More companies turn to serviced offices

More companies turn to serviced offices

Rudijanto, Contributor, Jakarta

Serviced office companies remain optimistic about strong
demand this year due to increased inquires and new sign-ups, but
are still refraining from expanding in Jakarta despite the
encouraging signs.

"The economic climate is improving after the elections. That
is why all of our suites were fully occupied in the third quarter
of last year. Our occupancy rate remains high early this year at
over 90 percent. I think we can reach the same level as last
year's third quarter this year," says Rosaline Mayapada, general
manager of The Executive Centre.

Indonesia's political and economic situation is steadily
improving after the successful presidential election last year,
although international surveys still indicate that Indonesia is
the most corrupt country in Asia. This is part of the reason
investors are still refraining from giving their full commitment
to the country.

Unlike the conventional office market, which depends on the
full commitment of investors for new take-ups, the serviced
office market is targeting investors who are still testing the
waters by opening a representative office in Jakarta.

"The demand for serviced offices remains strong. Even during
the crisis, we managed to grow. The reason for this growth is
that our concept meets the requirements of companies who are
downsizing, testing the waters or starting businesses here," says
Mee Kim, the president of CEO SUITE.

While the conventional office market might be shaken by bomb
blasts such as the ones at Jakarta's J.W. Marriott Hotel and in
front of the Australian Embassy, serviced offices might benefit
from such incidents.

With many offices near Jakarta's Australian Embassy damaged in
last year's blast, frantic executives from those offices
transferred their operations temporarily to serviced offices.
This helped boost demand for serviced offices last year.

"We are very flexible in rental terms so companies do not need
to commit themselves to long-term contracts with us. In addition,
we provide them with various services, including secretarial work
and legal limit processing, needed to set up an office," said
Lena Thong, the center manager of the Plaza Business Centre.

Mee Kim of CEO SUITE emphasized that her company did not
merely rent office space, but also comprehensive services that
enabled both newcomers and established businesses to operate
smoothly and efficiently in Indonesia.

Aside from providing general guidance on who is who, serviced
offices also have several affiliated companies, including law
firms and sworn translators, to assist their clients. This one-
stop-service concept is one of the strengths that helps the
sector to keep growing.

Rather than finding their own office space and spending money
for furniture, businesses with up to eight employees can take
advantage of a serviced office. By using the services of a
serviced office, businesses have no need to spend money and
energy finding an office and hiring secretaries, cleaning and
security staff, and other non-core personnel.

"The initial capital investment for an integrated back office
and IT system may cost a lot for a start-up company if they
choose to own or rent their own office. In addition, the
unproductive space used for the reception, pantry and meeting
room can reach up to 30 percent of the rented space," said Lena.

As the Indonesian economy steadily improves, many players in
the serviced office sector are expressing optimism about the
outlook of the sector. However, most of these players are still
not planning any expansion.

"There is always the possibility for us to expand the size of
our centers. This still needs a feasibility study. But, at the
moment, we are concentrating on countries where we have strong
demand, for instance China, namely in Beijing and Shanghai. We
will not expand our operation in Indonesia this year," Rosaline
said.

Plaza Business Centre's Lena answered diplomatically when
asked whether the company would expand its operations in
Indonesia this year, saying the company's CEO was still studying
the expansion plan.

"There are many criteria in looking for a building for Plaza
Business Centre. It is not easy to get a building that suits us.
I foresee many new office buildings being completed in the next
two years and that is an opportunity for us to expand," Lena
said.

In spite of admittedly strong demand, Mee Kim said CEO SUITE
would not expand its space in Jakarta, namely in the Jakarta
Stock Exchange Building and Wisma GKBI. Instead, the company will
open another operation in Beijing at the LG Beijing Tower, this
August.

"Many people want to do business in China. That is why we have
decided to expand to that country too," Mee Kim said.

While players in the serviced office sector admit strong
demand, their reluctance to expand their operations in Indonesia
indicates demand is not strong enough to justify an expansion at
this time.

Indonesia's serviced office sector still relies heavily on
multinationals and joint venture companies, with demand among
local companies still weak. For example, domestic companies make
up just 20 percent of Plaza Business Centre's clients.

Mee Kim says the serviced office sector still needs to educate
the local market and demonstrate that the concept offered by
serviced office companies, particularly CEO SUITE, is really cost
effective.

"The mentality among Asian businesses, including Indonesian
ones, is that they want to own their own offices and have their
own secretaries. But I see the mentality slowly changing now. For
instance, in Japan, 99 percent of the clients of serviced
apartments are local companies," said Mee Kim.

Price also remains a sensitive issue for local businesses,
particularly small and medium-scale enterprises. The fee for
secretarial and other services is still relatively high for most
local businesses.

"What makes our services seem expensive is that our
personalized services to clients are delivered and maintained at
premium quality," Lena said.

While the market for serviced offices is still weak among
domestic companies, another concept offered by serviced office
companies, namely virtual offices, has received a strong response
from local businesses.

With fees ranging from Rp 500,000 to Rp 1 million, local
companies can get an address, telephone and fax numbers from a
serviced office company. In addition, the receptionist can
transfer any incoming call to the mobile phone of the virtual
client.

Serviced office companies still need a more creative concept
to attract local clients. Otherwise, they will remain dependent
on multinationals and joint venture companies, or will simply
plan their expansion outside the country.