In a challenging business environment, tenant retention has been a key priority. Significant disruption to occupier demand has continued to swing the pendulum in favor of the tenant market for the time being. Looking ahead, the overall outlook for the year remains uncertain, considering the absence to date of an economic recovery. Uncertainties and underlying risks remain, as the pandemic continues to evolve globally.
Landlords need to continue adapting by communicating and negotiating in creative ways during times when it is difficult to secure tenants. The provision of incentives and mutual agreements between landlords and tenants are expected to encourage lease renewals and tenants to stay on in the future.
In this quarter, the government decided to extend the VAT incentive programme until the end of December 2021 as the sales growth has remained disappointing. However, the consequence is that developers will continue to have difficulty in raising their asking price. Also, the number of COVID-19 cases in Indonesia, especially in Jakarta, has risen again, making consumers more cautious than before as conditions become even more uncertain. Therefore, we assume there will be no change in the market until the end of this year and hope for recovery next year.
In the pandemic, other than keeping visitors coming, it is important for landlords to maintain extremely strict health protocols at malls to ensure safety of visitors. Landlords are able to consider creating more open-air spaces at malls to offer retailers the opportunity to do business there. Consumers tend to feel safer gathering outside with their friends and family compared to remaining in a closed environment.
Retailers also need to maintain the highest health standards at their outlets. This will give consumers the confidence to visit. Temporary tenants or pop-up stores in a mall seem to be the solution due to lower financial risk. Fashion, cosmetics, personal care, books, toys, and F&B are among those who are increasingly in favor of this pop-up store concept. In terms of location, retailers continue to look at sites near residential areas.
In terms of sales performance, the sign of recovery has yet to happen but optimism over a brisk period is reflected by land expansion activity in anticipation of the rising enquiries in the future. Sales volume may just be fair in number, but potential enquiries may still occur from traditional sectors like automotive, food and logistics, not to mention other opportunities from rising data centre and high-tech industries.
The strategy to broaden industrial areas is necessary in this current sluggish market in anticipation of the rise of industrial sectors. We think that the industrial market has touched the bottom of the cycle and will move on to the recovery phase once the pandemic can be contained and the economy starts to accelerate.
The trend is in the positive direction. Many business activities have started to be carried out in hotels, although with the concept of adjusting to existing health protocols. The “staycation” is one of the trends that is starting to rise, especially for some people who still want to explore outside the city. The vaccination process that has been intensively implemented by the government is expected to have a positive impact, one of which is for the hotel industry.