Research & Forecast Report I Retail

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“Limited new retail supply in DKI Jakarta brought the After the start of operations of Baywalk Mall, which is located occupancy rate up 2% to 89.3%. In contrast, the greater within the Complex, Jakarta saw little new retail Jakarta area outside DKI Jakarta registered a slight decline space provided from the extension projects at Mall Puri Indah in occupancy to 82% due to the opening of two new retail (around 3,000 sq m) and Mall (around 6,000 sq centers. In the meantime, the average asking base rental m). These extended spaces are designed as F&B areas. With rate in Jakarta climbed by 3.3% q-o-q to IDR491,675 / sq m the small addition, the Jakarta retail cumulative supply moved / month. Similarly in the greater Jakarta area, the average upward to 4.32 million sq m as of 1Q 2014. Of this, 2.86 million sq asking base rent moved to IDR302,618 / sq m / month, m or 66.3% was marketed for lease. representing a 9.2% increase compared to last quarter.” Historically, after growing by 10% and bringing huge supply to - Ferry Salanto, Associate Director | Research the market in 2009, the annual growth of supply of retail space in Jakarta began weakening. From 2010 to 2013, the average growth was only 3.6% per year. In 2014, the growth of supply for shopping centres in Jakarta will continue declining. Although St RETAIL SECTOR Moritz is a huge mall expected to enter the market, overall, the total additional supply is only 138,200 sq m. Comparing year-on- Supply year (YoY), the cumulative supply will only grow by 3.2%. Based on construction progress, seemingly St Moritz will be Jakarta ready in late 2014. Two shopping centres belonging to Agung Podomoro Land (APL), Central Park Extension and Shopping Jakarta Retail Cumulative Supply Mall at Pancoran are also pursuing progress to reach their Based on Marketing Scheme completion. Those shopping centres, together with Pantai Indah Kapuk Mall and Pulo Gadung extension, are expected to enter 3,500,000 the market in 2015. 3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F 2014YTD for Lease for Sale

Source: Colliers International - Research Again, a moratorium issue is expected to direct future shopping Jakarta Retail Future Supply - Based on Region centre developments to other areas besides Central and including the Central Business District (CBD). Development of shopping centres within townships continue. AEON Mall Indonesia has become one of the developers trying to take advantage of this opportunity. Last year, AEON confirmed the development of their second mall in Indonesia. This mall, which will be located within Jakarta Garden City in East Jakarta, is scheduled to begin operations in early 2016 and provide approximately 90,000 sq m of leasable area. With additional retail space from AEON Mall Jakarta Garden South Jakarta City, the total supply for future shopping centres in Jakarta is projected to be 462,200 sq m from 2014 to 2016. These projected numbers will also bring the cumulative supply for shopping centres in Jakarta close to 5 million sq m in 2016. CBD Additionally, in North Jakarta, which is actually known as a trading area, a big developer (Agung Sedayu) will also develop 0 50,000 100,000 150,000 200,000 250,000 300,000 a shopping centre in Pantai Indah Kapuk. Attracting a number of visitors from the surrounding areas is expected to become the 2014F 2015F 2016F way to avoid competition with other existing shopping centres, Source: Colliers International Indonesia - Research especially those located around Pluit.

New Supply Pipeline in Jakarta

shopping centers location region NLA (sq m) Status

2014

St. Moritz Puri Indah West Jakarta 129,200 Under Construction

2015

Central Park Mall Extension Slipi West Jakarta 40,000 Under Construction Pantai Indah Kapuk Mall Pantai Indah Kapuk North Jakarta 30,000 Under Construction @Pancoran Pancoran South Jakarta 8,000 Under Construction Pulo Gadung Trade Center extension Pulo Gadung East Jakarta 10,000 In Planning

2016

Mal Puri Indah 2 Puri Indah West Jakarta 75,000 In Planning Holland Village Mall Central Jakarta 40,000 In Planning Grand Cipulir Cipulir South Jakarta 40,000 In Planning AEON Mall Garden City East Jakarta 90,000 In Planning Source: Colliers International Indonesia - Research

2 Research & Forecast Report | 1Q 2014 | Retail | Colliers International Greater Jakarta Area (BoDeTaBek - Despite continuing, the growth of supply in BoDeTaBek during 2014 is forecast to be lower than the previous year. After BXc , Depok, , ) Mall, the market expects to see two shopping centres that will Greater Jakarta Retail Cumulative Supply begin operations during 2014, i.e. AEON Mall BSD City and Cinere Bellevue Suites Mall. Based on Marketing Scheme AEON Mall BSD City, a joint venture project between Sinarmas 4,000,000 Land and AEON Mall, is expected to begin operations by the end of 2014. Seemingly, this mall be completed by its projected date. 3,500,000 As an indication, the mall’s construction that started at the end 3,000,000 of 2013 still shows progress in line with the initial plan.

2,500,000 AEON MALL Indonesia is projected to be the most active mall developer in BoDeTaBek from 2014 to 2017. In addition to BSD 2,000,000 and Deltamas (Bekasi), AEON Mall is also planning to develop 1,500,000 another shopping centre in Cibinong (Bogor).

1,000,000 Greater Jakarta Retail Cumulative Supply 500,000 Based on Regions 0 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F Bekasi 2014YTD

for Lease for Sale

Source: Colliers International Indonesia - Research Tangerang A new shopping centre, Bintaro Jaya Xchange Mall, began operations in Tangerang in 1Q 2014. The mall, which is known as BXc Mall, combines the family and lifestyle mall concept. This Depok mall is part of a mixed-use project that in addition to the lifestyle centre mall, also provides an office tower, apartments and convention hall on 25 ha of land. Located on the side of Bintaro – Pondok Indah toll road, this mall brought 45,000 sq m of new Bogor supply into the market and brought the cumulative supply to 2.24 million sq m in BoDeTaBek. 0 50,000 100,000 150,000 200,000 250,000 300,000 As reported earlier, huge supply entered the Outside Jakarta 2014F 2015F 2016F 2017F market and recorded significant growth of 13.9% YoY in 2013. Source: Colliers International Indonesia - Research

New Supply Pipeline in Greater Jakarta

shopping centers location region NLA (sq m) Status

2014

Cinere Bellevue Suites Mall Cinere Depok 28,000 Under Construction AEON Mall BSD City Serpong Tangerang 75,000 Under Construction

2015

AEON Mall Deltamas Deltamas Bekasi 21,000 In Planning Cimandala City Mall Cimandala Bogor 60,000 In Planning Jababeka Bekasi 20,000 In Planning continued

3 Research & Forecast Report | 1Q 2014 | Retail | Colliers International shopping centers location region NLA (sq m) Status continuation

2016

Bekasi Trade Center 2 Bulak Kapal Bekasi 56,000 Under Planning Living World Jababeka Jababeka Cikarang 18,000 Under Planning Grand Dadap Mall Dadap Tangerang 20,000 Under Construction AEON Mall Bogor Cibinong Bogor 20,000 Under Planning Source: Colliers International Indonesia - Research Comparison of Annual Retail Supply in Jakarta and Annual Supply, Demand and Occupancy BoDeTaBek During 2008 - 2017 in 2008 - 2014 YTD

500,000 100% 600,000

95% 500,000 400,000

400,000 90% 300,000

300,000 85% 200,000 200,000 80%

100,000 100,000 75%

0 0 70% 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2014YTD 2014YTD

Jakarta BoDeTaBek Annual Supply Annual Demand Occupancy

Source: Colliers International Indonesia - Research Source: Colliers International Indonesia - Research

The occupancy rate for lower-class shopping centres (middle Demand and middle-low) was relatively stable at 86 - 87%. Shopping centres in North Jakarta and the central business district (CBD) recorded the highest growth of 3% QoQ. In the Jakarta CBD, entering its second year of operation, Lotte Shopping Sluggish growth of retail supply began to have a positive effect on Avenue made a significant improvement by having the least demand in Jakarta. The occupancy rate in Jakarta rose by almost number of stores remaining that have not opened. As mentioned 2% QoQ. The growth of occupancy was the highest since 2012 above, this mall became a major generator to lift the average and delivered an average occupancy rate of 89.3% for shopping occupancy rate for shopping centres within the CBD to 92.6% as centres in Jakarta in 1Q 2014. of 1Q 2014. This average occupancy rate rose by 3.5% QoQ.

The occupancy rate of upper-class malls recorded the highest The average occupancy rate for shopping centres in North growth of 1.8% QoQ. Lotte Shopping Avenue, which has been Jakarta was also growing. Although this area achieved the lowest in operation since last year, became the main generator to rate compared to others, performance of shopping centres in maintain the occupancy rate for this group of shopping centres North Jakarta grew by 2.8% QoQ and brought the occupancy to that remained above 90%. Some stores are preparing to open at 84.5 % as of 1Q 2014. the mall, which is continuing to improve access for visitors. Performance of new shopping centres also caused the average The performance of upper-class malls has surpassed 90% for occupancy in East Jakarta to rise. Cipinang Indah Mall, which has the last three years. This trend showed that, besides the ability been in operation since 2013, has helped the average occupancy to maintain tenants, location and type of visitor are factors that rate of shopping centres in East Jakarta rise by 1.9% QoQ to 87.6% make upper-class malls the choice for both premium local as of 1Q 2014. brands and foreign tenants.

4 Research & Forecast Report | 1Q 2014 | Retail | Colliers International Other areas such as South, Central and West Jakarta also grew, Spaces occupied at Mal Ciputra also continued to increase from but modestly. The occupancy growth for these areas was only January to March 2014. Two of those tenants, Samwon and below 1%. West Jakarta, which recorded the second highest Starbucks, come from the food and beverage industry. These occupancy of 92.4% after the CBD, only maintained the same retailers occupied 130 and 200 sq m at the mall, which maintains figure QoQ. Well-known malls like Mal Taman Anggrek, Central occupancy above 90%, continuously. Starbucks is an existing Park Mall and Mal Ciputra are still the main attractions for tenant that relocated within the mall to take a bigger space. potential tenants. The most significant transaction occurred at Mal Taman Anggrek with the opening of JYSK. JYSK Group has Another area that also recorded growth of less than 1% is South its origins in Scandinavia; the first store opened in Denmark in Jakarta, including the CBD and Central Jakarta. 1979. JYSK will open for the first time in Indonesia to meet the needs of households with a classy interior in a European style. The store will be of the same size as a Danish JYSK store, with a sales area of around 1,200 sq m.

Large Retailers Open in 2014

Retailers line of products opened at space taken (sq m) opening in JYSK Home Products 1,400 February XXI Entertainment Cipinang Indah Mall 2,000 January Electronic City Home Furnishing Cipinang Indah Mall 1,038 March Time Zone Entertainment Cipinang Indah Mall 1,038 May Source: Colliers International Indonesia - Research

Amount of Space Absorbed in Newly Operating and Occupancy Rates of Shopping Centers for Lease Future Shopping Centers in Jakarta (2013 - 2016) (Mall) and Strata-title Centers (Trade Centers)

100%

2013 90% 80%

70% 2014F 60%

50%

40% 2015F 30%

20%

2016F 10%

0% 0 50,000 100,000 150,000 200,000 250,000 300,000 2008 2009 2010 2011 2012 2013 2014 YTD Absorbed Supply for Lease for Sale

Source: Colliers International Indonesia - Research Source: Colliers International Indonesia - Research

Tenants in Newly Operated and Future Shopping Centers in Jakarta During 2013 - 2015

shopping center Completion anchor tenant mini anchor Lotte Shopping Avenue 2013 Lotte Department Store Ranch Market, Uniqlo Cipinang Indah 2013 Carrefour XXI, Electronic City, Ace Hardware, Time Zone Baywalk Mall 2013 Ace Hardware, Cinema XXI, Farmers Market, Electronic Solution, Informa, Time Zone, Toys Kingdom, Home Solution, Gold’s Gym ST Moritz 2014 Debenhams, Parkson, Matahari, Electronic City, Cinema XXI, Ranch Market, Sea World Indonesia Hypermart Pantai Indah Kapuk Mall 2015 Blitz Megaplex, Ranch Market, Gold’s Gym

Central Park Mall extension 2015 Central Source: Colliers International Indonesia - Research

5 Research & Forecast Report | 1Q 2014 | Retail | Colliers International BoDeTaBek Further, Bogor and Tangerang achieved 81-82% occupancy rate. Some committed tenants at Cibinong City Mall and Bintaro Annual Supply, Demand and Occupancy XChange were not yet in operation; and this was a reason the in 2008 - 2014 YTD average occupancy rate in both regions declined in 1Q 2014. In Tangerang, after successfully opening three outlets in Jakarta 500,000 100% previously, Uniqlo began to expand outside Jakarta by presenting their fourth outlet at Summarecon Mal Serpong. This outlet occupies nearly 2,500 sq m and is planned to open in April 2014. 400,000 95% Bekasi was flooded by abundant retail supply throughout 2013. However, in line with operation of some committed tenants, the 300,000 90% average occupancy rate for shopping centres in Bekasi gradually rose and recorded 2% growth QoQ as at 1Q 2014 and brought the 200,000 85% average occupancy rate for shopping centres in Bekasi to 78.9%.

100,000 80% Amount of Space Absorbed in Newly Operating and Future Shopping Centers in BoDeTaBek 0 75% (2013 - 2016) 2008 2009 2010 2011 2012 2013 -100,000 70% 2014YTD 2013 Annual Supply Annual Demand Occupancy

Source: Colliers International Indonesia - Research 2014F As retail performance in Jakarta started to grow, the opposite condition was occurring in BoDeTaBek, which showed poorer performance than in the previous quarter. Operation of two shopping centres, Cibinong City Mall and Bintaro XChange Mall, 2015F caused the average occupancy rate to fall by 1.1% to 82.0% as of 1Q 2014.

The average occupancy rate for shopping centres in Depok still 2016F leads by 89.3%. Depok Mall and Margo City became the main contributors to the overall occupancy in this area. Depok Mall, which evolved into a lifestyle and entertainment mall, continues 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 improving by adding new tenants that suit their concept. Absorbed Supply Currently, this mall is in negotiations to present a cinema. Source: Colliers International Indonesia - Research

Large Retailers Open in 2014

Retailers line of products opened at space taken (sq m) opening in Uniqlo Fashion & Accessories Summarecon Mall Serpong 2,400 April Source: Colliers International Indonesia - Research

6 Research & Forecast Report | 1Q 2014 | Retail | Colliers International Tenant List in Newly Operated and Future Shopping Centers in BoDeTaBek During 2012 - 2014

Retailers name Completion anchor tenant mini anchor Shopping Center Completion Anchor Tenant Mini Anchor Bekasi Junction 2013 Lotte Mart Grand Metropolitan 2013 Centro Farmers Market, Toys Kingdom, Funworld Summarecon Mall Bekasi 2013 Star Department Store, Cinema XXI The Premiere, The Food Hall, Ace Hardware, Best Denki Cibinong City Mall 2013 Matahari Dept Store, Carrefour Funworld, Hari Hari, Ace Hardware, Cinema XXI, Informa Mal Ciputra Citra Gran 2013 Matahari, Hypermart Gramedia, Farmers Market Cimone City Mall 2013 Lotte Mart Gunung Agung Grand Galaxy 2013 Ace Hardware, Blitz Megaplex, Lotus, Farmers Market Bintaro XChange 2014 Centro Farmer’s Market Best Denki Gold Gym Rockstar Gym, Bx Rink, XXI Cinere Bellevue Suites 2014 Hypermart Paper Clip, Time Zone, Best Denki, Cinema XXI, Celebrity Fit- ness, Rock Star Gym AEON Mall BSD City 2014 Grand Dadap Mall 2016 Giant Home Solution, Electronic Solution, Fun World

Source: Colliers International Indonesia - Research

The election to be held in 2014 is expected to boost consumption Average Asking as well as increase the money flow in society. Therefore, retail sales in Indonesia are projected to grow. Bank Indonesia also noted that the growth of retail sales was supported by financing Rental Rates facilities that helped consumers to purchase goods. Improving weather, which is expected to expedite distribution, is another Average Asking Base Rental Rates in Jakarta factor that can encourage sales. With sales projected to grow, mall owners are confident in IDR 900,000 adjusting their asking rental rates in 2014. This trend began in 1Q IDR 800,000 2014 when the average rent for shopping centres was IDR491,675 per sq m per month. The average rental rate rose by 3.3% QoQ IDR 700,000 and 5.0% YoY. Although this was not as high as from 2012 to 2013, IDR 600,000 the increase can be considered as the onset of an upward trend in rental rates at shopping centers in Jakarta. IDR 500,000 Upper-class shopping centres continue to be a major contributor IDR 400,000 to the overall increase. Growth of 4.9% QoQ has raised the IDR 300,000 average rental rate to IDR792,065 per sq m per month in 1Q 2014.

IDR 200,000 Significant growth was also seen at middle-low class shopping centres. With growth of 3.4% QoQ, this class of shopping centre IDR 100,000 had an average rental rate of IDR253,013 per sq m per month. IDR 0 Despite also growing, middle-class shopping centres rose 1Q 2010 1Q 2011 1Q 2012 1Q 2013 4Q 2013 1Q 2014 relatively steadily by less than 1% quarterly since 2013. This growth brought the average rental rate for middle-class shopping All Class Upper Class centres to IDR360,744 per sq m per month in 1Q 2014. Source: Colliers International Indonesia - Research

7 Research & Forecast Report | 1Q 2014 | Retail | Colliers International Average Asking Base Rental and Occupancy Rates Average Asking Base Rental Rates Based on Area in Jakarta IDR 350,000 IDR 800,000 CBD IDR 300,000 IDR 700,000

South IDR 600,000 IDR 250,000 Jakarta West Jakarta IDR 500,000 IDR 200,000 North IDR 400,000 Jakarta IDR 150,000

IDR 300,000 Central IDR 100,000 East Jakarta IDR 200,000 Jakarta IDR 50,000 IDR 100,000 IDR 0 IDR 0 2008 2009 2010 2011 2012 2013 2014 YTD 84% 86% 88% 90% 92% 94% Source: Colliers International Indonesia - Research Source: Colliers International Indonesia - Research Average Asking Base Rental Rates in BoDeTaBek Average Asking Base Rental Rates in Jakarta*

IDR 400,000 IDR 800,000

IDR 700,000 IDR 350,000

IDR 600,000 IDR 300,000

IDR 500,000 IDR 250,000

IDR 400,000 IDR 200,000

IDR 300,000 IDR 150,000

IDR 200,000 IDR 100,000

IDR 100,000 IDR 50,000

IDR 0 IDR 0 2008 2009 2010 2011 2012 2013 2014 2008 2009 2010 2011 2012 2013 2014 YTD YTD CBD Central Jakarta South Jakarta Bogor Depok Tangerang Bekasi North Jakarta East Jakarta West Jakarta Source: Colliers International Indonesia - Research *CBD includes parts of South and Central Jakarta Source: Colliers International Indonesia - Research

A significant increase was also noted QoQ in the average rental rate in the BoDeTaBek area. The increasing rent has been helped by shopping centres that were able to maintain their occupancy. Among those shopping centres, adjusting the pegged rate was one way to increase rental rates, which climbed by 9.2% to IDR302,618 per sq m per month in 1Q 2014.

8 Research & Forecast Report | 1Q 2014 | Retail | Colliers International the end of 2013. Cibinong City Mall charges a higher maintenance Service Charge cost than existing shopping centers in Bogor. The average service charge for shopping centres in Bogor was IDR60,106 per sq m Average Service Charges in Jakarta and BoDeTaBek per month as of 1Q 2014. In the other two areas, malls belonging to well-known developers IDR 100,000 became the main contributors raising the average service charge. IDR 90,000 Shopping centres developed by Summarecon and Kawan Lama IDR 80,000 have helped to raise the average service charge in Tangerang by 14.7% QoQ, to IDR88,085 per sq m per month. Service charges in IDR 70,000 the Depok area were IDR56,675 per sq m per month and had the IDR 60,000 lowest growth of 2.9%.

IDR 50,000

IDR 40,000 IDR 30,000 Concluding Thought IDR 20,000 Competition among retailers to secure retail space in the CBD IDR 10,000 or other favourite locations is quite tough, highlighted by high IDR 0 occupancy levels experienced by shopping centers located in 2008 2009 2010 2011 2012 2013 2014 those areas. In contrast to that, shopping centers in non-prime YTD Jakarta BoDeTaBek areas or aged shopping centers have been struggling to secure new tenants, particularly when the occupancy is low. In this Source: Colliers International Indonesia - Research situation, tenants became more demanding of the landlords, like Adjustments in service charges continued into 1Q 2014. The asking for longer grace periods, particularly when the physical increase in service charges by 8.0% QoQ was the highest growth occupancy at the mall was low. Low occupancy potentially leads at least since 2012. This growth brought service charges to low turnover. to IDR95,397 per sq m per month as of 1Q 2014. A service charge In some newly launched shopping centers, to boost the physical increase in this quarter was supported by all classes of shopping occupancy, most of the time landlords are try to lure pre- centres, upper to middle-low class. Five shopping centres that are committed tenants to immediately open their stores. Another classified as upper-class have raised their service charges in the way to increase the occupancy level is by lowering the current range of 8-40% as of 1Q 2014. Two shopping centres located in a asking rental rate; this will possibly occur in highly competitive premium area in the CBD were the highest, charging IDR155,000 locations in North Jakarta. psm / month. Two prominent shopping centres in the Outside Among big, anchor-type retailers, the competition to win CBD also had significant increases QoQ. favourite locations will become tougher particularly because Higher growth was shown by middle- to middle-low class large spaces are not widely available. On the positive side, remote shopping centres in almost all Jakarta regions. At some shopping locations but benefiting from direct turnpike access will become centres, there was a very significant increase in service charges. more popular. Emerging areas, like Cikarang or Alam Sutera, Middle-class shopping centres boosted the average service will benefit from this. As good retail locations in Jakarta and charge with an increase of 3.1% QoQ. At middle- to low-class the surrounding areas are becoming scarce, growing second- shopping centers, the increase was largely supported by and third-tier cities in Indonesia will be opted for by expanding shopping centres that have been in operation for some years. retailers, to widen their coverage. The average service charge grew by 8.6%. The increasing service In the dynamic market where shopping centres have to be opened charges will lead to better services, safety and more comfortable with any trend, the retail market is becoming more competitive circulation inside and outside of the building. Such measures for landlords particularly for older malls. In the future, the retail are needed so that the long-operating shopping centres will be market will become more cautious towards operational costs. ready to compete with other, especially newer shopping centres. Not only will the green building concept become more attractive, The service charge in Greater Jakarta as of 1Q 2014 was IDR76,928 complying with some of the green concepts will also become per sq m per month. The Bekasi area became a major contributor more interesting for retailers, like al fresco dining, which reduces by growing 21.4% QoQ. Adjusting the pegged rate is also a way electricity consumptions. for some shopping centres in Bekasi, especially malls belonging to Lippo and Metropolitan group, to raise service charges to IDR76,069 per sq m per month. The average service charge also rose significantly by 23.5% in Bogor. However, this increase was mostly driven by a new mall that has been in operation since

9 Research & Forecast Report | 1Q 2014 | Retail | Colliers International Primary Authors: 485 offices in Ferry Salanto Associate Director | Jakarta 62 21 521 1400 ext 134 63 countries on [email protected] 6 continents United States: 146 Canada: 44 Latin America: 25 Asia: 38 ANZ: 148 EMEA: 84

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Accelerating success.