Indonesia's property market enjoys robust demand
Indonesia's property market enjoys robust demand
JAKARTA (JP): PT Procon Indah, a leading property consultant
company, is upbeat about the performance and future outlook of
Indonesia's property market.
Craig Williams, senior technical advisor to Procon Indah, said
yesterday that the country's strong economic growth and last
year's high investment approvals have increased demand for
various property sectors, especially office space and industrial
estates.
"There is a strong correlation between the total investment
approvals and demand for office space and industrial estates,"
Williams said when releasing the April-edition of Property Market
Outlook, a quarterly magazine published by Procon, in association
with international property consultant James Lang Wootton.
Last year the Investment Coordinating Board approved a total
of US$23.7 billion worth of foreign investment projects, almost
three times higher than the previous year. The value of foreign
investments approved in the first three month of this year has
reached $12.9 billion.
In the past, Williams said, a large portion of office space
demand has been generated by local companies. With the growth of
foreign investments, more multinational companies are expected to
locate and expand their offices here.
Foreign investor interest in Indonesia's property has remained
dominated by Asian investors, especially from Singapore and Hong
Kong. Over 60 percent of the investment enquiries collected by
Procon Indah last year was generated from these two countries.
This year, demand for prime office space for rental remains
high, as demonstrated by the precommitment of almost 200,000
square meters of office space.
"This represents 70 percent of office space, which will be
completed this year," William said, adding that the high level of
precommitments will stabilize rental rates at $12.50 per square
meter of office space per month.
In the industrial market, the average occupancy level declined
by 2.6 percentage points, to 72.4 percent, from the previous
quarter. "However, it is expected to bounce back very quickly in
the next two quarters due to no new additional supply coming into
the market in the period," he said.
As industrial estates in Bekasi are reaching a relatively high
occupancy level, developers are now shifting their focus to new
industrial estates in Karawang. Both are in West Java.
"These two locations are expected to be the most active
development areas in the short to medium term," Bayu Utomo, head
of Procon's research center, said.
Procon Indah foresees a surging future supply level for the
retail market, which is the strongest performing market at the
moment.
"There is a lot of construction underway for retail centers,
and thus we expect a large number of supplies in the near future,
but there is very strong precommitment also," Bayu said.
More than 70 percent of retail space, almost 200,000 square
meters, which will be completed in the second quarter of 1995,
has been precommitted.
A number of foreign department stores are among those who have
given precommitments. Kelapa Gading Mall, for instance, has
attracted Sogo Department Store of Japan. Mega Pasaraya and
Senayan Square have clinched Seibu of Japan and the Metro
Department Store of Singapore, to anchor the retail centers.
For apartments, Williams predicted that the demand will slow
down in a short term because "the launching of condominiums and
apartments has been in a huge race in the last two or three
years."
Besides, Williams said, those who buy apartments or
condominiums are only doing so for speculation. "In the long run,
however, we will see a move towards apartment living, both in
low-cost apartments and luxurious apartments."
In addition to the surging future supply level for most
sectors in the short to medium term, the government's tight
credit policy for the property sector, increasing lending rates
and increasing cement prices and building materials have put some
pressure on developers in proceeding with their proposed
projects.
"Only projects that have successfully secured financing or
precommitments from buyers or tenants are likely to go ahead,"
Williams said. (rid)