As the Indonesian retail industry evolves from traditional markets to modern outlets, demand for retail real estate is increasing. Indonesians are migrating to urban areas at a rate of 4.4% per year, with 53.7% settling in cities as of 2015, up from 49.9% in 2010, according to World Bank data.

This has led to Indonesia’s retail property sector becoming the fifth-most attractive retail market in the world behind China, India, Malaysia and Kazakhstan, according to consultancy AT Kearny’s 2016 Global Retail Development Index. New, modern retail spaces is what these new urban consumers want, instead of sprawling markets and traditional neighbourhood shops. They prefer new, well-lit, uniform modern retail outlets, such as convenience stores, minimarts, shopping malls and hypermarkets. In 2015, the modern retail outlet market size surpassed traditional shops for the first time.

At a glance:

• Indonesians are shifting alliance from traditional markets to modern retail outlets
• The positive economic outlook for Indonesia is seeing many new malls being developed
• Despite additional supply, rental rates continue to climb
• The average retail rent in Jakarta was Rp566,087 ($41.30) per sq metre per month in 2Q 2016
• This is up from Rp400,000 ($29.20) per sq metre per month just six years ago

Frost & Sullivan research valued the modern retail market at Rp189.5trn ($13.8bn) in 2015, compared to Rp181.4trn ($13.2bn) for the traditional segment.

Even though there is more retail space available, the strong economic forecast, rental rates continue to climb. Colliers International reports the average rent in Jakarta was Rp566,087 ($41.30) per sq metre per month in the second quarter of 2016, with around 20% of Jakarta malls seeing a rental increase. This is up from Rp400,000 ($29.20) per sq metre per month just six years ago. The CBD is the most expensive region with rent for retail occupation asking Rp855,965 ($62.50) per sq metre per month in mid-2016.

Meanwhile, occupancy has remained stable, at 86-87% in the second quarter of 2016, according to Colliers International, with the CBD retaining the highest occupancy rate in Jakarta at 92% as of mid-2016.

Fifteen new shopping centres in greater Jakarta since 2011 can be attributed for much of the growth, and nine of these are part of integrated residential developments, according to Colliers International. 

In Bali, the trend of favouring modern retail outlets is seen across the island in places such including:

• Beachwalk in Kuta Beach
• Lippo Mall in Kuta Tuban
• Discovery Shopping Mall in Kuta Tuban
• Bali Collection in Nusa Dua
• Park 23 in Kuta Tuban
• Mall Bali Galeria in Dewa Ruci, Kuta
• Level 21, Denpasar
• Duta Plaza, Denpasar
• Plaza Renon, Renon, Denpasar
• Samasta Lifestyle Village, Jimbaran 

For more detailed information, visit the Colliers International Research Indonesia website, or email Ferry Salanto from Colliers International Research Indonesia via the contact details below.

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