Apartment sector sees signs of recovery, occupancy increases

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)