Business, Despite some optimism and efforts from governments worldwide to address the global downturn, the overall economic situation remains marked by uncertainties, as property investors maintain a *wait and see' attitude.
In these tough economic conditions, higher competition and limited fund availability will impact on retailer expansion and put pressure on rental rates.
Data from the first quarter of 2009 shows that the occupancy rate for the rental retail market in Jakarta is 85 percent, a 3 percent decrease from the last quarter. This is due to a number of new retail malls entering the market, with many tenants in various stages of fitting-out.
In strata title retail centers, the take up rate is continuing to fall, a trend since 2006. The occupancy rate for this sector during the first quarter 2009 is around 63 percent.
By and large however, the retail market sector remains resilient, underpinned by Jakarta's huge population and consumer spending.
Whilst a large number of retail projects have been constructed in recent years, the potential for more is still there in particular for well-planned sub regional and community developments that cater to the everyday needs of the communities they serve, within the wider urban sprawl, offering many opportunities for savvy developers.
These developments must provide a hub, a meeting place for the community, provide the right products and services and suit the individual target market needs and aspirations, within a modern, bright, family friendly environment.
However, for any developer to succeed in this current market, they must be willing to meet the retailers' requirements for softer terms and negotiate packages to attract retailers to the development.
The downturn in consumer spending, the tight monetary policies on bank finance and lending is creating cash flow and liquidity issues contributing to effects on retailer expansion strategies. Therefore, a flexible approach to negotiating commercial terms is imperative to close deals.
There are several approaches to flexible terms that will maintain the capital value of the property, yet make it easier for retailers to commit to leasing space.
Despite the demand for softer terms, retailers are now clearer on the type of malls in which they will consider opening branches. More retailers are adopting a wait and see approach to opening new stores based on the success of the mall, its location, the quality of the tenant mix and the management team.
Supply is still expected to remain high for the next two years despite some delays anticipated in construction schedules of several projects, it is estimated that there will be around 290,000 m2 of retail space entering the market in 2009-2010.
However, as some retailers are closing unprofitable shops due to decreasing consumption patterns, and reviewing territories for expansion strategies, this will contribute to the slowdown in absorption.
Recent economic updates indicating positive sentiment, underpinned by a stronger rupiah, have created conducive economic conditions, driving a stronger retail consumption pattern that will support a return to growth by the end of 2010, so that Jakarta's retail property market will back on track.
Whilst retailers are generally wary of committing to any development, given the downturn in consumption, the government can also assist in strategies to improve retail spending within Indonesia and this can be done with tourism incentives, both domestic and international.
Jakarta is one of the best kept secrets in the retail market in Asia. The city has a wonderful array of amazing shopping venues and malls with many international brands offering a range of merchandise at much lower prices than other nearby countries within the region.
A "Shop Jakarta" brand should be developed and marketed internationally using this as a vehicle to promote tourism in other areas of Indonesia other than Bali.
Similar projects have been done in Hong Kong, Singapore and Kuala Lumpur respectively, with great success.
The international future retail trend is away from mega malls to one stop community shopping centers in suburban areas, where ease of shopping, parking, and community lifestyle options are paramount.
People are veering away from large impersonal malls looking for a friendly, green environment with an emphasis on outdoor food and beverage and lifestyle venues.
For Indonesia, especially Jakarta, the trend is still to develop large one stop shopping malls, however, the consumer is becoming more conscious of the lack of green space available in the city, and more pressured by the traffic congestion and pollution and their affect on health.
Savvy developers in the future will provide true green parkland and outdoor spaces within the mall environment to cater to the needs of young educated families, who want to combine shopping with an outdoor activity attraction suited to the whole family.
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