Bali blast to negatively affect property sector

Bali blast to negatively affect property sector

Rendi A. Witular, The Jakarta Post, Jakarta

An international property analyst painted on Tuesday a bleak
picture of the country's industrial property sector following the
Bali bomb blast, saying the sector would take longer to recover
due to the incident.

The Bali bomb attack over the weekend, which killed more than
180 people, mostly international tourists, would further scare
away investors, which already lacked interest in Indonesia over
legal uncertainties, labor issues and security.

Thus, a lot of areas in the industrial property market, which
have been left vacant due to the drop in foreign and domestic
investment over the past several years, would remain so in the
next several years.

"Already compared to 2001, we have seen a further decline in
new investments in the industrial estate sector. The blast will
cause an extended recovery," said Chief Executive Officer of PT
Procon Indah David Cheadle.

Procon's latest report said the take-up of the industrial
estate in the Greater Jakarta area reached 29.7 hectares in the
third quarter of the year, or about 4 percent lower than the same
period of last year, but 200 percent higher than the second
quarter of the year.

The rise in the third quarter take-up compared to the previous
quarter was mainly attributed to a large transaction by a
Japanese car manufacturer which bought space in an industrial
estate in Cikampek. The report did not provide details.

Procon's local director for strategic advisory group Lini
Djafar said the sector was first predicted to fully recover in
three years from now. But, the Bali bomb blast could extend the
recovery to about seven years.

"There was a slight progress in the estate market. We have
even put it in the circle of three-years recovery. But the Bali
blast has jeopardized all the prospects.

"We now predict it will only recover in seven years," said
Lini.

The short-term impact of the Bali bomb blast on the office
market was minimal as the existing occupiers are tied to
contracts which make them difficult to immediately walk away.

Following the Bali incident, office building tenants will put
more emphasis on security and safety of the buildings.

"Most certainly, in the office sector occupiers' decision
making will be more focused on the security and safety standards
of the building they want to occupy," said Cheadle.

Office demand in the Jakarta central business district was
relatively flat during the third quarter with occupancy rates
marginally rising to 78 percent. Of the total 4.95 million square
meters of office space available in the area, 651,800 square
meters remain vacant.

With regard to the Greater Jakarta retail sector, Procon said,
the impact of the Bali incident would not be felt in the sector
as it has thrived mostly from domestic sales. Even if many
expatriates leave Greater Jakarta, the impact would be small.

However, Procon said, in the short term, there would be a drop
in the number of people visiting shopping malls due to fears that
the Bali incident could happen in Jakarta.

The average occupancy rate of retail space in Jakarta as of
the end of September was 91.37 percent. Of the 1.35 million
square meters available in the retail sector, only 116,600 square
meter space were vacant in the third quarter of the year.

With regard to the apartment and condominium market, occupancy
is likely to drop in the short term, but it won't happen
immediately.

Occupancy rates in this sector increased to 62.9 percent in
the third quarter of the year, from 61.6 percent in second
quarter. Of the total 14,768 units available, 5,472 units were
vacant.