New landmarks in growing Jakarta

New landmarks in growing Jakarta

Burhanuddin Abe, Contributor, Jakarta

If you drive around Jakarta's Golden Triangle area, which
covers Jl. Thamrin, Jl. Sudirman, Jl. Gatot Subroto and Kuningan,
you will surely catch sight of a number of property projects
still underway: high-rise buildings that will later become
apartments, shopping centers and office compounds.

The Peak, for example, will certainly attract attention as it
will be Indonesia's tallest building. Having four towers, made up
of two buildings with 35 floors each and two others with 55
floors each, The Peak is scheduled to be completed in July 2006.

Outside this Golden Triangle area, in all other areas in the
expanding Jakarta, such as in Kelapa Gading, Kemayoran, Pondok
Indah and Permata Hijau, construction is under way of shopping
centers, town houses, apartments, office compounds and also
integrated real estates.

Once these projects are completed, Jakarta will have a very
different outlook. The city will be full of tall buildings. You
can imagine yourself what Jakarta will look like with so many
new landmarks.

Indeed, the construction of property projects in Indonesia,
which has gone through its critical period, is now enjoying its
revival. Several property players like Ciputra, Trihatma Haliman,
Alexander Tedja, Sucipto Nagaria and Djan Faridz have predicted
that the property business will remain bright for the next three
to five years, slow down for a period and then rise again.

A study conducted by Jones Lang Lassale Indonesia has shown
that in the past two years, the property business has been stable
with a slight market increase in several sectors and a small drop
in some market segments.

Although the construction of apartments and office compounds
does not involve areas as vast as that of shopping or trade
centers, this business shows its growing dynamism.

Unfortunately, these new supplies are not coupled with a
similarly big demand so, as a result, there is a fall in the rate
of occupancy in the apartment and office compound sectors.

Research head of Jones Lang Lassale Indonesia, Anton Sitorus,
said that supplies in the office sector in Jakarta had continued
to increase. Location-wise, up to mid 2005, close to 61 percent
of these supplies were found in the Central Business District
(CDB) area of Sudirman-Thamrin, while the remaining 23 percent
and 16 percent were found respectively in the Rasuna Said area
(including Mega Kuningan) and Gatot Subroto.

"At present, there are at least 10 construction projects that
will be completed in the next three years, including Sudirman
Plaza, One Pacific Place, an office tower in Senayan City, Pearl
Garden, Grand Indonesia Complex, Menara Kuningan, Sudirman Plaza
(one tower) and Menara Marya. These projects together will supply
a total of 350,000 square meters of space," he said.

From the demand side, Anton said, there has been a positive
impact on the demand for office space thanks to the favorable
sentiment that the business community shows toward the socio-
economic development program that the government is implementing.

This year, several deals have been concluded, including
involving the movement of CSFB to Sentra Mulia (1,800 sq.
meters), Schroeders Investment to the Bursa Effek Jakarta (JSX)
Building (700 sq. meters), the Directorate General of Higher
Learning of the National Education Ministry to Wisma Aldiron
(2,700 sq. meters) and Pyramid International Media to Setiabudi 2
Building (400 sq. meters).

Indeed, a commercial property survey conducted by Bank
Indonesia over areas in Jakarta, Bogor, Depok, Tangerang and
Bekasi (Jabodetabek) shows that the selling prices of office and
apartment space went down in February 2005 compared with the same
period the year before.

The selling price of office space dropped by 0.71 percent
while that of apartment space by 6.3 percent.

This survey, involving 242 property companies, also shows that
the average selling price of office space in February 2005 was
recorded at Rp 10.85 million per square meter while that of
apartment space stood at Rp 6.80 million per square meters.

The rent, on the contrary, has increased. For office space,
the rent was recorded at Rp 119,011 per square meter, or a jump
of 7.35 percent over the same period in the previous year, while
for apartment space, the rent stood at Rp 118,476 per square
meter, or a rise by 29.16 percent over the same period in the
previous year.

The conclusion that Bank Indonesia has made is that the
public's limited cash liquidity and economic considerations have
been instrumental in the drop in the selling prices of office and
apartment space and the rise in the rent of these two types of
property. The developers have set their selling prices lower than
the rent.

Executive director of the Indonesian Center for the Studies of
Property (PSPI), Panangian Simanungkalit has a different opinion,
though. He said that the survey by Bank Indonesia had been
conducted for commercial property constructed prior to 2000.

Meanwhile, the construction of commercial property after 2000
had shown a rapid growth. "The selling prices of these two types
of commercial property may as well drop if the office compounds
or the apartments were constructed prior to 2000. In view of its
own physical condition, old property cannot compete with new
property," he said.

Given the increase in the prices of fuel, Panangian added, the
selling prices of property would not drop because construction
materials, like iron, for example, had risen in price. As for
houses, the prices would rise by between 15 percent and 20
percent over the level recorded prior to the fuel price increase.
Meanwhile, the prices of apartment and office space would undergo
a price increase of between 5 to 10 percent.

The data compiled by the PSPI shows that office compounds
built since January 2005 add up to a total of 50,000 square
meters in space while in the same period as many as 4,000
apartment units have been put up.

Obviously, the revival of Indonesia's economy has prompted the
springing up of exclusive office buildings. When all these
projects are completed, there will be an additional 86,000 square
meters of office space. Totally, by the end of 2006, Jakarta will
have had a supply of 321,600 square meters of new office space.

Geoff Baldwin, CEO of Australia's Roy Weston, a property
brokering company, said when inaugurating Roy Weston's branch
office in Mangga Dua Raya, Jakarta in late July that property
transactions in Jakarta were very brisk.

The country's economic revival has prompted major retailers,
like Debenhams, for example, to open its branch office in
Indonesia. Meanwhile, several other foreign companies have also
begun to open their Jakarta offices. Office leasing transactions
have come mostly from small-to-medium-scale lessees seeking space
measuring between 50 and 500 square meters. Generally, these
transactions come from the expansion or relocation of existing
lessees but some new faces, ranging from IT firms and oil
companies, have also made these transactions.

Large and multi-national companies have become the main engine
promoting the rise in the demand for office space in Jakarta's
main business centers. Meanwhile, medium-class companies,
including workshops, prefer office compounds located not in
downtown Jakarta, for example in Tebet, Kebayoran and Kelapa
Gading.