Apartment market to remain gloomy until year end
Apartment market to remain gloomy until year end
JAKARTA (JP): Property consultants have predicted that the
capital will continue to experience a decline in demand for
residential apartment rental space throughout the year, and
expect increased vacancy at the end of 1999.
PT Procon Indah/Jones Lang LaSalle said the dim outlook was
particularly due to the continuing business contraction and
company rationalization.
"Although economic indicators, such as GDP growth, interest
rates and inflation, showed early signs of recovery during the
first quarter of 1999, uncertainty toward the political events in
June and December remains," the company said in its latest
biweekly property report.
It predicts the overall vacancy levels to increase to 45
percent by the end of 1999 and to reach 48 percent by the end of
2000.
A slight rebound is expected to occur at the end of 2001 as a
result of positive economic growth in 2000 and 2001, which would
generate new demand and limited new supply in the market, the
company said.
Weak demand and higher vacancy by 2000 would increase pressure
on landlords to reduce rental rates.
The report said total occupied apartments declined by 108
units during the first quarter of 1999, due to weakened demand
resulting by the shrinking expatriate population amid foreign
companies' on-going rationalization.
Total vacancies during the period was 5,859 units, reflecting
an increase of 2.3 percent over the quarter. The average vacancy
level was 42 percent as at March this year.
Weakened demand for rental apartments have forced developers
to further reduce rental rates or offer other incentives to
secure new tenants.
More apartment owners now offer shorter lease terms or a
minimum of six months with quarterly payments. They previously
offered two to three-year leases with payments in advance.
Some landlords have even started to offer existing tenants
monthly lease extensions in a bid to maintain occupancy levels.
Most owners of prime apartments continued to offer rents in
U.S. dollars, but with discounts of up to 60 percent following
the economic crisis.
The company predicted apartment rentals to bottom out in 2000
and grow modestly in late 2001 as demand was expected to rebound.
Total stocks now stand at 13,984 units, a figure reflecting a
6.2 increase from last year, according to the report.
It said no new projects were completed during the first five
months of the year, in line with the generally sluggish
construction activities during the period.
All construction work is expected to be suspended until the
general election process is concluded.
The supply of purpose-built rental apartments, including
serviced apartments and rental townhouses, remained at 5,786
units as of May.
It is estimated that 1,189 rental apartment units would enter
the market by 2001, about 68 percent of which would come from
individual condominiums available for lease.(cst)