Property demand reached record level last year

JAKARTA (JP): The demand for all types of property, except industrial estates, in Greater Jakarta peaked last year, according to an international property consultancy firm.

"Demand for property was very high in almost all sectors during 1996. But at the same time, it was unable to keep pace with the higher levels of new supply," Craig Williams, a senior technical advisor of PT Procon Indah/Jones Land Wootton (PI/JLW). said yesterday.

Procon Indah/Jones Land Wootton, one of the country's leading property consultants, issued the January 1977 edition of its quarterly Property Market Outlook yesterday.

Williams said the main engines of demand for property -- invested and economic growth -- performed strongly in 1996.

The capital's Central Business District office market experienced a historic record high level of new demand last year, in which the annual take up was 278,781 square meters, representing a growth of 14 percent over that of 1995.

"Precommitment of buildings completed during the fourth quarter reached 85 percent, although physical occupancy is lower due to the time required for fitting out," JLW Asia director Susan Pranata said.

She said total prime office stock here by the fourth quarter of 1996 reached 2.52 million square meters, an increase of 6 percent over the previous quarter.

With a total of 2.1 million square meters of cumulative supply during the same period last year, the market had witnessed an increase in total stock of 12 percent over the last 12 months, or approximately 420,600 square meters.

As net take-up was lower than net supply in this quarter, the overall occupancy level decreased to 86.3 percent from 89.3 percent three months ago and 90.2 percent 12 months ago.

Based on a selected basket of existing buildings, average effective rents remained fairly stable at US$13.50 per square meter per month during the review period. Average rents have increased, however, from $13 in 1995 and $12.50 in 1994, reflecting a compound growth rate of 3.5 percent (1995-1996) and 4 percent (1994-1996).

The average occupancy rate is estimated to reach 88 percent by the end of this year.

"While the combined 1998 and 1999 potential supply totals more than 1.2 million square meters, it's highly unlikely that this amount of supply will be delivered. PI/JLW Research's current forecast is for 850,000 square meters, but this figure is likely to change as development activity is monitored during 1997," Pranata said.

Williams commented that the forthcoming general elections were expected to cause a short-term postponement of some investment decisions, "but being prior to mid-year, there is adequate time for the economy to achieve its target prior to the end of 1997."

Retail

Last year, the city's retail market also achieved the highest annual take-up ever recorded.

"Annual net demand in 1996 was 166,400, higher than that of 1995," company technical advisor Jeffrey Hong said yesterday.

He said the total cumulative supply of retail space here last year reached 1,004,220 square meters, or 21 percent of last year's figure.

He said average occupancy in 1996 remained high at 92.5 percent, representing a 2 percent increase over the third quarter of 1996 and 0.5 percent in 1995, despite the completion of two megamalls.

Average occupancy would remain over 90 percent this year, he said, adding that additional supply would reach 148,200 square meters in 1997

Meanwhile, JLW director Lucy Rumantir said the overall supply of housing units grew last year by 14 percent to 13,525 over the previous quarter and by 71 percent over 1995.

"Latest projections show that the adjusted total number of units planned for construction during 1997-1999 is 25,342, compared to 11,693 units as projected in the previous 12 months. This clearly indicates that developers are still ambitious about this sector, despite high supply."

She said tenant-occupancy levels in rental apartments reached 83 percent in 1996, while serviced apartment occupancy rates grew to 76.2 percent in the same period.

This year, with a substantial addition of new supply, average tenant occupancy rates were expected to decline further to below 60 percent, she said.

Company associate director Bayu Utomo said cumulative take-up of serviceable industrial estate land in the Greater Jakarta area dropped last year by two percentage points to 79 percent. "This was caused by much higher additional new supply compared to net demand over the year," he said.

He said the cumulative supply of serviceable industrial estate land in the Greater Jakarta area was 3,624 hectares in 1996, an 14 percent increase over 1995.

He said estates in Karawang, west of here, dominated the additional annual supply.

"Additional new supply this year will be 427 hectares, 169 hectares of which are in an advanced stage of preparation. PI/JLW Research predicts that cumulative take-up rates will decline slightly by the end of 1997, despite growth projections of 10 percent and 4 percent for demand and supply, respectively."

In the city's hotel market, overall lodging demand did not expand dramatically last year, despite a 12 percent growth in passenger arrivals at Soekarno-Hatta International Airport.

Company advisor and director Leo Volkers said room rates in 1996 climbed by 4 percent.

"Whereas mostly top-end hotels opened in the 1992-1994 period, the market will shift towards more budget-oriented hotels in 1997-1998, in line with traveler demand to Jakarta. By 1999-2000, the new supply trend will shift back toward the top-end class." (icn)