Levels of vacant office space to rise to 11%

Levels of vacant office space to rise to 11%

JAKARTA (JP): A property market study predicts a brighter future for retail property despite the fact vacancy levels of office space in the capital are likely to rise to 11 percent by the end of this year from 7.51 percent last year.

The managing director of the property consulting company, PT Colliers Jardine Indonesia, Peter Collins, said in the 1995 edition of the company's Asia-Pacific Property Trends that the increase in the vacancy levels of office space will be partly caused by the new space entering the market.

The report said that 340,584 square meters of new office space will be ready for use in 1995 and another 464,081 square meters in 1996.

Among the new office space is that in the Jakarta Stock Exchange building, the Bank Artha Graha building, Mashill Tower, Bapindo Center Towers, Empire Tower, Great River Tower, Exim Center and Adhi Building.

Other, previous studies found that the market for office space in the capital has been in oversupply by 20 percent over the past two years.

The Indonesian association of property and housing developers, Real Estate Indonesia, foresaw that the oversupply will increase after the operation of the new Jakarta Center Business District on Jl. Sudirman, South Jakarta, with its 825,700 square meters of office spaces.

Collins said that net effective rents, therefore, are expected to fall although the capital values of the property will likely remain firm at between US$2,400 and $2,800 per square meters.

He added that banks and financial institutions will continue to occupy the majority of office spaces available in the market, noting that they are now taking up some 40 percent of the current space.

Retail

Although an oversupply of office space exists, Colliers saw new burgeoning growth in the demand for shopping centers in the capital due to the increase in the number of people of the middle class, primarily those aged between 25 and 35 years.

The company estimates that around 214,400 square meters of new shopping space will be available on the market this year and another 218,750 square meters next year.

Mega Pasaraya, for example, is to open a 25,000 square meters shopping center by May, it said.

"The largest shopping center to be completed in 1995 will be the 92,000 square meters Taman Anggrek Shopping Center, in which St. Michael & Spencer has already committed itself to 3,000 square meters," Collins said.

According to Collins, the average retail rents have reached between $430 and $730 per square meter per annum, while Plaza Indonesia has raised its rents by 30 percent to 40 percent this year to $1,500 per square meter per year.

"With the entry in the greater Jakarta area of at least five shopping centers which are greater than 20,000 square meters in size, competition for quality tenants will be fierce, but we expect rents to hold," he said.

In the hotel business, he said that the occupancy levels dropped slightly to 75 percent in the second half of last year due to the opening of several new three-star and four-star hotels, which offered discounted rates of between $65 and $120 per night.

"Total supply of quality hotel rooms in Jakarta is currently 12,300, with five star-rated hotels representing 43 percent of stock. A further 1,000 three-star rated rooms, and 800 five-star rated rooms will come on line in 1995," he said.

As for residential demand, he said that this year will see a gloomy market. For that reason, residential facility developers are trying to target middle class families, who are enjoying rapidly growing spending power, he said.

He noted that in the last quarter of last year, some 4,000 apartments came on stream, of which three quarters were aimed at the middle class sector.

"While apartments, developed solely for lease, have overall occupancy of 87 percent, demand is soft from expatriates looking to lease upper-class strata title units," he added.

Collins said the industrial property market in Indonesia is improving this year with the inquiry rate to purchase land up by 10 percent during the fourth quarter of last year. (fhp)