Office space demand predicted to rise in 2001

JAKARTA (JP): The demand for office space in the capital may increase in 2001 if the country's social, political and economic stability returns as expected, leading property consultant PT Procon Indah/Jones Lang LaSalle has said.

The increase in inquiries following the smooth general elections in June and the strengthening of the rupiah indicated that the demand may recover relatively quickly, the company said in its biweekly property market report.

"We have therefore revised our absorption forecast from negative 110,000 square meters to negative 66,000 square meters in 1999, and from negative 42,000 square meters to negative 21,000 square meter to positive 21,000 in the year 2000," the company said, adding that the absorption was expected to reach positive 42,000 by the year 2001.

The vacancy level would continue to rise until year 2000 though no new development activity was expected to commence until mid-2000, it added.

The recent increase in inquiries was mainly due to existing companies reviewing their requirements and looking to reduce occupancy costs, it said, adding that the active industries included securities, accounting, business, law consultants, foreign banks, shipping and trading.

It said overall physical occupancy has decreased by two percent to 75.7 percent over the quarter.

Currently, around 696,150 square meters of office space in Jakarta's Central Business District (CBD) is vacant as a result of some companies' closures and tenant relocations.

Jones Lang LaSalle said the current high vacancy level of 24.3 percent and the weak new demand levels would prevent rentals from moving upwards, especially in rupiah terms as majority rentals were in U.S. dollars with a fixed exchange rate.

It said that the average effective rupiah rents had declined by 4.5 percent during the second quarter of this year, while the ineffective dollar rentals rates increased by 23 percent due to rupiah's appreciation by 29 percent against the greenback during the same period. The concessionary exchange rate remained at between Rp 4,000 and Rp 5,000 per dollar.

The company also predicted investment activity would increase in line with the government's bank restructuring program, of which it has set a target for the Indonesian Bank Restructuring Agency (IBRA) of Rp 17 trillion in asset sales of troubled banks by March 31, 2000.

Currently, most investors continued to adopt a wait and see approach due to concern over the coming presidential election in November and the large difference between asking and offering prices, it said.

Interest from prospective local investors remained high, focusing on good quality office buildings in good locations with prices in the region of Rp 100 billion. However, no transactions, occurred in the second quarter of 1999. (cst)