Industrial estate sales drop as foreign investment falls
Industrial estate sales drop as foreign investment falls
JAKARTA (JP): Declining investor interest during Indonesia's
turbulence will continue to slow demand for industrial property
this year after last year's downturn, according to a recent
property report.
The biweekly report issued by property consultant Procon
Indah, in cooperation with its partner Jones Lang Wootton
Research, said the industrial sales activity would not pick up
until 2000, when the economy is expected to swing back.
"Based on the projected decline in the manufacturing sector,
which determines the demand for industrial land, cumulative take-
up in 1998/1999 is projected to bottom at 76 percent to 78
percent of total land area," the report's Dec. 21 issue said.
This is a slide from last year's third quarter industrial
property sales, totaling 3,789 hectares, or 79 percent of
existing industrial area, which also showed minimal market
activity.
The report said sluggish sales would force developers to sell
their remaining industrial properties at a big loss to ensure
that investor commitment maintained cashflow.
In the third quarter of 1998, the total area of available
industrial land remained at 4,792 hectares.
Foreign firms were seen to delay industrial investment
decisions in response to the deterioration in domestic consumer
demand and declining exports as a result of the economic crisis.
Predictions of continuing social unrest and the uncertain
political conditions in Indonesia this year had a further
negative impact on major foreign investment decisions, the report
said.
The secondary market, however, showed some activity as owners
were more likely to lower prices, giving investors major savings.
The report said that most joint-venture industrial estate
developers targeting foreign companies quoted their prices in
U.S. dollars.
But they had now reduced asking prices by 10 to 20 percent,
some even as low as 15 percent. They also set the exchange rate
at Rp 5,500 to Rp 7,500 to the dollar, lower than the market
level of about Rp 8,000.
"This indicates an estimated drop of effective prices by up to
50 percent in U.S. dollar terms," the report said.
In Bekasi, West Java, dollar-denominated asking prices dropped
by 75 to 90 percent, in Tangerang they dropped by 40 to 75
percent, Karawang by 60 to 70 percent and Serang by 55 to 85
percent, the report said. All are industrial boroughs
surrounding Jakarta.
As the economy remained in the doldrums last year, developers
shelved expansion plans and focused on selling their developed
properties. The proposed development of about 2,385 hectares of
industrial land had been put on hold since the onset of the
economic crisis in July 1997, the report said. (das)