Leased apartments expect more guests this year

Leased apartments expect more guests this year

With the improvement in business sentiment, the demand for
leased and serviced apartments in Jakarta is likely to continue
to revive this year.

New demand is expected to come from the increase in the number
of short-term business visitors and expatriates working for
multinational companies in the capital.

"Inquiries for leased and serviced apartments are expected to
increase in South Jakarta in line with the concentration of the
new business area on Jl. Simatupang," property consultant
Colliers International Indonesia said in its quarterly research
report.

The property consultant predicts that existing and newly built
offices in the Jl. Simatupang area will generate fresh demand for
leased apartments as most of the occupants are multinational
companies involved in oil and gas, mining, telecommunications and
consumer goods.

With its close proximity to a number of international schools
such as the Jakarta International School, Singapore International
School and the Netherlands International School, as well as
supporting facilities such as shopping centers and hospitals, the
Simatupang area might be an attractive alternative for those
looking for apartments.

Another property consultant, Procon, also sees promising
demand for leased and serviced apartments in Jakarta this year.

Like Colliers, Procon also believes a projected increase in
the supply from new serviced apartment projects and from the
conversion of strata-titled apartments into leased apartments
will make the competition among operators even fiercer, despite
the expected higher demand.

According to Procon, the occupancy rate will consequently drop
due to the high supply but lease rates will most probably
increase on the impact of the expected increase in fuel prices.

Procon estimates that serviced apartments will continue to be
an attractive accommodation option for long-term visitors because
they offer the same quality of service and facilities provided by
five-star hotels at lower rates.

On the supply side, Colliers reported that the supply in the
rental apartment market increased by 2 percent in 2004 to about
6,280 units. About 56 percent of these units are managed as
leased apartments while the remainder are operated as purely
serviced apartments.

Of the total supply, about 45 percent are located within the
central business district (CBD) around Jl. Thamrin and Jl.
Sudirman in Central Jakarta and Kuningan, South Jakarta.

According to Colliers, as a long-term investment, leased
apartments are not as popular as strata-titled apartments because
there are only 1,038 potential leased and serviced apartments
scheduled to enter the market between 2005 and 2007.

Similar to the situation experienced by the strata-titled
apartment market, 2006 will be a peak period for the leased
apartment supply.

"2006 supply is around 75 percent of the annual supply in 1998
when the highest annual supply was recorded," Colliers said.

Of the 1,038 units of leased apartments coming into the market
in the next three years, serviced apartments will dominate the
supply, with 995 units.

About rental rates, Colliers estimates there will be an
increase of between 5 percent and 7 percent within the next 12
months due to the expected increase in fuel prices.

In general, rental rates of leased and serviced apartments
during 2004 were stable. The average monthly rental rate for
middle-class and up apartments was about Rp 117,800 ($US12.70)
per square meter with an additional service charge of Rp 29,300
per square meter a month. For luxury apartments like The
Dharmawangsa Residence in Kebayoran, South Jakarta, units were
offered at Rp 165,000 per square meter a month, plus a monthly
service charge of Rp 14,940 per square meter.

Serviced apartments naturally charge higher rates and charge
in US dollars. The asking gross rent of selected apartments
within the CBD area was about $19.90 per square meter a month,
while several developments outside the CBD were offered at $11.40
per square meter a month. -- The Jakarta Post