Retail Space Rental Business Expected to Recover in 2023

retail sales

The business of retail space rental is expected to recover throughout 2023, driven by several factors, including the relaxation of mobility restrictions after the end of the PPKM in late 2022.

According to The Wealth Report 2023 by Knight Frank, the retail space sector is one of the sectors that foreign investors are interested in globally, with a percentage of 12.2%.

Jakarta Property Highlight, also released by Knight Frank, shows that this year there will be three new shopping center or mall projects in Jakarta that will be operational.

These three malls are the Retail Podium Thamrin Nine, covering an area of 72,000 square meters (lease type); Holland Village Mall, covering an area of 44,000 square meters (lease type); and Pusat Grosir Senen Jaya, covering an area of 10,249 square meters (strata-title type).

The current total supply of retail space is 4.9 million square meters with an occupancy rate of 78.81% in the second semester of 2022.

This condition shows a recovery in the sector, which has led to an increase in rental and service charge prices by 1.24% or Rp751,351 per square meter. The signals of recovery in the retail sector are also shown by the expansion carried out by several companies.

Syarifah Syaukat, Senior Research Advisor at Knight Frank Indonesia, said that at the beginning of 2023, there is no evidence to suggest that consumer visits to retail spaces have weakened.

Sindiani Adinata, Director of Strategic Consultancy at Knight Frank Indonesia, also mentioned that the retail sector is one of the property sub-sectors that still has prospects in the future due to the fast bounce back after the pandemic.

“The level of activity by society in most malls and shopping centers in Jakarta has sharply increased after the end of the PPKM. This has become a driving force for the retail market in catching up with the lag in recent years,” said Adinata.

According to Mark Dixon, Founder and CEO of IWG, a flexible workspace provider, research shows that 90 percent of employees say they want flexibility in terms of when and where they work. They want hybrid work.

“Our own research shows that three times as many companies from the large group [FTSE 250] prefer to adopt a hybrid and flexible office model rather than returning to conventional methods,” he said.

Dixon believes that a mixed way of working can provide savings and ensure economic stability for corporate clients. This method also benefits property owners.

This working system provides opportunities for stable and sustainable business growth. On-demand IWG membership sales, he said, have increased by 93 percent year on year, with projected growth of 10 percent annually and a return on investment (RoI) of over 20 percent.

Dixon stated that the current business activity has enabled attractive flexible workspaces in shopping centers, transportation hubs, or their favorite hangouts.

“This method supports a much better and balanced working life than traveling to work to the city center,” he said.

Commercial property owners, he added, have an opportunity to play a crucial role in transitioning to a better way of working.

Shortly, he believes there will be professional workspace available anywhere, from metropolitan cities to the smallest villages.

“This transformation will unlock new value that has never been seen before for workers, businesses, and the local economy, while also making a significant contribution to improving the environment. With people working locally, local facilities and retail outlets will receive a boost, and new jobs will be created to serve the national workspace network.”