Monthly rental rates continue upward trend

Monthly rental rates continue upward trend

The average asking gross rent of mid-up leased apartment units
continued to climb upwards in the second quarter of this year,
partly due to the increase in the oil price in the first three
months.

Colliers International Indonesia (CII) property consulting
company reported the average monthly rent of mid-up leased
apartment units for two-bedroom increased to US$18 per sq m from
$17 per sq m.

"However, the asking rent of lower-segment apartments was
recorded to stabilize at $11 per sq m per month," CII said in its
Quarterly Research Report.

According to CII, existing leased apartments were facing tough
competition from converted strata-title units in the market.

In the secondary market, selected fresh strata-titled units
from some completed projects offered lower rent, ranging from $5
up to $8 per sq m a month for middle class apartments located
outside the Central Business District (CBD) area, such as
Mediterania Tanjung Duren, Gajah Mada Mediterania Residence and
Mediterania Palace Kemayoran. Units offered were mostly of small
size averaging 45 sq m.

Meanwhile, the upper class units which were mostly located in
the CBD area -- Sudirman Mansion, Bellagio Residence and Daksa
Residence -- offered rental prices at between $13 and $19 per sq
m per month.

Serviced apartment with daily service were priced higher. In
the CBD area rent for two-bedroom units with the average size of
139 sq m was around $20 per sq m per month, while in the non-CBD
area, the asking rent stayed at $16 per sq m per month.

Supply

Similar to the condition in the previous quarter, there was
non additional supply entering the market for leased and serviced
apartments.

As the result, in the second quarter the total stock was
maintained at 6,180 units which comprised 57 percent of leased
units and 43 percent for serviced units.

New supply is predicted to enter the market in the next
quarter by the completion of three apartment projects in south
and north Jakarta.

CII estimates that during the period between 2005 and 2007,
leased and serviced apartment would increase by 7.3 percent which
will bring total stocks to more than 7,500 units in 2007.

"By that time, serviced units with hotel services will
dominate the leased and serviced market to 53 percent," it said.

As purpose-built leased and serviced apartments aim at
expatriates, who mostly prefer to live in the CBD and South
Jakarta areas, development of such apartment were concentrated on
these locations.

Consisting of 2,850 units from the total of 25 projects, the
CBD area leads the market, followed by South Jakarta with its
2,130 units generated from 30 projects.

Demand

In the second quarter, 2005, modest demand for leased and
serviced apartments continued to prevail. Leased apartments
maintained its occupancy rate from lease renewal plus some
portion new tenants.

Favorite locations like South Jakarta and CBD area enjoyed
good occupancy rates at 84 percent and 82 percent, respectively
during the quarter.

Demand for leased and serviced apartments still has the
potential following investment influx to Indonesia both from
overseas and domestic sources primary in infrastructure and
energy sector.

"Based on expatriates living in Indonesia who need short- and
medium-term accommodation, the leased and serviced apartment
market will benefit from its flexible leasing terms," CII said.

Outlook

The apartment market is becoming popular for Jakartans and
other domestic market with specific buyers' profiles like
students, executives, young couples and investors.

CII estimates that purpose-built leased and serviced
apartments are likely to record a sustainable demand from
expatriates, while strata-titled apartments target domestic
buyers.

Development, which emphasizes the expatriate market, should
take into account the companies' budgets to keep the premise
competitive. Apartments located in the CBD area with reasonable
rental rates are highly demanded.

Anticipating a massive supply in the market in 2006-2007
period, developers will be more aggressive selling the unsold
units in the second half. However, due to the tight market
competition in the CBD, North and West Jakarta, selling will be
tough, CII predicts. -- The Jakarta Post