Current affairs

Impact on commercial buildings as a result of the re-implemented PSBB (large scale social restrictions)【In-mall tenants or freestanding stores】

2020/09/14


PSBB re-implemented in Jakarta (commonly known as PSBB2)

Jakarta, where the spread of the new corona epidemic shows no signs of abating, has re-enforced the PSBB (large scale social restrictions) as of today, and general companies are basically allowed to work from home except for 11 specific industries: (1) health, (2) food, (3) energy, (4) communications, (5) finance, (6) logistics, (7) hotels, (8) construction, (9) strategic industries, (10) public utility services, (11) daily necessities, and (13) other general businesses.

Although it was mandated, the governor of Jakarta, Anis, in an effort to accommodate the political and business community, eventually allowed office work on the condition that the attendance rate be kept below 25% only when it was unavoidable.

Restaurants in Grand Indonesia are allowed to take out, but some restaurants are completely closed during PSBB.

Mall admissions were limited to 50% of capacity, but even last Saturday night, before the PSBB was re-implemented, no more than 50% of the people walked inside the building, so now that eating inside restaurants has been banned, the limit will naturally be adhered to even if you don't count the number of people entering,

And in an environment like the one in the mall, where the 3Ms of Memakai masker (wearing masks), Menjaga jarak (maintaining physical distance), and Mencuci tangan (hand-washing enforcement) are strictly enforced.

I don't know how much sense it makes to kill the economy and impose restrictions, but it seems to me that it only hurts the tenants.

  • Movie theaters, game centers, sports centers, and other entertainment facilities are closed.
  • The restaurant serves takeaway only.
  • Maximum entry capacity in the mall is 50%.
  • 10.00 - 21.00 Open in the range of WIB

I was prepared for the checks to be a bit stricter as it was indeed the first day of PSBB2, but there was no particular change in the checking of cars entering the grounds, checking body temperature upon entry, etc., and there was no sign of any special counting of the number of visitors.

The PSBB2 started today only in Jakarta, and the mall in West Bekasi, which is about 15km away to the east, allows you to eat and drink inside the store as usual.

This means that from an economic point of view, the restaurants in Bekasi and Cikarang will have a chance to recover from the decline in sales, and from a social point of view, the risk of encouraging the spread of infection through out-of-prefecture travel will increase.

In addition, the mall in Bekasi is operating normally.

The governor of Anis initially argued that West Java and Banten, Jakarta's neighboring provinces to the east and west, respectively, should also be aligned.

But with criticism of the PSBB2 for killing the economy from within the central government, coordination has been difficult.

And the decision to mitigate the PSBB in June in the first place the reopening of the odd-even system on major roads during the "transition period to phase out the PSBB" has led to cluster infections on buses and trains.

The ICU (intensive care unit) of the city's covid-19 receiving hospital to be nearly full.

Due to the expected influx of Jakarta citizens into Bekasi province during PSBB2, the police have again demanded that tourist sites and malls be more rigorous in their enforcement of 3M, but there has not been any particular tightening of checks at the time of entry.

The impact of PSBB2 implementation on commercial buildings

If tenants in both office buildings and malls stop operating, the building's day-to-day operations staff, such as cleaning and security, will have less work to do, and if corporate office relocations and expansions slow down and vacancy rates increase, the building management company itself will suffer, leading to a move to cut fixed costs through highly effective cost-cutting measures such as employee layoffs, termination of outsourcing contracts, and salary cuts.

Due to the corona pandemic, office building rents fell 5% in the second quarter, and the occupancy rate of new office buildings in Jakarta is said to be roughly 70%, and this downward trend is expected to continue until the end of the year, with some owners cutting their prices by 10% to 50%.

At the PSBB in April, the tenants of the commercial building complained that they would not be able to run their businesses unless they were exempt from the rent, and even though the rent was reduced by 50% after the business license was granted in June and another 50% during the transition period to the new normal, not all the stores have reopened. The building had to PHK workers because of the loss of income, and now WFH is forced to do the same thing.

I was running a boutique as a tenant of Ramayana Mall in Denpasar, Bali for 2 years from 2002, and shortly after the opening, a bombing attack happened. I received a call from my parents telling me that the attack was caused by a TNT bomb planted in a car in front of the Sari Club on Legian Street.

After the bombing, foreign tourists disappeared without a trace, and even the Ramayana Mall, which was crowded with locals, was deserted, and the number of employees was reduced from six to four, then from four to two.

The following month, the store moved to a stand-alone location on Danau Tamblingan Road in Sanur.

Tenant rent in the mall is more expensive than renting an independent store, and as a rule, the electricity and management fees (iuran) charged every month are very expensive, and when you add in the salaries of the employees, it is quite difficult to recoup all of these fixed costs through gross profit (sales - clothing purchase costs).

We had to sell a certain number of clothes to get our money back, but because of the nature of the mall, consumers would travel to the mall to do other things as well, so advertising in the newspaper was very effective in increasing sales.

Sanur Independent Store at a bazaar at a mansion in the neighborhood

After moving to an independent store in Sanur, I no longer worry about high fixed costs, but the atmosphere is more relaxed than in Kuta and the tourists were sparse after the bombings, so there were days when I thought there would be no sales, but there were also days when the aunties of Europeans and Americans would buy a lot of stuff.

The downturn was so severe that I asked a wealthy Westerner living nearby to participate in a bazaar, and I tried to cut back on sales and administrative costs by having my employees, who were not busy, make accessories out of natural stones and beads (turning overhead costs into direct costs) and other methods to increase sales.

To do business as a tenant in a mall, it's important to know how many people are attracted to the mall itself, and the surrounding tenants benefit from the presence of Starbucks, JCO doughnuts, and other stores that attract customers, but on the other hand, the psychological fears of bombings, like the ones we had then, and now If the mall itself loses its ability to attract customers due to the caution of Corona and the PSBB2's restrictions on eating in restaurants, I don't think it will be possible to recover the fixed costs of the mall.

In short, in the case of tenants in a mall, you have to pay a high fixed cost to be able to attract customers, while in the case of independent stores, you have to own all the costs of attracting customers, but the fixed cost is cheaper, and even if you choose the mall, if the mall's ability to attract customers drops, you will also have to pay high fixed costs.


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