Apartment sector sees signs of recovery, occupancy increases
JAKARTA (JP): The prospects for the apartment sector in the capital are much brighter this year as more middle class people are prefering to live in these high-rise residential buildings.
Some leading apartments are experience increasing and stable occupancy rates after a harsh time during the economic downturn and political uncertainties.
Cheah Hooi Theng of Allson Residence said his apartments were seeing increasing occupancy after the gloomy situation in 1998/1999.
"The occupancy rate was only 25 percent or 30 percent in 1998/1999. It rose to 55 percent on average in 2000 and has now further risen to 70 percent on average.
There have been sometimes higher occupancy rates such as during the holiday season in July when we saw 90 percent occupancy," he said.
He added that the occupancy rate had been increasing as the country was experiencing a better situation now.
"Finally, businesspeople are coming back. The new government ahs given hope to many people. On the other hand, investors can't leave forever (from Indonesia)," he said.
Allson Residence, opened in mid-1997 in the Senen area, Central Jakarta, is part of the Allson international chain of Hong Kong. The serviced apartments offer a total of 158 units (currently only 115 units) comprising one-bedroom and four- bedroom types, and two-story penthouses.
As serviced apartments, tenants can only lease units at Allson.
"The number of long-term and short-term tenants at Allson are equal. Most of the long-term tenants are expatriates while some 30 percent of the short-term tenants are locals," said Cheah.
He added that more people preferred to stay in serviced apartments as they felt more at home.
"There are bedrooms, a living room, kitchen and main room. In the meantime, each occupied unit is served daily," he said.
He said rates at Allson ranged between Rp 400,000 and Rp 1.2 million per day and between Rp 7 million and Rp 30 million per month. The rates depended on the type of the unit and length of stay.
Executive Menteng Apartment, in Central Jakarta, is also seeing higher occupancy rates.
General manager for marketing at Executive Menteng Apartment Veri Y. Setiady said his apartments were seeing up to 99 percent occupancy this month.
"Due to the rupiah fluctuation, we have had to increase leasing rates, but we have also increased our facilities and services," he said.
The new facilities included more cable TV channels and an Internet connection in every unit, he added.
The rate for a one-bedroom unit had increased to $1,500 per month from $1,100, while the three-bedroom units were up to $2,400 from $1,800 per month.
Executive Menteng Apartment has 240 units including one- bedroom units and penthouses. Some 72 percent of the units are for leasing. The minimum lease is one year, except for the one- bedroom units which are available for a minimum lease of six months.
Veri said the tenants on his apartments were mostly expatriates from the U.S., Britain and Japan.
Promising?
As a matter of fact, apartments are a relatively new concept in Indonesia. It was not until the late 1980s that the city started to see the development of high-rise apartment buildings.
At that time, expatriates were the main target for developers, but then they realized that more locals were also interested in purchasing apartments. There was also a time when locals were buying apartments not for living in, but rather as investments.
The future of serviced apartments in Indonesia looks promising as busy executives are seeking convenience and the best location near the central business district. This is something that serviced apartments do offer.
Allson and Executive Menteng Apartment may be having good luck as several property consultants believe that the apartment sector will remain bleak this year.
In its survey, property consultant PT PricewaterhouseCoopers (PwC) said the apartment sector had not seen much change in occupancy rates by the end of the second quarter of this year.
By the end of June of this year, the average lease/serviced occupancy rate was about 71 percent in the Central Business District (CBD) and 62 percent in secondary areas.
In the same period, around 82 percent of the strata market was confirmed sold and occupancy rates in this sector were 62 percent for the CBD and 68 percent for secondary areas.
Willie Prasetio of PwC said that these conditions would likely still be the same as of the end of this month.
"There will be no major changes in the supply of apartments in Jakarta. Rents and prices will also be the same except for those charged in rupiah due to exchange fluctuations," he said.
Total stock remained at about 9,800 units in the CBD and about 19,230 units in secondary areas. Leased (non strata-title) and serviced apartments accounted for about 5,000 units (51 percent CBD and 49 percent secondary) and strata title approximately 24,000 units (30 percent CBD and 70 percent secondary).
New apartments
According to PwC, over the next three years about 2,350 new units are planned including two towers for Four Seasons, three towers for Pavilion Park and one tower for Menara Da Vinci in the CBD. The remaining units, namely Permata Senayan, Rajawali Chrysant Tower, Taman Gloria and Boulevard Park Plaza are in secondary areas, as well as the four towers of Pantai Mutiara Kondominium.
Prasetio said the average prices for middle grade strata title apartments would rise following the fluctuation of the rupiah against the U.S. dollar.
"By comparison, in the second quarter of this year, the rupiah was set at an average of 11,237 per U.S. dollar. If the rupiah is now about 9,000 per U.S. dollar, therefore the average prices for middle grade strata title apartments will likely rise as the rates are usually charged in rupiah," he said.
He said the average base transaction rents for CBD upper and middle grade leased apartments were US$10.60 and for serviced apartments were $12.30 with service charges of around $1.70- $3.10.
Average prices for strata title apartments were $2,150 for upper and $580 per square meter for middle grade apartments, he added.
Meanwhile, Procon Strategic Advisory Group reported the vacancy level in the apartment market fell slightly to 41.1 percent in the second quarter of 2001 from 41.8 percent as a result of a positive take up of 106 units and no new supply.
Condominium units for lease continued to increase their market share contracting the share of purpose-built rental apartments as well as serviced-apartment projects.
Only a few preferred rental apartment projects and some condominiums for lease in prime areas increased rentals by up to 5% and 10% respectively during the second quarter as their occupancy rates continued to improve over the last 12 months.
Most projects maintained their rentals although the market remained thin and vacancy rates were high, Procon said.
"A few condominium projects mainly in the secondary area however are still flexible in their rental negotiations," it said in the second quarter market review.
Purpose build-rental apartments will continue to face strong competition from condominium units for lease. Apartments with U.S. dollar rentals are likely to adjust their rentals to reduce the gap with the rupiah rental condominium projects, Procon said. (I. Christianto)