Demand for office space in Jakarta remains strong
Demand for office space in Jakarta remains strong
JAKARTA (JP): An international property consultant believes
that worries about the possible oversupply of office spaces in
the city this and next year are unfounded as demands will remain
strong while supplies will fluctuate over the next two years.
"Everyone talks about oversupply in office market... We are
confident that the market will not be in oversupply and the rent
will remain firm at much the same level as now," Martin Steens, a
director at PT First Pacific Davies Indonesia, said yesterday.
He contended that demand is very likely to remain strong this
year, at some 250,000 square meters, the same level as last
year's.
During the first quarter of this year alone, 85,000 to 90,000
square meters of office space were already taken up, Steens
added.
The company projected that the demand for office space will
decline slightly to 230,000 square meters next year and increase
again to 250,000 in 1998.
On the supply side, Steens projected that the supply of office
space will reach a record level of 472,305 square meters this
year before diving to 129,250 square meters next year and recover
at 427,000 square meters in 1998.
Steens, however, forecasted that a number of projects for 1998
will be postponed because the market is more sophisticated, while
developers and banks are much more aware of the supply.
Because of such robust demand and just enough supply, office
rents, which have been stable at US$13 to $14 per square meter a
month -- excluding service charges -- for the last three years,
are expected to remain at similar levels this year and possibly
increase slightly next year, Steens noted.
The vacancy rate of office space is forecasted to fall to
about 10 percent next year, compared to the current level of some
12 percent.
In 1998, however, when supply is expected to recover, the
rental rate is expected to subside to an average of $12.50 a
month per square meter and the vacancy rate is likely to rise to
14 percent.
Because of the large supply this year, large tenants in the
market are very aware that they can obtain attractive packages in
terms of best rental rate, delay commencement date and free car
parking.
"Since the incentives are very great, we have seen a lot of
movements, especially by larger companies," Steens said, naming
Asamera and Mobil Oil among those who have relocated their
Jakarta offices.
Steens noted that traditionally, the market for offices has
been driven by oil companies. Currently the market is much driven
by those in the service sector, including banks, insurance firms,
securities firms, brokerage houses and property companies.
He noted that the large demand for office space has also been
driven by foreign direct investment in the country, which has
increased sharply during recent years.
The government approved foreign direct investment projects
worth US$39.9 billion last year, up from $23.7 billion in 1994.
During the first four months of this year, foreign investment
approvals reached $17.9 billion.
"Even though not all the projects are realized, we still see
that there is a direct relationship between foreign direct
investment and office space demand," Steens said.
Speaking of the retail market, Julian Rayner, another
executive at First Pacific Davies Indonesia, acknowledged that
some areas of the city, especially East Jakarta, will most likely
suffer an oversupply of retail space.
Retail space supply is projected to increase by 50 percent
over the next two years from the existing supply level of some
800,000 square meters. Retail space supply will reach 260,000
square meters this year and 140,000 square meters next year.
On the demand side, Rayner said retail take-ups currently
reached 90 percent of existing space. In most retail projects to
be completed this year, 70 percent to 80 percent of the space has
been precommitted.
Rayner projected that retail rental rates will swing in favor
of the tenants.
"At the moment, landlords demand from tenants payment in
advance for one year, even when they have not moved in. Now, the
trend is changing," he said.
He said average rents are likely to drop from the current
level of $75 per square meter a month in the city center and
$45 in the suburbs.
He also projected that more and more foreign retailers will
enter into the country, either by forming joint ventures with
local partners or forming franchise networks here.
Warner Bros of Hong Kong, BHS department store of Hong Kong,
Tower Records of the United States and Virgin Records of Britain
will possibly enter Indonesia within the next two years, Rayner
said.
At present, the Indonesian retail sector is still closed by
law to foreign investment. The sector is actually allocated for
local small and medium businesses. (rid)