Property industry shows improvement

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)