The already saturated office market since last year are now exacerbated Covid-19 pandemic. When this report is prepared, Surabaya became the epicenter with the highest record of confirmed cases and deaths. This does not help the overall slowdown in office absorption. Supply projection surpasses the real need for office space. This also push asking rent to stay with no anticipative increase over the next semester.
We think there should be no additional project beyond our list of supply pipeline at least to maintain hope by focusing on creating new demand which possibly coming from local small to medium enterprise, start-up companies or even big corporations that plan to expand in Surabaya. Developers’ focus should be on catching up a safe occupancy level and become more accommodative particularly to a big corporation.
Some transactions were made in Q1 2020, but by the end of April the Surabaya government had imposed large-scale social restrictions as the number of COVID-19 cases had risen rapidly. As a result, all sales activity was hampered, and both new inquiries and sales transactions were almost zero. Prices remained flat as most developers held prices at pre-COVID-19 levels, and it was pointless for developers to launch new projects, because no matter how they adjusted the price down, or offered marketing gimmicks, demand was negligible.
This is a good time for potential buyers to make transactions, as many developers are willing to negotiate to attract buyers during the pandemic. However, for developers, it is better to hold off on any new project launches and focus on finishing under- construction projects to retain their reputations
Mall visitations in Surabaya have fallen by an average of 30% due to the COVID-19 pandemic, according to Indonesian Shopping Centre Association (APPBI) East Java. Some retailers that sell basic needs, such as supermarkets and pharmacies, are still allowed to open, but restrictions and adjusted operating hours remain in force in anticipation of the spread of COVID-19.
During the pandemic, landlords need to maintain mall visitations, especially in a tougher competitive climate with newer shopping malls. Malls with rejuvenation programs focused on façade work and facility improvements have been performing quite well when re- opened. Retailers should focus on increasing sales amid limited visitors.
COVID-19 has further decreased hotel performance in Surabaya. Even in April and May, occupancy according to STR data was recorded to be less than 20% and ADR was below US$30.
Hoteliers must reassess their strategies to be able to adapt to the changes. Moreover, Surabaya is known as one of the MICE centres, even though MICE activities will become very limited going forward because there are protocols that must be followed, one of which is to cut capacity by 50%.