Tue, 19 Aug 2003

Jakarta property sector shows modest performance

The Jakarta Post, Jakarta

Jakarta's office and industrial property market performed modestly with no new supply in office space, and particularly low demand in the office sector in the first half of 2003, signaling a weakening trend as the country gears up for the elections in 2004.

Property consultant Procon in its Jakarta quarterly property market review said no new supply in available space was recorded in the office and industrial estate market.

Overall Jakarta office space remained at 4.97 million square meters (sqm) as there were no new office projects completed at the second quarter of 2002.

Demand and leasing activities in the office market remained low despite improving macroeconomic indicators.

Demand in the central business district (CBD) market was only recorded at 7,500 sqm. Total leasing transactions were down by 10 percent with total recorded transactions of 24,000 sqm in the second quarter of 2003.

Weak business confidence, corporate consolidation and increasing expenses were factors noted as contributing to the low demand for office space.

"Landlords are led to concentrate on maintaining existing tenants in their buildings by offering competitive rental rates and other forms of concessions," the report said.

Demand outside the CBD area was better at 29,100 sqm. Offices outside the CBD area had a higher occupancy rate of 83.9 percent compared to the 79 percent rate in the CBD area.

Amid the weak market and declining demand, rental rates in the CBD were relatively stable. The strengthening rupiah contributed to a slight decline in rental rates by 0.8 percent from Rp 105,370 per sqm per month to Rp 104,500.

The general election in 2004 is expected to cause a downward trend in the office market as a weak business sentiment lingers.

On industrial estates, industrial land supply was flat at 6,953 hectares (ha) as of June 2003.

However, it recorded a better sales transaction with take-up recorded at 20.1 ha compared to 12.7 ha in last the quarter. On average, land area sold ranged between 0.4 ha to 6 ha. Land that are leased ranged from 0.02 ha to 4 ha.

Local investors dominated the buyers for industrial land area. Leased industrial land was also dominated by local investors (82 percent), with the remainder leased by Asian investors.

About 96 percent of the demand came from food processing factories, automotive, electronics and depot containers.

The price of industrial land declined by 4.41 percent to 304,412 per sqm as the local currency strengthened against the green back.

The report said that industrial land demand would remain modest in the future.

"Supporting industries and small to medium sized enterprises from local investors will continue to be demand generators for small land plots and standard factory buildings," Procon said.

"Demand for large plots of industrial land will continue to be limited," it added.

The report, however, noted that the condominium market recorded active sales and increasing supply.

As of June 2003, total cumulative supply reached 26,884 units. An additional supply of 149 apartment units came from Pantai Mutiara apartment tower, Ibis Mangga Dua and Permata Senayan.

Procon said 320 units were sold during the second quarter of 2003. In the previous quarter, some 184 units were sold.

The report said the condominium market would become the most active sector in the future.