Economic growth triggers demand for office space

Primastuti Handayani, The Jakarta Post, Jakarta

Expansion by existing multinational and local firms and a growing list of new ones have boosted demand for office space in Jakarta, particularly in the central business district (CBD), according to a quarterly report by property consultant Jones Lang LaSalle.

The company pointed to the country's improving economy, which expanded by 6.35 percent in the first quarter due in part to increasing foreign investment, as the main trigger for the higher demand.

"Currently, there are 3.11 million square meters (sqm) of office space in the CBD with some 707,000 sqm vacant in different office buildings," Jones Lang LaSalle Indonesia national director Lucy Rumantir said.

"By 2008, office space supply will increase by some 350,000 sqm to make a total of 3.4 million sqm," she added.

Overall, demand between January and March totaled approximately 16,200 sqm, which represented a 14 percent decline compared to the previous quarter. However, it represented a 58 percent increase compared to the same quarter of last year.

The company said that vacant space slightly increased from 22.6 percent in 2004's last quarter to 22.8 percent in this year's first quarter, due to the completion of Plaza ABDA on Jl. Jendral Sudirman.

With regard to rents, Lucy estimated these would increase from the current range of between US$11 and $15 per sqm per month to about $19 to $20 per sqm per month by 2007.

"Rents are nearing their pre-1997 financial crisis levels in new office buildings with improved security facilities, such as separate entrances and exits, as well as security check points."

Jones Lang LaSalle said in its report that by location, 61 percent of total CBD supply was located along Jl. Jendral Sudirman and Jl. MH Thamrin, with Jl. HR Rasuna Said and Jl. Gatot Subroto accounting for 23 percent and 16 percent respectively.

At present, there are 10 office building projects in those areas slated for completion over the next three years.

Although the CBD remains attractive for many companies, many others have sought to relocate -- with Jl. TB Simatupang in South Jakarta being the most popular choice -- due to continuing traffic jams in the CBD and the extending of the three-in-one traffic restriction policy by the Jakarta administration.

This policy obliges private cars to have at least three passengers when passing through the restricted zones from Jl. Sisingamangaraja to downtown Kota and from the Senayan overpass to the Kuningan intersection between 7 a.m. and 10 a.m. and from 4:30 p.m. to 7 p.m.

An earlier study revealed that Jakarta's economic losses from traffic congestion reach Rp 41.05 billion (US$4.33 million) every day.

All in all, Jakarta is among the major cities in Asia Pacific, such as Tokyo, Hong Kong, Singapore, Shanghai and Sydney, that are experiencing growing office space demand.

"The demand for office space (in Asia Pacific) is the highest since 2000," Jane Murray, Jones Lang LaSalle Asia Pacific head of research, said in a statement.

Economic growth, however, has yet to successfully trigger apartment demand as this year's first quarter demand figures showed.

By the end of March, total condominium supply stood at approximately 33,300 units with some 82 percent having been sold. This figure represented an increase over 2004's last quarter supply of 31,376 units, of which some 81.36 percent had been sold.

With a supply of 15,095 units available in the first quarter and some 32.2 percent remaining vacant, landlords were forced to lower rents by 1 percent to $11.2 per sqm per month.

"Therefore, we would urge (condominium) developers to be careful in aiming for the right market segment. Otherwise, (if the condominium buyers are investors), we'll see more units with lights off during the night," Lucy said.