1Q 2012 i PROPERTY MARKET report

retail sector

research & forecast report

Property Sector Overview

retail sector
A total of 247,456 sq m of retail space to be completed during all of 2012 has already been 81% pre-committed. Further 59% of the 129,200 sq m of retail space scheduled to be completed in 2013 has already previously been pre-committed. Similarly, in the cities surrounding Jakarta, 86% of total retail space of 93,000 sq m scheduled to be completed in 2012 has already been taken up. Both average asking base rental rates andoccupancy rates increased modestly in the last year, but we anticipate that both will grow at a faster pacethis year as retail space inventory grows moderately.

Supply
A retail centre located in Depok, Cimanggis Square, is the only new retail centre in 1Q 2012. This centre provides around 15,000 sq m of lettable retail space, which moved the cumulative figure for retail space slightly upwards to 5.97 million sq m. In Jakarta and greater areas (including cities like Bogor, Depok, Tangerang and Bekasi, formally abbreviated as Jabodetabek) more retail space is expected to flood onto the market. There will be 395,827 sq m of leasable retail space entering as new retail space in Jabodetabek during 2012. Retail space is growing not only from the development of new shopping centres, but also from the expansion of existing shopping centres. Three shopping centres in the greater Jakarta area are planning for expansion in response to the dynamic market. Citra Gran Mall is one example where they are expanding the space due to the growing residential market in the Cibubur area. Likewise, Plaza Cibubur, targeting lower-end shoppers, will also expand in response to growing demand. Lastly, Supermall Karawaci is also moving to enlarge their retail space.

annual supply of retail space in jakarta and greater jakarta

600,000 500,000 400,000 sq m 300,000 200,000 100,000 0 2000 2002 2004 2006 2011 2012F 1Q 2012 2014F 2008 2001 2005 2009 2003 2007 2010 2013F

Jakarta

Greater Jakarta
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jakarta | 1q 2012 | retail

jakarta supply

Retail Sector

No new retail centre is on-stream, and thus cumulative retail supply closed the quarter at 4.04 million sq m for the Jakarta area. Further, during the Y-o-Y period (1Q 2011 to 1Q 2012) there were only 81,663 sq m of retail space. Nevertheless, 2012 will see a significant influx of retail space. A total of 244,052 sq m of retail space will be contributed by three large centres, including Kota Kasablanka, Kemang Village and Ciputra World. Among the three centres, Kota Kasablanka will provide the largest retail space comprising 38% of the total retail supply for 2012. In Jakarta, there are only six shopping centres providing retail space of more than 100,000 sq m, and Kota Kasablanka is one of these. Other than the abovementioned, there are three more retail centres projected to future retail space in jakarta
200,000 150,000 100,000 50,000 0 CBD

begin operations in 2012, including Menteng Square, Pulomas XVenture and Pondok Indah Mall Street Gallery, which comprise a total of 38,775 sq m of retail space. Thus in total, there will be six new shopping centres during 2012, contributing 282,827 sq m of retail space. Supply is not only about new retail space, but also about the new look of existing retail space. Ciputra Mall, located in Jalan S. Parman and surrounded by new and fresh shopping centres like Central Park, is planning to rejuvenate their premises this year in order to retain their loyal visitors and tenants. Such renovation is needed after 19 years of operations and in view of the tough recent competition.

Central Jakarta South Jakarta North Jakarta 2012F 2013F

East Jakarta

West Jakarta

2014F
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FUTURE retail centers in jakarta

Development 2012 Kota Kasablanka Kemang Village Ciputra World Jakarta 1 Menteng Square Pulomas XVenture Pondok Indah Mall Street Gallery 2013 Cipinang Indah Mall The Baywalk @Green Bay Pluit St Moritz 2014 Mall @The City Center The Gateway Pondok Indah Mall 3

location Kasablanka Kemang Satrio Menteng Pulomas Pondok Indah Cipinang Pluit Puri Indah KH Mas Mansyur Pondok Gede Pondok Indah

region South Jakarta South Jakarta South Jakarta Central Jakarta East Jakarta South Jakarta East Jakarta North Jakarta West Jakarta Central Jakarta East Jakarta South Jakarta

nla (sq m)

status

110,000 Under Construction 56,052 Under Construction 78,000 Under Construction 4,475 Under Construction 25,200 Under Construction 9,100 Under Construction 20,000 Under Construction 52,000 Under Construction 57,200 Under Planning 35,000 Under Planning 10,000 Under Planning 40,000 Under Planning

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greater jakarta supply

Cimanggis Square was the only new retail centre officially opened in Depok in 1Q 2012. This retail centre is owned by Matahari Putra Prima (Lippo Group) and brings the overall retail space in the greater Jakarta area to 1.93 million sq m. Of this figure, around 38% and 31% of the space is situated in Tangerang and Bekasi respectively.

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retail space distribution in greater jakarta

Bekasi 31%

Bogor 17%

Depok 14%

Tangerang 38%
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In terms of area distribution, the existing retail supply in BoDeTaBek area is highly concentrated in Tangerang and Bekasi. Those areas represent 38% and 31% of the total stock. Following renovation, the Citra Gran Mall will be reopened in 2013 with a more appealing concept, and will represent a serious threat to the existing Cibubur Junction, which is so far the principal shopping destination for the Cibubur community. Still in the same street, Plaza Cibubur is also planning to expand to the backside of the existing building, adding a leasable area of about 2,000 sq m, and projected to finish in early 2013. Meanwhile, Supermall Karawaci in Tangerang is also planning to expand its leasable area to approximately 20,000 sq m. Other centres like Cibinong

Square, located in Bogor, are also considering expanding. The owner is thinking of extending their shopping area as they are currently holding sizeable vacant land. Overall, up to 2014 there will be 443,720 sq m of new retail space entering the market. For the remainder of 2012, the market expects to see the operation of the new Shopping Mall Alam Sutera and Mall Balekota, both of which are located in the Tangerang area. Meanwhile, two shopping centres projected to begin operations in 2013, i.e. Cibinong City Mall and Metropolitan Grand Mall, have started construction in line with the completion schedule.

future retail space in greater jakarta

200,000 150,000 100,000 50,000 0 Bogor 2012F Depok 2013F Tangerang 2014F
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Bekasi

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FUTURE retail centers in greater jakarta

Development 2012 Plaza Dua Raja Shopping Mall @Alam Sutera Mall Balekota 2013 Metropolitan Grand Mall Cibinong City Mall Citra Gran Mal (extension) Plaza Cibubur (extension) Cimandala City Trade Center Mal Harapan Indah The Breeze Sinar Mas Land Bekasi Junction Bekasi Trade Center 2 Urbana Cinere Bintaro Lifestyle Center 2014 Lippo Cikarang Citywalk (phase 2) Summarecon Bekasi (phase 1) Bekasi Bekasi Bekasi Bogor Bogor Depok Bogor Bekasi Bogor

location

nla (sq m)

status

20,000 Under Construction 68,000 Under Construction 25,000 Under Construction 40,000 Under Construction 30,000 Under Construction 26,000 Under Construction 2,000 Under Construction 30,000 In Planning 44,420 In Planning 24,300 In Planning 14,000 In Planning 30,000 In Planning 30,000 In Planning 15,000 In Planning 10,000 In Planning 35,000 In Planning

Tangerang Tangerang

Tangerang Bekasi Bekasi Depok Tangerang

*) Under Construction: where construction activity is in progress, including either foundation or superstructure. Under Planning: no contruction activities on site but all permits have been approved by the fovernment.

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Demand
Retail centres for lease in Jakarta are enjoying a good leasing performance in 1Q 2012, albeit with only a small increase, as occupancy levels registered at 89.6%. The North Jakarta area showed the highest demand growth at 4.7%, due in particular to the performance of Mall Kelapa Gading. Some of the leasing transactions were Toys Kingdom, which is going to start fitting-out work on around 600 sq m at Mall Artha Gading, and Informa, which expects to occupy around 2,000 sq m. Other than that, we also recorded leasing activities for F&B retailers at Pluit Junction, as well as Mall of Indonesia and Emporium, which continue to maintain increasing occupancy levels by obtaining new tenants in significant numbers. In Central Jakarta, Samsung, Minimal Fashion, Icon 99 and Fanco are new tenants at Gajah Mada Plaza. Despite being an old mall, this retail centre remained as a destination in the Gajah Mada area. In the upper class segment, Plaza Senayan filled up with new tenants like All Dress Up, Dunhill, Hermes Watch and Swatch. These two retail centres have helped bring down the vacancy levels in Central Jakarta to around 3.2%. In the West Jakarta area, Central Park Mall also helped the overall leasing performance in this area by having several new tenants open their retail outlets.

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In East Jakarta, Kramat Jati Indah is still being renovated, but a number of tenants are preparing to return to a better concept in the mall. XXI cinema will be occupying this shopping centre, and it will be the first XXI in East Jakarta.

In South Jakarta, food and beverages (F&B) retailers are quite actively expanding their outlets in several retail centres, along with other mini-anchors, to complement tenancy mainly in the newly operating malls.

list of new major tenants during 1Q 2012

retailers Metrox Store Informa Office One Toys Kingdom Informa Ace Hardware Eat n Eat Hypermart

line of business Footwear Home Furnishing Stationary Kids & Toys Home Furnishing Home Equipment Food and Beverage Hypermarket

size (sq m) 2,000 Kuningan City 2,000 Mall Artha Gading 500 Mall Artha Gading 600 Mall Artha Gading 1,200 Grand Paragon 1,200 Grand Paragon 2,000 Mal Ambasador 4,500 Cimanggis Square

location South Jakarta North Jakarta North Jakarta North Jakarta Central Jakarta Central Jakarta South Jakarta Depok

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list of new some tenants during 1Q 2012

retailers Coffee Bean Ming Chinese Outback Steak House Starbucks Tiramisu Keizia Samsung Minimal Fashion All Dress Up Dunhill Hermes Watch Swatch Roppan Payless Kingscobra Grand Duck King BMK BMK The Executive Et Cetera

line of business Food and Beverage Food and Beverage Food and Beverage Food and Beverage Food and Beverage Body Treatment Electronics Fashion Fashion Fashion Jewellery, Watches and Accessories Jewellery, Watches and Accessories Food and Beverage Footwear Hobbies Food and Beverage Food and Beverage Food and Beverage Fashion Fashion

size (sq m) 200 Kuningan City 200 Kuningan City 200 Kuningan City 170 Kuningan City 46 Slipi Jaya 60 Slipi Jaya 120 Gajah Mada Plaza 60 Gajah Mada Plaza 200 Plaza Senayan 200 Plaza Senayan 200 Plaza Senayan 200 Plaza Senayan 200 Plaza Semanggi 200 Pejaten Village 60 Pejaten Village 300 Cilandak Town Square 200 Bintaro Plaza 200 Depok Mall 200 Supermal Karawaci 200 Supermal Karawaci

location South Jakarta South Jakarta South Jakarta South Jakarta West Jakarta West Jakarta Central Jakarta Central Jakarta Central Jakarta Central Jakarta Central Jakarta Central Jakarta South Jakarta South Jakarta South Jakarta South Jakarta Tangerang Depok Tangerang Tangerang

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By contrast, there were also several termination cases during the reviewed quarter. The first case occurred in Pasaraya Grande, where they are now trying to deliver a new concept to accommodate and attract more visitors. This brings consequences for underperforming tenants who may pull out from their premises in order for the mall to become more competitive in the retail business. Similarly, this also happened to old shopping centres like Ratu Plaza, where the new owner demanded a better performance for the mall and introduced a fresher concept to entice new prospective tenants and to lure more visitors. Consequently, a number of tenants could leave their premises. The expansion of convenience stores has impacted those F&B retailers which leased food court area in a retail centre located around Pasar Baru. Such F&B retailers are seeing

fierce competition from convenience stores and decided to close down in order to save themselves from greater loss. This was not exclusive to local brands, as an international prominent burger restaurant has had to close their store in Pondok Indah Mall following their previous closure at Gandaria. Overall occupancy rates in greater Jakarta area rose modestly by 2% compared to the previous quarter, which registered at 86.3%. The strong performance of new retail centres such as Summarecon Mal Serpong 2, Tangerang City, Living World, Metropolitan Mall, Supermal Karawaci, Depok Mall, Teraskota and Margo City has helped contribute to the overall performance. Even the newly operating Cimanggis Square operates with two major tenants (of their own group) i.e. Hypermart and Matahari Department Store.

vacancy of retail space in jakarta and greater jakarta

40% 35% 30% 25% 20% 15% 10% 5% 0% 2005 2006 2007 2008 South Jakarta West Jakarta 2009 2010 2011 North Jakarta
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1Q 2012

Central Jakarta East Jakarta

Greater Jakarta

DEMAND FOR FUTURE RETAIL CENTRES

Up to the first quarter of 2012, the precommitted occupancy of future retail centres in Jakarta reached 80%, a reasonable increase of 3% compared to the previous quarter. Hypermart opens at Kemang Village, marking their soft launch in a mall located in the expatriate area of South Jakarta. Leaving around 10% of vacant space, Kemang Village is projected to begin operations in around 2Q or 3Q 2012. In the greater Jakarta area, Mall Balekota witnessed significant commitment from various tenants. Planning to open this year, this retail centre located around Tangerang Government Center has secured about a 50% leasing commitment from major tenants such as Hypermart, Matahari Department Store, Gramedia, Ace Hardware, Toys Kingdom, Electronic Solution, Informa, Golds Gym and XXI, while some food and beverages retailers comprise Burger King, Dominos Pizza and Starbucks.

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pre-commitment level during 2011 - 2013 jakarta area

Space Absorbed Annual Supply

bodetabek area
Space Absorbed Annual Supply

2013F

2013F

2012F

2012F

2011

2011

100,000 200,000 300,000 400,000

100,000 200,000 300,000 400,000

sq m

sq m
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list of new committed tenants in the operating shopping centres

Retailers
Toys Kingdom Ace Hardware Informa QQ Kopitiam

line of business
Kids & Toys Home Equipment Home Furnishing Food and Beverages

size (sq m)
600 1,800 2,600 200 Cibubur Square Cibubur Square Cibubur Square

location
East Jakarta East Jakarta East Jakarta Tangerang

date
4Q 2012 4Q 2012 4Q 2012 4Q 2012

Supermal Karawaci

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list of committed tenants in future shopping centres

shopping center
Jakarta Area Kuningan City Tebet Green Ciputra World Kemang Village

committed occupancy
90% 50% 100% 85%

major tenants

Lotte Mart (10,000 sq m), Gramedia, Best Denki, XXI, Electronic Superstore, Flame Karaoke, Lollipop Playland, Amazing Zone, Ace Hardware, (1,200 sq m), Jatomo Fitness, Metrox (2,000 sq m) Burger King, Starbucks, Warung Leko, Dominos Pizza, Steak 21, Sapo Oriental and Sago Kitchen, Ace Hardware (1,400 sq m) Lotte Department Store (6,000 sq m) Debenhams (17,500 sq m), Zara (1,500 sq m), Next Boutique (500 sq m), Marks & Spencer (1,000 sq m), Kidz Station, Starbucks, Burger King, Dominos Pizza, Hypermart (4,000 sq m), Ace Hardware (2,300 sq m), Fitness First, XXI, Chipmunks Playland and Cafe (1,500 sq m)

Kota Kasablanka

90%

Sogo (19,000 sq m), Ace Hardware (2,500 sq m), XXI, Electronic Solution, Kem Chicks, Carrefour (8,000 sq m), Informa (5,000 sq m), Toys Kingdom (1,100 sq m), Muji Store (400 sq m), Nautica, Marks & Spencer, Giordano, Jack Nicklaus, Family Karaoke, Charles & Keith, Sate Khas Senayan, Batik Keris, Planet Sport, Duck King, Rockport

St Moritz

80%

Debenhams (17,000 sq m), Zara, Next, Marks & Spencer, Kidz Station, Starbucks, Burger King, Dominos Pizza, Matahari, Hypermart, Electronic City, XXI, Ranch Market, Sea World Indonesia, Tony Romas, Kiyadon Sushi, The Coffee Bean, JCo

Cipinang Indah Mall The Baywalk @Green Bay Pluit

25% 50%

Carrefour (5,850 sq m) Ace Hardware, XXI, Farmers Market, Electronic Solution, Bandar Djakarta, Informa, Time Zone, Toys kingdom, Burger King, Optic Seis, Giordano continued Colliers International | p. 8

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continuation Greater Jakarta Area Living World Alam Sutera 85% Han Gang Korean Food, Sushimise, Steak 21, Canton Boy, Sate Khas Senayan, Ajisen Ramen, Kopitiam, Informa (30,000 sq m), Ace Hardware (15,000 sq m), Toys Kingdom, XXI, Gramedia, (1,200 sq m), Kampoeng Nelayan, Breadtalk, Hero Summarecon Mall Serpong 2 Shopping Mall @Alam Sutera 95% 90% Eat and Eat (1,500 sq m), Centro Department Store (10,000 sq m), Best Denki, Do It Best Pongs Home Center (3,000 sq m), Takigawa, Dante, Secret Recipe Sogo Department Store (10,000 sq m), The Food Hall (3,000 sq m), Funworld, Mango Farm, Gramedia (1,200 sq m), XXI, Chipmunks Playland & Cafe (2,100 sq m), Electronic Solution, Home Solution, Giant (5,000 sq m), Guardian Grand Metropolitan CitraGran Mall Mall Balekota 70% 75% 75% Centro, Farmers Market, Toys Kingdom, Funworld Sate Khas Senayan, Optik Melawai Matahari (10,000 sq m), Hypermart (6,000 sq m), Gramedia (1,200 sq m), Starbucks, Bengawan Solo Hypermart (7,300 sq m), Electronic Solution (4,500 sq m), Ace Hardware (1,000 sq m), Gramedia, Informa, XXI, Matahari (7,000 sq m), Toys Kingdom (2,000 sq m), Amazone (900 sq m)

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Rental Rates and Service Charge

rental rates
Thus far, the majority of landlords are still maintaining rental rates at the current levels because the overall retail market still needs some time to improve performance. However, some landlords are now strategising in order to gradually increase their rental rates. Remixing their tenants is one of the strategies, which includes changing the lesser performing tenants, and then inviting potential tenants which can pull crowds to the shopping centre, and then selling primary retail space at premium tariffs. Other strategies include renovating the appearance of the mall and improving facilities for visitors. These have been implemented by two shopping centres in the Blok M area, namely Pasaraya Grande and Blok M Plaza, which succeeded in offering their primary space at higher rates. Average rental rates in South Jakarta improved to Rp393,268/sq m/month, reflecting a minor growth of around 1%. Meanwhile, the average leasing tariff in East Jakarta only fetched Rp246,204/sq m/month, which was the lowest average rental rate compared to other regions in Jakarta. Central Jakarta, which is populated by high-end shopping centres like Plaza Indonesia, Plaza Senayan and Grand Indonesia, captured the highest average rates at Rp584,635/sq m/month. Overall, the average rental rate of retail for lease or malls (excluding strata-title/trade centres) during 1Q 2012 was Rp380,576/sq m/month. It was also noted that the average rental rate for retail for lease in greater Jakarta area was relatively stable at Rp247,723/sq m/month. However, two malls, in Tangerang and in Depok have anticipated price adjustments of 15% to 20% in their effort to upgrade tenancy and pull new tenants in to improve the performance of the mall. The mall in Depok is trying to reposition itself into a mall that focuses on higher income targets, and is therefore adjusting its rental rates.

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average asking rental rates of different class shopping centres in jakarta and greater jakarta
Rp700,000 Rp600,000 Rp500,000 Rp400,000 Rp300,000 Rp200,000 Rp100,000 Rp0 2005 Middle Upper 2006 Middle 2007 2008 Middle Low 2009 2010 Average 2011 1Q 2012

Greater Jakarta

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service charge
In the Jakarta area there were only minor changes on the operating costs per square metre where service charges stayed at Rp77,155/sq m/month, reflecting only a 3% increase q-o-q. The overall change was mainly attributed to two retail centres in Central and South Jakarta which decided to increase service charge costs after doing renovation work. In the greater Jakarta area, Teraskota (located in Tangerang) adjusted the service charge tariff and thus brought a slight increase to the overall service cost for the greater Jakarta area to Rp60,380/sq m/month.

average service charge of different class shopping centres in jakarta and greater jakarta
Rp120,000 Rp100,000 Rp80,000 Rp60,000 Rp40,000 Rp20,000 Rp0 2005 Middle Upper 2006 Middle 2007 2008 Middle Low 2009 2010 Average 2011 1Q 2012

Greater Jakarta

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Outlook
2012 will be a brisk period for retail business, highlighted by retailers business expansion and landlords efforts to deliver underconstruction projects on time due to precommitment agreements with tenants. In fact, several macro indicators suggest that the economy has a positive outlook. Further, domestic consumption and lifestyle shifts will be increasing, and these will be the key drivers for retail business growth. On the retailers side, several lines of business have reported enjoying surging profits from growing consumption. For example, Hero is a robust prospect as it acquired franchising licenses from Swedish home furnishing stores brand IKEA which will start in 2014. The attempt to bring in this well-known brand is aimed at growing middle and upper-middle customers which have been pampered by home furnishing retailers like Ace Hardware. Likewise, a subsidiary of South Korean retailer Lotte Group, Lotteria Co Ltd, will open more Lotteria fast food franchises in addition to their three retail outlets. This retailer will serve meals featuring organic food and expects to become one of the top three fast food restaurants in Indonesia by 2020. For some time now, branded products have benefitted from the improving standard of living of the middle class. Such a phenomenon continues to encourage more foreign retailers to expand their operations to Indonesia, as they endeavour to capitalise on the growth momentum. Thus, both retailers and consumers will propel the countrys retail markets. More business expansion by operating retailers, combined with the expanding business of overseas retailers will lead to lower levels of vacant retail space, and accordingly occupancy costs will head upwards. Given the solid performance of the retail business, vacancy levels are projected to fall further to less than 10% over the next two years in Jakarta.

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Over

COLLIERS INTERNATIONAL INDONESIA: World Trade Centre 10th & 14th floor Jalan Jenderal Sudirman Kav. 29 - 31 Jakarta 12920 Indonesia
tel 62 21 521 1400 FAX 62 21 521 1411

Michael Broomell Managing Director World Trade Centre 10th & 14th floor Jalan Jenderal Sudirman Kav. 29 - 31 Jakarta 12920 Indonesia tel 62 21 521 1400 ext 131 FAX 62 21 521 1411 Ferry Salanto Associate Director, Research World Trade Centre 10th & 14th floor Jalan Jenderal Sudirman Kav. 29 - 31 Jakarta 12920 Indonesia
tel 62 21 521 1400 ext 134 FAX 62 21 521 1411

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.

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