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.