATER JAKARTA RETAIL MARKET Summary & Recommendations Typical stores and those following the supermarket concept (smaller than anchor tenants) are predicted to become quite expansive as they open in shopping malls. They might replace and fill up the spaces left by hyper stores and department stores. Shopping centres will continue to benefit from the expansion of F&B retailers in pulling in crowds of people to the centre, as well as grow offline fashion retailers that still attract customers and visitors. On the other hand, we also see a shifting model in F&B retailers. They have begun occupying stand-alone stores or shop houses due to flexible time operations and more competitive rents. The phenomenon of the closure of several anchor stores in the US is likely to also happen in Indonesia. We opine that the traditional store concept has to run efficiently by utilizing digital technology, such as shifting from traditional newspapers to social media and other digital means. With a goal to also maintain the fresh look of the premises, a regular assessment on the tenancy is needed for at least every three years, particularly in this fast-changing and dynamic business environment. In the operation side, F&B retailers could reduce investment in human capital by applying a self-service concept to consumers/visitors, which is now commonly observed when saving operational costs. Demand Supply Vacancy Rent Service Charge > Big stores, such as department stores and hyper stores, are anticipated to become obsolete for modern shopping centres in the next few years. Landlords are prone to accommodate more portions for specialty stores within shopping centres. In the meantime, F&B retailers will continue to be the most active type of tenants that will continue their rapid expansion in Jakarta and the greater area. > Approximately 206,000 sq m of new retail spaces will be available in Jakarta and the greater area by the end of It is estimated that there will be additional 180,000 sq m retail spaces per annum from 2019 to Cumulative supply in Jakarta and the greater area (JaBoDeTaBek) is projected to reach 8 million sq m in > We expect occupancy rates in Jakarta to remain stable at 83-84% in The occupancy performance will be much challenged by future supply projections in , which will bring down occupancy to 77% in Likewise, the influx of retail spaces will greatly affect the occupancy in greater Jakarta area. Occupancy rate is forecasted to drop to 78% by the end of 2018, a decline by almost 5% compared to Q A moderate addition of future retail spaces will likely assist occupancy to rebound in 2019 and will stay relatively stable at 81% up to > Rents will likely remain stable by the end of 2018, both in Jakarta and the greater area. We anticipate a modest growth in rental projection of 4-5% from the end 2018 to In the greater Jakarta area, we expect a slightly higher increment in rental tariff by 5-6% for the same period as above > Service charge is estimated to climb % at the end of 2018, compared to that in Q Much of the service charge projection in Jakarta in of 6% is mainly attributed to the overall calculation, as a result of the new influx of shopping centres in that period. Similar growth will be shown in greater Jakarta area when projected service charges increase by 2.5-3% QOQ (by the end of 2018). Furthermore, service charges will grow 19.6% in 2021, as compared to the end of 2018 Note: *) Jakarta; **)Greater Jakarta Q ,573 sq m* -3,191 sq m** 0 sq m* 0 sq m** Full Year ,193 sq m* 28,093 sq m** 60,000 sq m* 146,000 sq m** E Annual Average 45,627 sq m* 207,620 sq m** 0%* 0%** 1.3%* & 5.7%** 7.3%* & 7.4%** 114,920 sq m* 66,562 sq m** 0.4%* & 0.2%** -0.3%* & 3.5%** 6.9%* & -2.4%** 83.5%* 83.1%** IDR367,947* IDR226,319** 83.9%* 78.5%** IDR367,947* IDR226,319** 4%* -1.2** IDR mio* IDR mio** 77%* 80.9%** 0.4%* & 0.2%** -0.3%* & 3.5%** 6.9%* & -2.4%** 0.5%* -1.4%** IDR135,011* IDR ** 6.3%* 6.5%** IDR165,004* IDR **

2 Jakarta Supply Cumulative Retail Supply in Jakarta Based on Marketing Scheme concentrated. We expect to see more small retail centres (commonly below 10,000 sq m) as part of integrated facilities of public transportation networks, such as the MRT and LRT. The concept of small retail centres as supporting facilities has already been adopted in some commercial and residential locations in Jakarta. Occupancy Occupancy Rates Based on Area in Jakarta The absence of new shopping centres in operation continues, bringing yearto-date supply to remain unchanged. For the last three quarters of 2018, cumulative supply in Jakarta has stayed at 4.65 million sq m as of Q Similarly, we did not record any new retail project in Jakarta. The only supply in the pipeline for 2018 will be in operation in Q4 and that should be the only supply throughout the year. The shopping centre concept will continue to evolve and transform. Retail centres with al fresco dining will be increasingly in demand. One of the retail centres in the BSD integrates several stores with open spaces circulation and is quite well-accepted. The next shift in transportation, such as the MRT and LRT, has also changed the general retail concept, from being the centre of destination, to just supporting facilities in connection hub areas where a crowd of people is Occupancy in Jakarta has been quite stagnant for the last 12 months. The QOQ change was slight by less than 1% this Q3 to register 83.5%, leaving around 520,000 sq m of vacant spaces. Several malls in Jakarta continue to make improvements, especially in the tenant composition. The general practice is to reduce spaces commonly occupied by anchor tenants and replacing them with fashion and F&B retailers to make a mall more attractive. Average occupancy in the CBD dropped by 2.1% QOQ to 85.2% in Q This is the fourth time that occupancy rates in the CBD showed a declining trend, which is partly due to spaces that are non-operating or suspended because of partial renovation. Plaza Senayan, Senayan City, Pacific Place and 2

3 Grand Indonesia are some upper class malls in the CBD that are being refreshed with a new tenancy mix for the last year. The occupancy rate outside the CBD area hovered at 83% in Q2 and Q Currently, 85% of the total vacant spaces mentioned earlier were contributed by shopping centres outside the CBD. Occupancy rates in East Jakarta experienced the highest growth due to the robust performance of two newly operating malls. By mall grade, upper class shopping centres have maintained their average occupancy at 90% for the last five years. Various F&B and fashion retailers continue to be demand generators for shopping centres in Jakarta. Zara, Uniqlo and H&M for instance, these branded retailers will continue to expand with more stores, of which some will be opened at shopping centres in the CBD. Flix Cinema will occupy the largest mall in North Jakarta, whilst F&B will expand to search for spaces ranging from 300 sq m to 500 sq m. Rents Until Q3 2018, landlords maintain their rental tariffs, bringing the average rents to stay at IDR 617,920/sq m/month. Service Charges Average Service Charges in Jakarta Average Asking Rents in Jakarta Most of the landlords maintained and stabilised their service charges in To date, average service charges remain at IDR135,511/sq m/month as of Q

4 Greater Jakarta (Bogor, Depok, Tangerang, Bekasi) Supply Cumulative Retail Supply in Greater Jakarta Occupancy Occupancy Average Occupancy in Greater Jakarta Without new shopping centres in operation, total retail spaces in the greater area remained at 2.55 million sq m in as at Q The market is anticipating three new shopping centres in the southern area outside Jakarta that are now in the final stage of construction and expected to meet completion simultaneously at the end of These three will add 146,000 sq m of retail spaces and will bring the total retail supply to 2.69 million sq m by the end of 2018, a 5.7% growth compared to that in Q After having adjusted up by 1% last quarter, the average occupancy rate stays relatively flat at 83.2% in Q in the greater area. The leasing activity at the existing malls was not much. However, future shopping centres scheduled for operation in Q have secured some committed tenants. Nonetheless, the overall occupancy performance will still foresee a declining trend of 3-4% at the end of 2018, given the amount of additional retail spaces is not aligned with the volume of space being absorbed. 4

5 Rents Average Rental Rates in Greater Jakarta Area (in IDR/sq m/month) Service Charges Service Charges in Greater Jakarta (in IDR/sq m/month) The short-term growth in occupancy rate in 2018 does not seem to provide adequate basis to justify higher rental adjustment. The average rental rate was currently at IDR386,253/sq m/month in Q3 2018, almost unchanged compared to that in The QOQ change in service charge in the greater Jakarta area showed a higher growth compared to that in Jakarta, showing an overall increase of 1.4% to record IDR105,984/sq m/month as of Q The QOQ service charge growth was contributed by less than 20% of the existing shopping centres in the greater area. Most of these shopping centres raised their service charges starting from IDR2,000 to IDR5,000/sq m/month. 5

6 Primary Authors: Eko Arfianto Senior Manager Research Indonesia For further information, please contact: Ferry Salanto Senior Associate Director Research Indonesia About Colliers International Group Inc. Colliers International Group Inc. (NASDAQ: CIGI) (TSX: CIGI) is a top tier global real estate services and investment management company operating in 69 countries with a workforce of more than 12,000 professionals. Colliers is the fastest-growing publicly listed global real estate services and investment management company, with 2017 corporate revenues of $2.3 billion ($2.7 billion including affiliates). With an enterprising culture and significant employee ownership and control, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide, and through its investment management services platform, has more than $20 billion of assets under management from the world s most respected institutional real estate investors. Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice to accelerate the success of its clients. Colliers has been ranked among the top 100 global outsourcing firms by the International Association of Outsourcing Professionals for 13 consecutive years, more than any other real estate services firm. Colliers is ranked the number one property manager in the world by Commercial Property Executive for two years in a row. Colliers is led by an experienced leadership team with significant equity ownership and a proven record of delivering more than 20% annualized returns for shareholders, over more than 20 years. For the latest news from Colliers, visit our website or follow us on

7 COLLIERS QUARTERLY RETAIL JAKARTA Q OCTOBER 2018 JAKARTA & GREATER JAKARTA RETAIL MARKET - APPENDIX Jakarta Supply From Q to 2021, retail spaces in Jakarta will only grow with the six additional shopping centres with a total of around 400,000 sq m, bringing the cumulative retail supply in Jakarta to 5.05 million sq m in Total Retail Spaces by Region in Jakarta Occupancy Occupancy Rates in the CBD by Mall Grade Premium 94.6% 94.6% 91.3% -3.3% -3.3% Middle Upper 88.8% 87.8% 89.8% 2.1% 1.0% Middle 82.8% 84.2% 81.8% -2.4% -1.0% Middle Lower 74.5% 76.2% 75.8% -0.4% 1.2% Occupancy Rates in Outside the CBD by Area South Jakarta* 87.3% 87.1% 87.0% -0.1% -0.3% Central Jakarta* 68.8% 68.7% 68.9% 0.2% 0.0% North Jakarta 86.7% 86.7% 87.0% 0.2% 0.3% West Jakarta 81.0% 81.3% 80.9% -0.4% -0.2% East Jakarta 72.6% 75.4% 78.1% 2.7% 5.5% *excluding the CBD

8 New Pipeline Shopping Center Location Region NLA (sq m) Developer Development Status 2018 New Harco Plaza Glodok West Jakarta 60,000 Wahana Sentra Sejati (Agung Podomoro Land) Under Construction 2019 Holland Village Mall Cempaka Putih Central Jakarta 56,000 Lippo Karawaci Tbk Under Construction Shopping Mall at South Gate Lenteng Agung South Jakarta 39,200 Sinarmas Land & Aeon Under Construction 2020 Menara Jakarta Shopping Mall Kemayoran Central Jakarta 151,560 Agung Sedayu Permai Under Construction Pondok Indah Mall 3 Pondok Indah South Jakarta 70,000 PT Metropolitan Kentjana In Planning 2021 Daan Mogot City Daan Mogot West Jakarta 28,000 China Harbor In Planning Newly Committed Tenants (above 1,000 sq m) at Shopping Centre Retailer Name Occupied Space (sq m) Retailer Category Shopping Centre Name Area Expected Operation Uniqlo 2,500 Fashion Senayan City Central Jakarta 2018 Flix Cinema 4,500 Cinema Mall of Indonesia North Jakarta 2018 Zara 1,500 Fashion Plaza Senayan Central Jakarta 2018 H&M 4,100 Fashion Plaza Indonesia Central Jakarta 2018 Transmart Carrefour 5,000 Supermarket Cijantung Mall East Jakarta

9 Rents Asking Base Rents by Mall Grades in the CBD (in IDR/sq m/month) Premium 1,416,404 1,416,404 1,416, % 0.0% Middle-Up 769, , , % 1.7% Middle 453, , , % 1.9% Middle Low 282, , , % 0.0% Asking Base Rents by Area in Outside the CBD (in IDR/sq m/month) South Jakarta 624, , , % 2.7% Central Jakarta 367, , , % 5.4% North Jakarta 478, , , % 0.0% West Jakarta 599, , , % 0.0% East Jakarta 373, , , % 0.0% Service Charges Asking Service Charges by Mall Grades in the CBD (in IDR/sq m/month) Premium 203, , , % 1.3% Middle-Up 152, , , % 1.4% Middle 121, , , % 1.0% Middle Low 87,667 87,667 87, % 0.0% Asking Service Charges by Area in Outside the CBD (in IDR/sq m/month) South Jakarta 624, , , % 2.7% Central Jakarta 367, , , % 5.4% North Jakarta 478, , , % 0.0% West Jakarta 599, , , % 0.0% East Jakarta 373, , , % 0.0% 3

10 Greater Jakarta (Bogor, Depok, Tangerang, Bekasi) Supply The growing retail business in the greater Jakarta area will provide additional 200,000 sq m of retail spaces that will be contributed by four shopping centres in Most of these shopping centres are currently under construction. Total Retail Spaces by Region Occupancy Average Occupancy by Region in Greater Jakarta Bogor 83.6% 84.8% 84.9% 0.0% 1.2% Depok 88.9% 89.1% 87.4% 1.8% 1.5% Tangerang 81.3% 83.0% 82.8% 0.2% 1.5% Bekasi 79.7% 81.4% 81.6% 0.2% 1.9% Occupancy Average Rents by Region in Greater Jakarta (in IDR/sq m/month) Bogor 360, , , % 0.0% Depok 351, , , % 0.0% Tangerang 420, , , % 1.8% Bekasi 373, , , % 0.0% 4

11 New Pipeline Shopping Center Location Region NLA (sq m) Developer Development Status 2018 Galeria Mall Vivo Sentul (Cimandala City) Cibinong Bogor 35,000 Megapolitan Under Construction AEON Mall Sentul City Sentul Bogor 71,000 AEON & Sentul City Under Construction Pesona Square Shopping Mall Juanda Depok 40,000 Menara Depok Asri Under Construction 2019 Grand Dhika City Mall Bekasi Bekasi 24,000 Adhi Persada Property Under Construction 2020 Plaza Indonesia Jababeka Cikarang Bekasi 55,685 Plaza Indonesia Realty & Graha Buana Cikarang Under Construction 2021 Mall at Transpark Cibubur Cibubur Depok 30,000 Transcorp Under Construction AEON Mall Deltamas Deltamas Bekasi 90,000 AEON & Deltamas In Planning 5

12 COLLIERS QUARTERLY SECTOR MARKET Q DD MMMMMM 2018 Committed Tenants at Future Shopping Centres with Spaces Occupied Starting from 1,000 sq m Retailer Name Occupied Space (sq m) Retailer Category Shopping Centre Name Area Expected Operation H&M 2,000 Fashion Grand Galaxy Bekasi 2018 ACE Hardware 2,000 Home Furnishing Revo Town Bekasi 2019 H&M 2,000 Fashion Pesona Square Depok 2019 Uniqlo 2,500 Fashion Pesona Square Depok 2019 Cinema XXI 4,000 Cinema Pesona Square Depok 2019 Decathlon 6,000 Sports Equipment Summarecon Mall Bekasi Bekasi 2019 Service Charges Service Charge by Region in Greater Jakarta (in IDR/sq m/month) Bogor 106, , , % 12.7% Depok 95,841 96,339 89, % -7.1% Tangerang 99, , , % 3.2% Bekasi 108, , , % 0.8% 6

13 Primary Authors: Eko Arfianto Senior Manager Research Indonesia For further information, please contact: Ferry Salanto Senior Associate Director Research Indonesia About Colliers International Group Inc. Colliers International Group Inc. (NASDAQ: CIGI) (TSX: CIGI) is a top tier global real estate services and investment management company operating in 69 countries with a workforce of more than 12,000 professionals. Colliers is the fastest-growing publicly listed global real estate services and investment management company, with 2017 corporate revenues of $2.3 billion ($2.7 billion including affiliates). With an enterprising culture and significant employee ownership and control, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide, and through its investment management services platform, has more than $20 billion of assets under management from the world s most respected institutional real estate investors. Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice to accelerate the success of its clients. Colliers has been ranked among the top 100 global outsourcing firms by the International Association of Outsourcing Professionals for 13 consecutive years, more than any other real estate services firm. Colliers is ranked the number one property manager in the world by Commercial Property Executive for two years in a row. Colliers is led by an experienced leadership team with significant equity ownership and a proven record of delivering more than 20% annualized returns for shareholders, over more than 20 years. For the latest news from Colliers, visit our website or follow us on