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.