Business getting better as economy shows its strength

Debbie A. Lubis, Contributor, Jakarta

As the country's economy begins to show signs of recovery and the security situation has improved, more and more businesspeople and expatriates are coming to Jakarta, making the serviced- apartments business a lucrative venture.

Major serviced apartments, particularly in Jakarta, reported an occupancy rate of between 80 percent to 100 percent in 2003. Occupancy is expected to remain high this year, despite fears that the general election and the country's first presidential election on July 5, could incite social unrest.

"The elections are not seen as a security threat and that's why we are optimistic that the service industry will continue to grow," said Ratu Neilla, marketing manager of Plaza Residences, which is located above the Hotel InterContinental MidPlaza on Jl. Jend. Sudirman, Central Jakarta.

Neilla said that more foreign investors had been drawn to the country, while expatriates who had left Indonesia following the financial crisis, had already returned.

Indications of the improved economic situation include the strengthening of the rupiah and the low inflation rate.

Economic growth is expected to increase to five percent this year, from about 4.5 percent last year. The inflation rate is also projected to continue to decline to between 5 percent and 6 percent this year, from between 6 percent and 7 percent in 2003.

However, economic analysts estimate that foreign investment will remain low, despite improvements in the economy, as many foreign investors are waiting for the results of the elections.

With 257 apartments -- both furnished and unfurnished -- the Plaza Residences has enjoyed an occupancy rate of 100 percent over the last three years.

"Until today we still maintain a good occupancy-rate. Most of our tenants prefer to have short-term contracts, but only because they are waiting to see what happens during and after the elections. Moreover, we still have 28 prospective tenants on our waiting list," Neilla said.

This optimistic outlook is shared by Yuliet Lokananta of Allson Residence, who works in public relations, "The serviced-apartments business is looking good this year, nowadays most people choose to stay in a serviced apartment rather than a hotel," she said. Allson Residence has 117 apartments and is located in Senen, Central Jakarta.

Grace Alviar, the director of communications of Hotel Borobudur Jakarta is also bullish about the apartment business this year despite the elections.

"We believe that the demand for our Garden Wing Serviced Apartments will continue to increase this year," Grace said.

The Garden Wing apartments always had high occupancy rates during the elections, she said, adding that many foreign journalists and political observers stayed at the apartments during the general elections in 1999.

Dwi Lies Anggraeni, the Aston Hotel Jakarta director of sales, said their apartment business would grow party because of the changing tastes of visitors.

Many business people chose to stay in serviced apartments because they guaranteed more comfort and privacy than hotels, she said.

Most of the city's serviced apartments are located in close proximity to the central business district, on Jl. Sudirman, Central Jakarta. They generally provide excellent service, such as 24-hour security and comfortable rooms, with quality furnishings and health and sports facilities.

In addition, they usually provide bath towels and bed linen, free tap water and electricity, a television with access to cable vision, and a kitchen with refrigerator, electric stove, oven, kitchen utensils and microwave.

Serviced apartments are generally rented at a monthly rate of at least Rp 17 million (about US$2,000) for a two-bedroom apartment. Tenants are mostly expatriates who work for multinational companies and embassies.

According to property consultant Procon Indah, the average occupancy rate of Jakarta's rental apartments (including serviced apartments) reached 66.5 percent as of Dec. 23, leaving 4,998 units vacant.

In its fourth quarter report, Procon said that the total annual "takeup" (space occupied) in 2003 was 5.2 percent lower than last year's figure of 535 units.

The cumulative demand as of December, 2003, totaled 9,953 units, an increase of about 27 percent from 7,812 in June 1997, just before the financial crisis hit the country.

The rental rate was relatively stable in 2003, although there was a slight change due to the depreciation of the rupiah against the U.S. dollar.

Procon says, that the average monthly rental-rate for serviced apartments in the fourth quarter of last year was $18.78 per square-meter, while that of non-serviced rental apartments was $14.55 per sq. meter, for those located in prime areas, and $9.86 per sq. meter for those in secondary areas.

An additional supply of 37 units was recorded during the fourth quarter of 2003, bringing the total cumulative supply to 14,936 units at the end of 2003.

The property consultant says that additional supply of non- serviced rental apartments is expected to come from Boelevard Park Plaza in West Jakarta and Four Seasons Regent Residence Tower 4, which are both scheduled for completion in 2004.

For serviced apartments, additional supply will come from Pluit Gold Park Regency in North Jakarta and Aston Rosuna Residence in South Jakarta, which are also scheduled for completion this year, Procon says.