Indonesian Malls Grapple With Rising Costs, Tenant Rents

Indonesian mall operators are caught in a difficult position as operational costs climb due to the rupiah's weakening against the US dollar. Alphonzus Widjaja, Chairman of the Indonesian Shopping Mall Management Association, explained that rising expenses for natural gas and logistics are squeezing their budgets.

Adding to the financial strain, some regional governments are increasing taxes to boost revenue, further inflating operational costs for malls. However, mall managers are hesitant to pass these costs onto tenants through higher rents. This caution is driven by the current "low season" for retail sales, which is expected to be prolonged this year after major holiday shopping periods have passed.

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On one hand, we cannot raise (costs) to the tenants.

Widjaja stated that raising prices is a last resort, especially with consumer purchasing power already under pressure. Instead, the focus is on strategies to increase sales, such as implementing new shopping programs. The association is targeting an optimal sales performance in the fourth quarter, viewing it as the final opportunity for the retail industry to significantly boost its annual figures and potentially meet targets.

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Raising prices is a last resort amid a situation where public purchasing power is under pressure.