The long and winding road<\/p>\n
By I. Christianto<\/p>\n
JAKARTA (JP): The office market in the capital's Central
\nBusiness District (CBD), which was badly hit by the economic
\ncrisis, is on a long and winding road to recovery.<\/p>\n
The reluctance of many office building owners and operators in
\nCBD, also known as the Golden Triangle, to share their
\nexperiences in the business shows that they are over cautious of
\ntheir rivals and do not want the public to know the real
\ncondition of this sector.<\/p>\n
The office building owners and operators sometimes, by
\ndisplaying a full list of tenants at the lobby, deceive the
\npublic into believing that there is full occupancy at their
\nproperties.<\/p>\n
The property sector was the first sector to be affected by the
\neconomic crisis that hit the country in mid-1997.<\/p>\n
The country watched the sector falling into doldrums in the
\nfollowing years. As a result, many firms defaulted on their debt
\npayments. Banks were forced to transfer the assets of heavily
\nindebted property developers to the Indonesian Bank Restructuring
\nAgency (IBRA).<\/p>\n
Property and real estate consultants believe that office space
\nleasing in CBD, which covers Jl. Thamrin, Jl. Sudirman, Jl. Gatot
\nSubroto and Jl. Rasuna Said, will remain relatively sluggish
\nwhile vacancies will be high.<\/p>\n
The latest report of the Center for Indonesian Property Study
\n(PSPI) shows that the vacancy level of office buildings in CBD
\nwas 34 percent in 2000, slightly down from 35 percent in 1999.
\nPSPI predicts the figure will reach 32 percent this year.<\/p>\n
According to the report, at the end of last year, office stock
\nin Jakarta stood at 4.56 million square meters, with 3.24 million
\nsquare meters in CBD and 1.32 million square meters outside CBD.<\/p>\n
Out of 3.24 million square meters of office stock
\nin CBD, only 66 percent or 2.14 million square meters were
\noccupied as of the end of last year.<\/p>\n
This year, there will be a new 19,000-square-meter office
\nspace in CBD with the completion of Menara Jamsostek on Jl. Gatot
\nSubroto. Estimated total stock this year is 3.55 million square
\nmeters, while take-up or occupancy is estimated to grow to 68
\npercent with some 1.03 million square meters space vacant.<\/p>\n
Monthly rental rates of Jakarta's CBD offices will also remain
\nat some Rp 67,500 or approximately US$8 (with an exchange rate of
\nRp 8,500 per U.S. dollar) per square meter. In 1999, the rate was
\n$9.<\/p>\n
Figures of non-CBD office buildings are better. The occupancy
\nlevel is estimated to reach 80 percent this year from 74.6
\npercent in 2000. Monthly rental rates in this area is expected to
\nreach Rp 61,500 or approximately US$7.<\/p>\n
Strategies<\/p>\n
Office buildings in CBD also face another challenge: over
\nsupply.<\/p>\n
The average occupancy level in the sector increased by only
\n0.32 percent to 66.2 percent last year from 65 percent in 1999,
\naccording to PSPI. For comparison, the occupancy level of office
\nbuildings outside CBD rose to 74 percent, on average, last year
\nfrom 70 percent in 1999. This is because they absorbed those who
\nquitted their space in CBD.<\/p>\n
The over supply and low occupancy levels have led to a
\nsignificant decrease in rental rates in CBD. This is also due to
\nthe fact that many companies have consolidated and moved to
\nlocations offering cheaper rates or to their headquarters in
\nother areas.<\/p>\n
During the economic crisis, many tenants had difficulties
\ncontinuing leasing spaces in CBD because of their financial
\nproblems. Most of them relocated after their leasing period
\nexpired. To keep their businesses alive, they moved to shop
\nhouses or lower grade commercial office buildings.<\/p>\n
Thus, most owners or operators of office buildings in CBD have
\ntaken measures to attract tenants and maintain existing ones.<\/p>\n
Wisma Dharmala Sakti, for example, boasts as the only artistic
\noffice building in CBD in terms of architecture and facilities.<\/p>\n
\"Dharmala Sakti, has a very accessible location. In addition,
\ntheir leasing rates are competitive,\" said Lukas Bong of
\nPT Dharmala Intiland, a company which owns the office building.<\/p>\n
He said most office buildings in CBD offered facilities like
\nrestaurants and banks, competitive leasing rates, which are
\nusually quoted in rupiah, and a good location.<\/p>\n
\"So each of them are now trying to provide something different
\nfor their tenants. Dharmala hosts regular events related to the
\narts, just as the building reflects art,\" he said.<\/p>\n
For MidPlaza, another office building on Jl. Sudirman,
\ninformation technology and communications system-based facilities
\nare the key words for the tenants. Therefore facilities related
\nto IT are used for a competition edge in the sluggish sector.<\/p>\n
Mulia Group which manages dozens of office buildings adopts a
\nunique approach. Each of the property they operate is run by a
\nseparate management team. Therefore tenants will always get the
\nbest service.<\/p>\n
Strata-title<\/p>\n
Besides leasing their office spaces, Jakarta's CBD strata-
\ntitle office buildings also face other challenges.<\/p>\n
However, one strata-title office building, Menara Imperium, is
\nnot facing much difficulties as most of its spaces were sold
\nbefore the economic crisis began.<\/p>\n
Building manager of the Tenant Association of Menara Imperium
\nTom F. Chandra, said most spaces at the building were occupied.<\/p>\n
\"If there are vacant spaces, it is primarily due to businesses
\nthat have closed down. For instance there was a defunct bank
\nwhich was taken over by IBRA,\" he said, adding that current
\noccupancy level of the building is 2 percent.<\/p>\n
PSPI said selling rate for Jakarta's CBD and non-CBD strata-
\ntitle offices remained at Rp 7.6 million or $880 (with an
\nexchange rate of Rp 8,500 per US dollar) per square meter.<\/p>\n
The selling rate at Menara Imperium, which was opened in late
\n1996, is Rp 10 million per square meter due to its competitive
\nadvantages, which includes its service and modern architecture.<\/p>\n
Strata-titled office buildings may also face a problem when
\nowners lease a purchased space to a third party without notifying
\nthe management.<\/p>\n
The capital's office market will survive as there are signs of
\nrecovery but the road will be long and windy. Building owners
\nwould have to work harder if they want to reverse gloomy
\nforecasts that although the economy is predicted to grow over 4
\npercent this year, occupancy levels of office buildings in CBD
\nwill be low this year.<\/p>",
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