Office
In view of the pandemic, a flexible office hour strategy has been increasingly adopted by many companies over the past two years. Some companies have reduced their office space footprint and considered moving to serviced office/co-working spaces. However, some companies decided to stay where they were instead of relocating. Many companies need an official address for company branding. Occupying office space is likely to generate more clients and increase company profits, so many companies prefer to stay in their own offices rather than becoming flexible office users or operating their businesses from shophouses.
Apartment
Despite business and economic activities returning to normal, in 2022, we have not seen improvement in the demand side or supply side of apartments in Surabaya. Prices have moved at a slow, steady pace because of slow sales and increasing numbers of secondary units for sale, which puts downward pressure on price growth.
Furthermore, as the central bank increased interest rates by 175 basis points (bps), we believe that mortgage rates will likely increase and this could soften the apartment market in general. Looking ahead, with a relatively pessimistic economic outlook expected to feed through to purchasing power, consumer sentiment could be affected in 2023. Therefore, we encourage developers to continue to implement attractive flexible payment terms to attract potential buyers.
Retail
The performance of Surabaya’s shopping malls continues to vary. Many malls have struggled, displacing many tenants. Nonetheless, others continued to see tenant expansion with F&B retailers dominating the trend. More events and exhibitions are being held on a regular basis. In terms of visitor numbers, several malls are beginning to return to pre-pandemic levels.
The mall owners use this situation to their advantage in order to continue to grow. Various new strategies and concepts are being implemented in order to entice more people to return to malls. A more favourable situation is expected to assist tenants in optimising the number of visitors and sales. After nearly two years of being closed due to the pandemic, several tenants carried out renovations by changing the store’s concept. Some of them have also been relocated by landlords in order to attract more visitors to the mall.
Hotel
Surabaya’s hotel industry is improving as the year 2022 comes to a close. It cannot be denied that hotel occupancy rates have increased as more business trips and MICE activities are being held at hotels.
According to past trends, the start the start of 2023 for businesses will be slow. Many business activities will pick up again in March, but because the month of Ramadan ends in March, followed by the Eid al-Fitr holiday in April, it is likely that business will pick up again in the middle of semester 1.
Industrial Estate
Generally, industrial land sales have synergy with the level of direct investment into the manufacturing sector. We believe that higher direct investment will translate into more industrial land sales. The government’s commitment to developing EV in Indonesia is real and we are expecting a surge in demand for industrial land from the EV-related industries, particularly in the Gresik area, in the next few years.
Logistics demand remained active in 2022 with the pandemic gradually contained, and the retail sector regained some momentum alongside a strong performance from e-commerce. Going forward, with the downtrend of pandemic related cases followed by the easing of social restrictions, the performance of the warehouse sector is likely to be positive.
