The office market is experiencing a big challenge as a result of the current COVID-19 pandemic. The economy has yet to recover, making it difficult for some companies to survive and causing a slowdown of office absorption. Landlords have also striven to increase occupancy rates by maintaining rents.
The biggest challenge likely will occur in 2021. Landlords currently should focus on securing committed tenants. In addition, landlords should begin providing more compact and flexible workspaces, which are currently expected to be in great demand. Small and medium local enterprises and start-up companies are expected to become demand generators in Surabaya.
During H2 2020, the government relaxed some preventive measures taken to combat the pandemic. Besides maintaining construction progress, developers have started using offline promotional channels. However, sales performance has remained depressed, since consumers have their own concerns, especially due to the uncertainty caused by the pandemic. Asking prices have remained flat too.
Furthermore, we have not yet seen the end of the pandemic. Again, this creates more uncertainty, although we have seen economic growth start to recover. Therefore, we predict this gloomy situation will continue into 2021.
Business activities have yet to fully return to normal. Nevertheless, people’s passion for going to shopping centres continues. Naturally, landlords and retailers welcome this and aim to keep visitors positive and returning to visit such centres.
During the pandemic, however, some tenants are waiting to see how the situation develops before deciding about store expansion. Others are expected to reconsider store layouts and sizes at the time of lease renewal.
On balance, the current retail situation needs more time to recover. The volume of sales transactions are expected to be much lower than normal due to reduced purchasing power as a result of layoffs and salary cuts. Retailers currently tend to boost sales with an omni-channel strategy. From the landlord’s side, the aim is to optimise the tenant mix to increase the number of visitors. Generally, in future, landlords are expected to be more careful in selecting and classifying the types of tenant, in order to better regulate the number of visitors within the centre and inviting visitors to regularly go and shop there.
Currently, the situation in Surabaya has started to improve. This can be seen from the improving hotel performance in Surabaya. It is still far from normal, but it is heading toward normal. Since the government has granted permits to carry out activities for government agencies in hotels, the government market has become the largest market as well as a driving force for the hotel industry, including that in Surabaya. From the construction side, it is estimated that several upcoming projects will experience operational delays considering the unstable condition.