'City industrial property market stagnant'

'City industrial property market stagnant'

Fitri Wulandari, The Jakarta Post, Jakarta

The industrial property market in Greater Jakarta remains
stagnant, with an average occupancy rate of below 69 percent amid
a sluggish investment climate.

Colliers International Indonesia, an international property
consultancy firm, said in its report that the occupancy rate in
Greater Jakarta industrial estates for the third quarter of 2002
averaged 68.6 percent, down from 71.8 percent in the same period
last year.

"Increasingly, investors are pursuing exit strategies from
Indonesia, resulting in a steady increase in properties being
offered for sale, with investors exploring opportunities in
countries such as east China and Vietnam, which offer more
certainty in the business climate and higher productivity with
lower operational costs," Richard Rossiter, the managing director
of Colliers International Indonesia, said.

The report said Indonesia had failed to lure investment as it
had lost its competitive edge over other ASEAN countries that
could provide investors with investment incentives, legal
certainty and reliable labor.

An unstable political climate, unfavorable labor regulations
and tax incentives are some factors that are prompting foreign
investors to postpone expanding their factories and make new
industrial investment in Indonesia.

Rossiter said it was a major factor behind the drop in demand
for industrial land in Greater Jakarta.

As of the third quarter of 2002, transaction volume in the
Greater Jakarta industrial property market only reached 14
hectares compared to 18 hectares in the same period last year.

Meanwhile, total supply as of the third quarter this year
increased by 2 percent to 10,234 hectares following the entry
into the market of an additional 200 hectares at the Modern
Cikande Industrial Estate in Cikande, Banten province.

The report also shows that the Karawang-Cikampek region has
the highest vacancy rate with 35 percent of industrial estate
land unoccupied, followed by Bekasi in West Java with a vacancy
rate of 33 percent.

Rent for standard factory buildings in 2002 is Rp 46,000
($5.10) per square meter and Rp 23,000 ($2.60) per square meter
per month for Jakarta and on the outskirts respectively.

Collier predicts that the industrial property market in
Greater Jakarta will not recover until after 2004.

"Recovery of the industrial property sector can only be
expected after 2004, along with a higher growth rate of the
manufacturing sector and the national GDP," Rossiter remarked.

He predicted that there would be no new supply of industrial
land for the remainder of 2002. For the next 12 months, Colliers
said that converting industrial premises into warehouse space and
distribution centers would continue to dominate the minority
demand.

However, he stressed that it would depend on the interplay of
political, economic factors and the outcome of the 2004 general
election.

Further, Rossiter advised the government to provide investors
with a more conducive business environment by improving labor
relations and offering tax concessions and other incentives.