Supply. research & forecast report RETAIL MARKET REPORT. 1Q 2013 i the knowledge. jakarta.

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1 1Q 2013 i the knowledge research & forecast report RETAIL MARKET REPORT Supply jakarta In 2013, up to 313,500 sq m of additional retail space will be added to the Jakarta retail market, when six new retail centres are completed (and in operation) after the first quarter of With no supply entered the market in first quarter 2013 will bring the cumulative retail space in Jakarta to a total of 4.15 million sq m. The opening of an additional three retail centres (that were forecast to be completed at the beginning of 2013) is likely to be rescheduled due to construction delays. The retail market continues to perform well, albeit with moderate price increase, with average asking base rental rates for all class shopping centres in Jakarta rising 3% QoQ to IDR468,084/ sq m/month. We anticipate a further increase in asking rental rates, given that the amount of retail space in the future will be quite limited (particularly in ). Of the total 313,500 sq m of space to be completed in 2013, 82% has already been booked. In 2014, there will be only 9,000 sq m of retail space completed but 53% has already been pre-committed. Similarly, of a total of 70,000 sq m projected to be added to the 2015 market, 32% has been reserved. The moratorium on new retail permits issued by the Jakarta municipality has affected future projections of retail space. In order to accommodate additional retail space, two existing retail centres in Jakarta will undergo extension works. Puri Indah Mall, located in West Jakarta, is extending its leasable space, which will be allocated to F&B. The other extension work in progress is at Mall Kelapa Gading 3. For both of these extension projects, construction works started in 2013, and are projected to be completed in Due to its size, the St. Moritz project has meant that West Jakarta has become the main contributor of retail space in Still in West Jakarta, 2014 will see an extension project at the existing Puri Indah Mall. Another extension in West Jakarta will occur in the existing Central Park Mall, which plans to be expanded to around 40,000 sq m in Further, the Pantai Indah Kapuk Mall in North Jakarta will offer mostly lifestyle and entertainment concepts. Meanwhile in South Jakarta, new retail space will support residential development in the Pancoran area. It will also offer the lifestyle concept with more F&B retailers, over the next couple of years. jakarta retail annual supply 600, ,000 s q m 400, , , , F 2014F 2015F 2016F The years 2005, 2008 and 2009 were the booming period for retail supply in Jakarta. After some declining years, total annual supply of retail space bounced back in 2012, and in 2013 total annual supply will reach 313,500 sq m. However, it is anticipated to drop significantly again, with only two mall extensions amounting to around 9,000 sq m. More space is anticipated to come in 2015, but again the area will be negligible considering that Jakarta will face a deficit supply of retail space from 2015 onward.

2 jakarta retail annual supply based on region Central Jakarta East Jakarta West Jakarta North Jakarta South Jakarta CBD 0 50, , , , , , , , YTD 2013F 2014F 2015F LIST OF future shopping centres in jakarta shopping centres name location Region nla (sq m) status 2013 Lotte Shopping Avenue Satrio CBD 78,000 Under Construction Pondok Indah Mall Street Gallery Pondok Indah South Jakarta 9,100 Under Construction Cipinang Indah Mall Cipinang East Jakarta 20,000 Under Construction Puliomas X Venture Pulomas East Jakarta 25,200 Under Construction The Bay Pluit Pluit North Jakarta 52,000 Under Construction St. Moritz Puri Indah West Jakarta 129,200 Under Construction 2014 Mal Puri Indah 2 (extension) Puri Indah West Jakarta 3,000 Under Construction Mal Kelapa Gading III (extension) Kelapa Gading North Jakarta 6,000 Under Construction 2015 Central Park Mall (extension) S. Parman West Jakarta 40,000 Planning Stage PIK Mall Pantai Indah Kapuk North Jakarta 30,000 Planning Stage bodetabek In the greater Jakarta area, known as BoDeTaBek (an abbreviation of surrounding cities of Jakarta including Bogor, Depok, Tangerang and Bekasi), all six of the retail projects to commence in 2013 are located in the Bekasi region. Two of these projects are to be completed within the quarter including the Bekasi Junction shopping centre (with a hyperstore from Korea as the anchor tenant) and the extension of Plaza Cibubur. These projects have brought the cumulative supply in the greater Jakarta area to 1.94 million sq m. Of this total supply, 39% is marketed as strata-title retail for sale. Bekasi Junction became the latest strata-title retail centre operating in the greater Jakarta area, after Tangerang City in After the completion of these two centres, the greater Jakarta area will see another 166,285 sq m of new retail space. Except for Bekasi, none of the other regions in the greater Jakarta area will provide new retail space during In 2014 however, all regions will have contributed new shopping centres totalling 220,300 sq m. Colliers International p. 2

3 Based on Area, Tangerang, with growth areas like Karawaci, Bintaro, Serpong and Alam Sutera, contributed 761,482 sq m of retail space, representing around 39% of the total retail stock in the greater Jakarta area. Bekasi is the most active region for new retail space provision this year, which amounts to a total of 607,249 sq m. Almost all new shopping centres projected to be completed during 2013 are located within densely populated residential areas, which are expected to become a given captive market for those shopping centres. Meanwhile in Depok and Bogor, only a few future shopping centres will be coming on line over the next two years. Cumulative retail space in Depok registered at 269,345 sq m, while in Bogor it remained at 299,154 sq m. bodetabek retail annual supply 600, ,000 s q m 400, , , , F 2014F 2015F 2016F AEON of Japan established PT. Aeonmall Indonesia founded a joint venture company with Sinarmas Land to build AEON Mall in BSD City, Tangerang, which is planned to open in This company has also confirmed their plans to build a shopping mall in Delta Mas, Bekasi, scheduled for completion in 2015 as part of their market penetration outside of Japan. bodetabek retail annual supply based on region Bekasi Tangerang Depok Bogor 0 100, , , , , YTD 2013F 2014F 2015F p. 3 Colliers International

4 LIST OF future shopping centres in bodetabek shopping centres name location Region nla (sq m) status 2013 Grand Galaxy Mall Bekasi Bekasi 23,000 Under Construction Bekasi Junction Bekasi Bekasi 42,000 Complete Grand Metropolitan Mall Kalimalang Bekasi 47,285 Under Construction Mall Ciputra Citra Gran Cibubur Bekasi 26,000 Under Construction Plaza Cibubur extension Cibubur Bekasi 2,000 Complete Summarecon Mall Bekasi Bekasi Bekasi 70,000 Under Construction 2014 Bintaro Xchange Bintaro Tangerang 45,000 Under Construction Lippo Cikarang Citywalk (phase 2) Cikarang Bekasi 10,000 Under Planning Cinere Bellevue Suite Cinere Depok 28,000 Under Construction The Breeze Sinar Mas Land Serpong Tangerang 24,300 Under Construction Cibinong City Mall Cibinong Bogor 40,000 Under Construction AEON Mall BSD City Serpong Tangerang 75,000 Under Planning 2015 Deltamas Mall Deltamas Bekasi Under Planning Demand jakarta retail occupancy rates based on grade 100% 80% 60% 40% 20% 0% Middle Upper Middle Middle Low Albeit moderate, the increasing trend for occupancy rates continued this quarter. Occupancy stood at 88.9%, which was a modest move up from 88.7%, compared to the previous quarter. With no new additional supply entering the market in 1Q 2013, occupancy levels remained relatively stable. Despite being lower than the other regions in Jakarta, the average occupancy level for South Jakarta achieved the highest QoQ growth, recording 86.5% in 1Q 2013, which is 2.38% higher than the previous quarter. Retail centres such as Pondok Indah Mall, Pejaten Village, Kalibata Mall, Shopping Mall Gandaria, Kota Kasablanka and Lippo Mall Kemang helped to stabilize the average occupancy level in South Jakarta. Colliers International p. 4

5 The East Jakarta region achieved an average occupancy rate of 92.67%. With limited new supply, occupancy levels were relatively stable. Plaza Kramat Jati, an old shopping centre, undertook renovation works to its exterior and rearranged its tenancy mix, which encouraged most of its tenants to commit. In the CBD area, which is populated by many in the middle- to upper-income brackets, retail centres reached occupancy rates of 91.7%, representing a slight increase compared to the previous quarter. Most prominent shopping malls within the CBD like Plaza Indonesia, Plaza Senayan, Senayan City, Grand Indonesia and Kuningan City continue to maintain their performance. Meanwhile, the average occupancy rates in other regions like West, Central and North Jakarta were down. Although occupancy is still recorded at above 90%, the average occupancy rates in West and Central Jakarta during 1Q 2013 were slightly lower than in the previous quarter. The occupancy rate in West Jakarta was recorded at 92.1%, while in Central Jakarta it registered at 93.7%. North Jakarta also noticed a modest declining trend, where occupancy was at 85.9% for this quarter. The overall upward trend in occupancy is insignificant when compared QoQ, because some retail centres also experienced a weakening occupancy rate. It has been identified that some shopping centres located in North, West and Central Jakarta experienced a slight downturn in occupancy. Evidently not all retailers will survive due to the level of competition. One notable café has had to close down, even though it is located in one of the preferred destination malls in Cilandak. In one of the CBD sub-markets, Jalan MH Thamrin, two malls experienced an increase in vacant space; with one having to release a well-known café, which will move to a luxury mall located in the SCBD area. The reason for the move is due to the fact that the café anticipated the redevelopment plans for the mall within which it was originally located (i.e. office building and high-rise residential). Meanwhile, due to lower traffic levels, the second mall will change its concept by replacing some under-performing tenants and inviting new F&B retailers to attract more crowds to the mall. bodetabek retail occupancy rates based on region 100% 80% 60% 40% 20% 0% Bogor Depok Tangerang Bekasi Average occupancy rates for all retail centers located in the greater Jakarta area registered at 85.7%, posing a relatively steady performance compared to last quarter. Almost all regions in the greater Jakarta area experienced a modest increase in occupancy, in particular Bekasi. Mega Bekasi and Bekasi Square are two retail centers that helped fuel a higher occupancy performance for Bekasi, with an influx of fashion and gadget-selling retailers. Meanwhile in Tangerang, three shopping centers, including Living World, Shopping Mall at Alam Sutera and Mall Balekota, had more new tenants which also helped maintain occupancy levels in Tangerang. Several pre-committed tenants have opened at Mall at Alam Sutera. In Depok, two retailers including Ace Hardware and D Cost opened at Depok Mall. p. 5 Colliers International

6 new foreign retailers Given a notable population and growing number of middle-income earners, a number of foreign retailers (mainly fashion retailers) are targeting the Indonesian market. In the 2Q 2013, a French department store, Gallery La Fayette, will open at Pacific Place Mall. Together with department store IROO, a Taiwanese fashion brand is also opening its first store in Indonesia. Another foreign department store from Thailand, Central Department Store, will open in Grand Indonesia around May A fashion and Swedish accessories retailer, H&M, will also open in Grand Indonesia and Pondok Indah Mall 1, in the near future. In addition to department stores and the fashion retailers, fitness centres also continue to expand their outlets in the region. After opening at Lippo Mall Kemang at the end of 2012, a fitness centre chain originating from the United Kingdom, Fitness First, will open two more outlets at other Lippo s malls. Initially, they will open at Pejaten Village in early 2013, and then in St. Moritz at the end of the year. Further, several foreign retailers will also invigorate the retail market in the capital city. Japanese clothing and accessories retailer, Uniqlo, has officially announced its plan to open a flagship store in Jakarta in mid-2013, hoping to benefit from the dynamic retail market in the city. The store is being touted as the second biggest in Southeast Asia. Another new brand aiming at this market is Penshoppe, a casualwear fashion outlet from the Philippines. They will be targeting Indonesian middle-income earners to further tap into the burgeoning youth market. Penshoppe itself has more than 300 stores in the Philippines as well as Saudi Arabia. pre-committed demand jakarta In Jakarta, the pre-committed occupancy level for newly completed and under-construction shopping centres throughout 2013 has been recorded somewhat high at 82%; about 257,000 sq m has been absorbed. Meanwhile, in the greater Jakarta area with 210,285 sq m of retail space projected to operate throughout 2013, the pre-committed level of absorption has been at the level of 71%. These numbers will further inflate, particularly in Jakarta given that retail space is relatively limited. In Jakarta, almost all new retail centres which will be completed this year have commitments from new tenants. Even for future projects like Pondok Indah Street Gallery (or Pondok Indah Mall 3), many new F&B tenants are already on the retailers waiting list for the mall that will be completed around May At Lotte Shopping Mall Avenue at Ciputra World Jakarta, the projects that will soon be completed in 2Q 2013 have confirmed leasing agreements with some new tenants to accompany the anchor, Lotte Department Store, including Ranch Market, Burger King, Cinema XXI, Gold s Gym, Hero Supermarket, Starbucks Café and Domino s Pizza. Meanwhile future shopping malls in West Jakarta (i.e. St Moritz at Puri Indah and The Baywalk at Green Bay Pluit) have reported10% and 20% vacancy levels respectively. pre-commitment level in jakarta retail F 2014F 2015F 0 30,000 60,000 90, , , , , , , , ,000 Absorbed Supply s q m Colliers International p. 6

7 LIST OF new significant tenants in existing shopping centers retailers kind of business size (sq m) shopping centres name region when H&M Fashion and Accesories 1,700 Pondok Indah Mall South Jakarta 2Q 2013 Electronic Solutions Home Appliances Kalibata Mall South Jakarta 2013 Fitness First Lifestyle and Entertainment 1,436 Pejaten Village South Jakarta 1Q 2013 Ace Hardware Home Furnishing 3,500 Depok Mall Depok 2013 debotabek In the greater Jakarta area, some malls have secured anchor tenants, which are expected to lure other smaller tenants. Bekasi Junction has Lotte Mart as their main tenant, while the totally refurbished and extended Citra Grand Mall will have Hypermart, Matahari, Farmers Market and Gramedia as their anchor tenant. pre-commitment level in debotabek retail F 2014F 2015F 0 20,000 40,000 60,000 80, , , , , , , ,000 Absorbed (sq m) Supply (sq m) s q m Rental Rates and Service Charge rental rates In 1Q 2013, rental rates per square meter per month in Jakarta were recorded at IDR468,084. This represents a slight increase by 3% QoQ, while YoY this suggests a 21% climb. Despite being small, the increasing pegged rate also influenced the overall rental rate in Jakarta this quarter. Overall, landlords are generally maintaining their current rental rates, given a steady level of inquiries for retail space in Jakarta. Further, some projects with high occupancy are asking for higher rates, primarily for prime space locations. Meanwhile, the average rental rate in the greater Jakarta area was relatively stable at IDR263,377/sq m/month. Colliers International p. 7

8 rental rates in jakarta (based on grade) and bodetabek IDR 800,000 IDR 700,000 IDR 600,000 IDR 500,000 IDR 400,000 IDR 300,000 IDR 200,000 IDR 100,000 IDR 0 Middle Upper Middle Middle Low Average BoDeTaBek pegged rates adjustment in jakarta IDR 8,000 IDR 7,750 IDR 7,500 IDR 7,250 IDR 7,000 IDR 6,750 IDR 6,500 service charge Additional to the Government s minimum wage policy, which will increase operating costs, its plan to also increase electricity tariffs will pose a major impediment to retail operators, because it will affect an increase in overall rental costs. The electricity tariff alone is a major component of the total operational cost, contributing about 40%. Since early 2013, the Government decided to gradually increase electricity tariffs quarterly, both for households and industry. For industry using of above 200 KVA, the basic electricity tariff is estimated to climb by around 20% up to the end of Although the increases in electricity charges and the minimum wage have not yet entirely been implemented, some retail centres located in Pondok Indah, Blok M, Pejaten and Cilandak within South Jakarta have already increased their service charge by 25%, on average. In West Jakarta, three retail centres located in Puri Indah and Slipi have also raised their charge by 26%, on average, while two shopping centres located in the CBD increased theirs by 8%. In this quarter, the average service charge for shopping centres in Jakarta climbed by 5% QoQ to reach IDR85182 per sq m per month. While for the greater Jakarta area, service charges were only up slightly at IDR62,821 per sq m per month. It is anticipated that shopping centre operators will adjust their overall service charge costs in mid p. 8 Colliers International

9 jakarta 1q 2013 industrial estate service charge in jakarta and bodetabek IDR 90,000 IDR 85,000 IDR 80,000 IDR 75,000 IDR 70,000 IDR 65,000 IDR 60,000 IDR 55,000 IDR 50,000 IDR 45,000 Jakarta BoDeTaBek 482 offices in 62 countries on 6 continents United States: 140 Canada: 42 Latin America: 20 Asia Pacific: 195 EMEA: 85 $2 billion in annual revenue square meter under management Over 13,500 professionals Outlook The growing number of middle-income consumers has been the main attraction for retailers opening stores in Indonesia, not to mention the influx of foreign retailers. Quite a few big retailers in their respective countries perceive Indonesia to be an important market. Big fashion retailers are the most active retailers penetrating this market. On the supply front, assuming that there will be continued growth in the economy, the next two years will be an unfavourable time for retailers to expand, given the scarcity in retail space during that period. Thus far, there is no official announcement on new projects, suggesting that finding new retail space will be challenging in Consequently, rents are expected to move up, reflecting the limited stock of retail space. This year alone will already be a difficult period for retailers, primarily because of the increases in electricity tariffs and new minimum wages regulations, which will translate into higher operational tariffs in shopping centres. COLLIERS INTERNATIONAL INDONESIA: World Trade Centre 10th & 14th floor Jalan Jenderal Sudirman Kav Jakarta Indonesia tel FAX Michael Broomell Managing Director World Trade Centre 10th & 14th floor Jalan Jenderal Sudirman Kav Jakarta Indonesia tel ext 131 FAX Ferry Salanto Associate Director, Research World Trade Centre 10th & 14th floor Jalan Jenderal Sudirman Kav Jakarta Indonesia tel ext 134 FAX Ferry.Salanto@colliers.com Copyright 2012 Colliers International The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has bee 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.