Thu, 29 Jul 2010

From: The Jakarta Globe

By Irvan Tisnabudi
Jakarta. More businesses will be relocating to South Jakarta and West Jakarta over the next several years, with the central business district seeing a decline in its share of the market due to high rents and traffic congestion, property analysts said.

Property consultant PT Procon Indah released a report on Wednesday saying that the central business district, which now has 65 percent of the leased office space in Greater Jakarta, will see its share decline to 53 percent by the end of 2012.

“Many residential areas are also located in [West Jakarta and South Jakarta], compared to the CBD,” Procon chief executive Lucy Rumantir said.

“So this makes commuting much easier for the residents living there and the traffic is relatively less hectic in non-CBD areas,” she said.

South Jakarta’s share of the office market is expected to rise from 18 percent now to 22 percent by the end of 2012, while West Jakarta’s share is projected to increase from 10 percent to 20 percent, according to Procon.

However, the total size of available office space in the central business district will rise 5.8 percent over that period to about 530,000 square meters, Procon predicts.

The overall area of the Jakarta office market is expected to increase 27 percent during that time, from 786,000 square meters to about one million square meters.

Meanwhile, the South Jakarta market will increase 41 percent to 220,000 square meters, and the West Jakarta market by 150 percent to 200,000 square meters.

Anton Sitorus, head of research at Jones Lang LaSalle Indonesia, said South Jakarta and West Jakarta would attract different types of companies than the central business district.

“Companies that want to maintain a high-profile corporate image, such as big trading companies or financial institutions, will always prefer being located in a CBD, even though the location is packed,” Anton said.

“But other companies that want to be located closer to residential areas, for example ones dealing with consumer goods, or companies that want to be closer to strategic facilities such as ports or airports, like shipping companies, will prefer to rent offices outside the CBD.”

Steeper rents are also a deterrent to companies that don’t feel the need to pay more to maintain their presence.

Procon said office space in the central business district cost $17.80 per square meter, 53 percent more than the average of $11.60 outside it.

However, along with rising demand, rents in outer areas would rise at a faster rate than those that are in the central business district, the Procon report said.

“We predict that the rental rate will grow by 8-10 percent per year in the CBD and 10-13 percent per year in non-CBD in the upcoming years,” said Utami Prastiana, Procon’s head of research.