There's a new trend taking place in Jakarta: more office space is being constructed outside the CBD than ever before.
The size of the Jakarta office market continues to grow. According to Procon data, the available office space grew 4.2 percent in the second quarter of this year to some 5.4 million square meters.
Office space in Jakarta is usually categorized into two areas: the Central Business District (CBD) and elsewhere. Currently, the amount of vacant space in the CBD amounts to double that of non-CBD areas.
However, the demand for office space is moving away from the city center towards areas further away in the south of Jakarta -- such as those areas that are close to the outer ring road. With the exception of the offices of financial services firms, which are mostly located in Sudirman or Kuningan, new office space nowadays is being built farther away from the bustle of the city center.
Why is this phenomenon occurring?
First we must ask, what do most companies consider when choosing an office building? Of course, they consider the facilities or benefits the building has to offer, such as conference rooms, parking space, wi-fi technology and as energy efficiency. Companies also consider neighboring tenants; for example, if the tenants are major, well-respected companies, the attraction becomes stronger and rental rates are usually higher.
However, in recent years we have been observing a shift in interest towards office space located along the Jakarta Outer Ring Road. For overseas oil companies and multinational consumer companies, many of their expatriate employees live in the southern outskirts of Jakarta, thereby enjoying relatively easy access to the Jakarta Outer Ring Road.
Having offices located at the edge of the city makes commuting easier for workers residing in the Bintaro, Serpong or even Kemang areas.
Security also appears to be high on the list of factors that companies consider in choosing their headquarters, especially in the case of multinational companies and firms engaged in the oil business.
In this post 9/11 world, oil companies, particularly overseas ones, are acutely aware of the risks of terrorism.
Even if their offices are located on Jl. Sudirman, most are shielded behind other office buildings and have little direct access to the road.
This is intended to lessen the risk from explosive devices detonated on the road, such as the one in Kuningan in 2003. Increased security concerns are one of the reasons companies are looking for lower-profile locations for their offices.
One building in the Simatupang area was even built facing away from the road, with additional security features such as tempered glass. This building is now home to a major foreign oil company.
Further evidence of increased concern about security is the separation of parking lots from the main building so as to reduce the risk from terrorism even more. Nowadays, increasing numbers of tenants are interested in buildings that have separate multistory carparks located some distance from the main building, primarily due to safety concerns.
Rental rates for office space outside the CBD area are on average 25 percent less than in the CBD. Therefore, office space in non-CBD areas is still attractive, and more multinational firms may be expected to move there.
Besides, land in the CBD is expensive, ranging between Rp 10 million and Rp 15 million per square meter. So, it is clear that developers will be striving to create and promote alternatives to the CBD for office locations. -- (The writer is a research analyst at PT Bahana Securities)