More discounts expected despite surge in rental demand

The rental apartment market in Jakarta has shown promising signs of activity over the first three months of this year but future demand will remain soft as primary occupants, such as foreign investors, are still waiting for the results of the presidential elections before coming back to the country.

According to a quarterly report issued by the Procon Indah property consulting company, the leasing market was very active during the January-March period, especially in the strata-title apartment for lease market.

"High net take-ups of over 10 units occurred in Taman Raja Apartment, Permata Eksekutif Apartment, Kintamani Apartment and Sudirman Tower Condominium," the property consultant said.

Positive net take-up was also recorded in the serviced apartment market, with Kuningan Apartment, Menteng Point, Batavia Apartment and Juanda Regency Condominium experiencing net take- ups of more than 10 units each.

In the purpose-built rental apartment market, Pondok Indah Golf, Apartment Tower 2 and Menara Budi booked additional take- ups of 16 and 15 units respectively in the period between January and March.

"Business expansion at the beginning of the year, especially by Japanese manufacturing and oil companies, has had a positive impact on leasing activities in the rental apartment market," said the company in its report.

Foreign observers and journalists coming here for the legislative elections earlier this month were also cited as being some of the main contributors to the surge in demand during the first quarter.

In contrast, leasing transactions within purpose-built rental townhouses recorded negative net take-up of 18 units during the quarter under review.

In line with increasing market activity, the overall occupancy level increased by 1.62 percent from the figure in the previous quarter to 68.3 percent, leaving an estimated 4,740 units vacant.

Procon said that total net take-up during the first quarter stood at 243 units, a sharp increase from the last quarter of 2003, which recorded a negative take-up of 32 units. This meant that net take-up was 38 percent higher than in the same period last year.

Cumulative demand as of March, 2004, stood at 10,196 units, an increase of about 30.5 percent from the pre-crisis figure of 7,812 units.

As for rents, Procon said that most projects, both purpose- built rental apartments in the prime area and serviced apartments, maintained their rental rates in order to remain competitive in the market.

"Several purpose-built rental townhouses in the prime residential area and three strata-title condominiums in the Central Business District (CBD) -- Ambassador Apartment, Setiabudi Apartment and Pavilion Apartment, however, reduced their rentals during the January-March period," Procon said.

The average monthly U.S. dollar-based rental rate for purpose- built rental apartments within the prime area remained at US$14.55 per square meter, whilst rental rates for strata-title condominiums for lease decreased slightly during the period.

Rupiah-based rentals for all types of apartments increased slightly over the first quarter, mainly due to a currency depreciation of about 1.4 percent during the period.

Procon said that condominiums for lease were predicted to continue to absorb most new leasing demand thanks to their more competitive rental rates and flexible leasing terms.

"In anticipation of increasing political tension in the run-up to the presidential election in early July, foreign tenants are likely to remain concerned about security issues, and thus when selecting apartments they will continue to focus on buildings with higher quality building managements and good security systems and procedures," it said.

The return of foreign investor confidence in Indonesia would greatly depend on the results of the legislative elections and Indonesia's first-ever direct presidential election.

Although the legislative election earlier this month passed off peacefully, overseas companies are still waiting for the results of the presidential election in July before returning to Indonesia.

"Accordingly, rental apartment demand is predicted to remain soft in the short term. The offering of discounts on certain projects, especially purpose-built rental townhouses, is therefore likely to continue," Procon said in its report. -- The Jakarta Post