Property industry shows improvement

JAKARTA (JP) The property industry, one of the sectors hardest hit by the economic crisis, showed improvement in the third quarter of this year on rising occupancy rates, according the latest survey issued by property consultant PT PricewaterhouseCoopers property group.

The occupancy rates of retail outlets, office space and apartments all showed an increase but the company said that the trend had yet to indicate a recovery in the industry.

"Although there were signs of improvement especially since 1998, unless we see some new construction activity we cannot say that a sustained recovery is underway," PwC property group director Katherine E. Harberd said on Wednesday in a media conference.

She said that new construction activity would demonstrate long-term optimism and confidence in the industry.

Occupancy rates of shopping centers in Jakarta reached 97 percent in the third quarter of 2000, a significant increase compared to only 87 percent in the same period in 1998, she said.

Occupancy was predicted to increase to 99 percent next year because of limited supply, she said.

In the Bogor-Tangerang-Bekasi (Botabek) area, the rate of occupancy remained stable at more than 90 percent due to limited supply and high demand, said Sari Wulaningsih, the property group's senior associate.

Harberd said that retail demand would eventually lead the property sector recovery as consumer confidence and spending increases.

There is increasing interest by foreign retailers who may follow the lead of foreign supermarket chains that started to enter the market three years ago, she said.

At the end of the third quarter of 2000 there were approximately 1.2 million square meters of available shopping center space, including about 140,000 square meters sold under strata title.

"Grade A and B stock accounts for 60 percent of the total," she said.

Grade A refers to high quality shopping centers located in the central business district (CBD) measuring more than 40,000 square meters, while grade B refers to medium quality shopping centers measuring less than 40,000 square meters in the CBD area, or more than 40,000 square meters outside the CBD area.

Market take up for the year 2000 is projected to be at least 50,000 square meters compared to 65,000 square meters recorded in 1999, she estimated.

In the period between July and September, grade A and B shopping centers rented at an average of $10.90 per square meter a month, Sari said, adding that service charge varies between $7 and $9 per square meter a month.

"Most shopping centers increased their service charge by $1 per square meter a month in June because of the government's electricity rate hike," she said.

Sari said that rents were likely to increase into 2001 as most grade A and B five-year leases are subject to renewal or rent review and increasing demand would pressure rents upward.

Office space

Average Jakarta occupancy for office space was 76 percent in the third quarter of 2000, up 4 percent from the lowest point in the fourth quarter of 1999, Sari said.

Whilst new supply is minimal, occupancy will tend to increase and could reach 84 percent in the CBD by 2001, she said.

Sari said that a positive take up of at least 120,000 square meters was expected this year compared to a negative take up of minus 300,000 in 1998 and minus 120,000 last year.

At the end of the third quarter of 2000 there was about 4 million square meters of office space in Jakarta, consisting of 92 percent for lease and the remainder strata title sale, Sari said, adding that about three quarters was in the CBD.

"Future supply will come from Wisma Mulia, the remainder of Jamsostek, and Wisma Asiatic which started construction this year," she said, adding that supply was unlikely to exceed 250,000 square meters over the next three years.

"Some suspended projects may recommence construction next year or in 2002, which will bring new supply on stream from 2004," Sari said.

Apartments

Diana Herutami, senior associate of PwC's property group, said that there were no new apartments coming on stream between July and September, and total stock stood at 27,400 units.

"About 9,800 units are in the CBD and about 17,600 units in secondary areas," she said.

Leased and serviced apartments totaled 5,000 units, and strata title totaled 22,400 units, Diana said.

At least 500 units from projects in the secondary area are confirmed to enter the market in the next quarter, she said, adding that 308 units will come from Permata Eksekutif Apartments and 214 units from Taman Gloria Apartments.

Between 2001 and 2002 about 1,750 new units will be operated, which include another two towers of Four Seasons Apartments and additional units of Pavilion Park in the CBD area.

Diana said that average base rents for CBD upper grade leased and serviced apartments were reported at $13.40 and $15.30 per square meters a month in the third quarter of 2000, while middle grade reached $7.10 and $10.50 per square meters a month.

"Tight competition from individual strata owners who lease their units and forthcoming new supplies will put further pressure on rates for leased and serviced apartments," Diana said.

The market for leased and serviced apartments is still predominantly expatriate, while strata apartments are dominated by local purchasers, she said.

CBD leased and serviced apartments occupancy was recorded at 79 percent and 68 percent respectively, which is a 15 percent increase from the lowest point in the fourth quarter of 1998, Diana said.

In the secondary areas, occupancy rates were recorded at 67 percent for leased apartments and 65 percent for serviced apartments, an increase of 7 percent from the lowest point in the second quarter of 1999, she said.

In the strata market, 80 percent of supply in the CBD was confirmed sold, while higher sales were recorded in the secondary area of up to 85 percent.

Occupancy of strata units, backed by ownership certificate in the third quarter of 2000 is at 59 percent in the CBD and 68 percent in secondary areas, Diana said.

Diana said that since leasing activities are mostly confirmed to the expatriate market, continued political uncertainty, poor business environment and security concerns might keep leasing quiet. (tnt)