No letup soon for RI property woes

JAKARTA (JP): The country's property sector will remain sluggish this year as political uncertainty continues to cast a shadow over the industry, according to First Pacific Davies Savills (FPDSavills) property consulting company.

A technical adviser at FPDSavills, Jay Smith, estimated on Thursday that there would be no growth in demand in the property sector this year because of political uncertainty.

"There is some uncertainty about the social and political direction of the country, and until these issues are settled there will be no interest in investing money in the property sector. Everybody will be anxious about traveling to the country," he said.

The assistant manager for valuation and consultancy at FPDSavills, Sari Wulaningsih, said that occupancy rates of office buildings, retail space, high-cost apartments and five-star hotels would continue to decline.

Sari said that the occupancy rate of office buildings might decrease from 78 percent in 1998 to 71 percent by the end of 1999, while the occupancy rate of retail space could drop to 78 percent from 87 percent.

The occupancy rates of high-cost apartments and five-star hotels will likely fall to 73 percent and 25 percent respectively in 1999, down from 76 percent and 33 percent at the end of 1998, she added.

She said that property owners would attempt to fill their properties by offering discounted prices, but clients would demand rupiah-denominated transactions to prevent losses during the monetary crisis.

"Landlords are trying hard to be flexible in order to maintain occupancy," she said, adding that fixed exchange rates, which were widely used in 1998, would be employed again this year.

Smith said that multinationals would reenter the country's property sector in the second half of 1999 if there were signs of improvement in the country's economic and political situations.

"If the unstable political climate continues this year, we will see the continued rationalization, downsizing and relocation of many multinational companies, which would lead to higher vacancy rates this year," he said.

He said that the hotel sector would be the quickest to recover because it was more flexible in its rates.

"A more stable political and social condition will bring more tourists and businesses here, and it will lead to the further recovery of other sectors of the property industry," he said.

Sari estimated that at least 200,000 square meters of new office space, 25,000 square meters of new retail space, 2,000 new apartments and 900 new hotel rooms would enter the market this year despite the sluggish economy.

In its latest report, FPDSavills said that the retail sector had been the worst hit by the economic crisis, with 100 percent of new retail projects being put on hold until 2000.

The report also said that there would be no additional retail space in the market before 2000, except for a 25,000 square meter shopping center in Central Jakarta.

In the office sector, 1.03 million square meters, or 85 percent of confirmed projects, have been delayed.

About 74.8 percent of the confirmed 23,000 apartments being developed, some 18,700 units, are on hold.

In the hotel sector, most of the delayed projects are four- star hotels. Of the 8,600 hotels rooms forecast to enter the market, 60 percent are on hold and 20 percent begun operations in 1998.

The report said that the occupancy rates of office space, retail space, apartments and hotels continued their downward trend in the fourth quarter of 1998. (gis)