Gloomy outlook forecast for office space market

JAKARTA (JP): Owners of office buildings in Jakarta's central business district are in for more tough times over the next two years, with a slump in demand and falling rent forecast, property consultants PT Procon Indah/Jones Lang Wootton said on Tuesday.

The amount of occupied space in Jakarta's main commercial district is expected to decline by 110,000 square meters in 1999, and by a further 42,000 square meters in 2000, the company said in its biweekly Indonesian Property Brief.

Continued rationalization, downsizing and relocation strategies being pursued by many companies would lead to higher vacancy rates this year, the report said, adding that Indonesia's political and social instability would also contribute to the downward pressure.

Average vacancy is projected to rise to 28 percent by the end of this year and to 31 percent in 2000. "Pressures on landlords to reduce rent are likely to persist due to higher vacancy," it said.

In 1998, the majority of office buildings in the central business district offered rents ranging from between US$10 and $13, plus monthly service charges in the region of $6 and $7 per square meter. However, most rents were fixed at an exchange rate of between Rp 4,000 and Rp 5,000 to the U.S. dollar to prevent tenants from leaving in hordes.

The rupiah plunged in 1998, at one time reaching Rp 17,000 to the dollar before ending the year just above Rp 8,000.

The report, which reviewed conditions in the office market in the last quarter of 1998, said that around 626,800 square meters of office space in the central business district was vacant by the end of the year.

Office space supply in the district increased by 81,500 square meters to 2.84 million square meters by the end of 1998.

Many planned office construction projects have been put on hold, the report said, citing Menara Jamsostek, Wisma Mulia and a former Danamon Data Center building.

Nevertheless, 48,000 square meters of new office space will be opened this year, with a further 85,000 square meters scheduled for completion in 2000. (02)