Property market to remain under pressure
JAKARTA (JP): The property sector in Jakarta will remain under pressure this year as business uncertainty and the tense political situation keep new investments quiet, property consultant PT PricewaterhouseCoopers (PwC) said in its latest survey.
The company said that despite showing some signs of recovery during 2000, except for the retail sector, all other property sectors will remain difficult this year.
No new supply of office space was available in the fourth quarter of 2000, and total stock remained at approximately four million square meters, the company said in its recent quarterly report.
Leased offices showed slight improvement in the fourth quarter, with net take up of 130,000 square meters in the central business district (CBD), and 55,000 square meters in the secondary areas, it said.
"Remaining vacant space (was) reduced to 870,000 square meters, with 66 percent in the CBD," PwC said in its report.
By the end of 2000, the average occupancy rate was at 77 percent or a one percent increase from the previous quarter, the report said, adding that CBD and secondary area occupancies also increased by one percent over the quarter to 79 percent and 73 percent respectively.
New or expanding tenants in the CBD were generally in the oil and gas business, financial services, IT, trading, and consultants, while in the secondary areas they were mainly in telecommunications and IT.
PwC said that construction of new office space may be difficult to finance, and new supply will remain limited over the next three years due to the large volume of vacant space and low rents.
"Based on the take-up figures for the year 2000 it would take almost five years to occupy the existing vacant space," it said, adding that supply was not all located or specified according to demand and there was already relatively limited supply of quality space for major users.
However, occupancy figures will improve and are expected to reach around 84 percent in 2001, and gross rents will increase gradually throughout this year especially as better quality space becomes rare.
Service charges are likely to increase due to plans for further electricity tariff increases, and new rents will mostly be denominated in Rupiah.
Apartments
Apartment leasing activities are likely to stay quiet within the first three months of 2001 due to continuing uncertainties in the business and political sectors, PwC said.
About 450 new units were added in the fourth quarter of 2000, bringing total apartment stock to about 9,950 units in the CBD and about 17,750 units in the secondary area.
Leased and serviced apartments accounted for about 5,000 units, and strata title accounted for approximately 22,700 units.
There may also be about 2,300 new units released between this year and 2002, which may add further downward pressure to rents of leased and serviced apartments, it said.
Rent prices saw a gradual decrease to US$9.1 per square meter per month for CBD upper and middle grade leased apartments in the fourth quarter of 2000, compared with a peak of more than $18 per square meter per month in 1997, and $10 per square meter per month in the third quarter of 2000, said the report.
Serviced apartments also experienced the same downward pressure, with an average rent of $11.1 per square meter per month for upper and middle grade serviced apartments in the fourth quarter of 2000, from an average of more than $25 per square meter per month in 1997, and $12.9 per square meter per month in the third quarter of 2000.
Average prices for strata title apartments reached $2,100 per square meters and $700 per square meters for upper and middle grade apartments respectively.
Hotels
Most hotel managers expect average room rates to stabilize and higher occupancy rates this year despite several incidents in the fourth quarter of last year which may inhibit tourists from coming, such as the staff strike in a five-star hotel and the bombing of a four-star hotel in November, PwC remarked.
However, hotel competition may peak this year due to the planned opening of two new three-star hotels later in February or March, which could be detrimental to market performance, it said.
Some hoteliers therefore were considering the postponement of new developments and others may convert properties to serviced apartments or other uses, the company said in its report.
By the end of 2000 there was a total stock of 20,700 hotel rooms in Jakarta, consisting of 41 percent in five-star hotels, 34 percent four-star hotels, and 25 percent in three-star hotels.
"It is expected that another 660 rooms will be available in 2001 at the Alila, FM1 and Sentral Mutiara (Marriott) Hotels," PwC said.
Occupancy rates decreased slightly during the fourth quarter of 2000, averaging about 37 percent for five-star hotels, 46 percent for four-star hotels, and 55 percent for three-star hotels. In the previous quarter, the rates were 38 percent, 46 percent, and 62 percent, respectively.
Revenue per available room at the end of 2000 was $27 per night in a five-star hotel, $17 per night in a four-star, and $12 per night in a three-star. Compared with the same quarter of 1999, these figures increased by 18 percent, 26 percent, and 55 percent for five-star, four-star, and three-star hotels respectively.
"Jakarta had the lowest revenue per available room of any major city in Asia Pacific," PwC said, adding that for comparison hotels in Kuala Lumpur and Bangkok in October 2000 achieved $40.19 a night and $48.72 a night respectively.
Retail
Assuming that customer spending activity continues at its current level, retail demand will remain high and Jakarta occupancy might reach 99 percent this year, PwC said in its report.
At the end of 2000, shopping center stock was approximately 1.2 million square meters, including some 140,000 square meters of strata title.
This year, new supply will include the extension of Pasaraya, Diamond Department Store in Jl Fatmawati, and the rebuilding of Glodok Plaza, it said.
In the fourth quarter of 2000 occupancy rates for grade A to grade C shopping centers increased by 0.7 percent to 97.2 percent from the previous quarter.
Take-up was recorded to be approximately 80,000 square meters during all of last year for grade A to grade C shopping centers, which is less than in 1999 when net take-up was 100,000 square meters, Pwc said.
"By the end of the fourth quarter of 2000, only approximately 22,500 square meters was vacant in Jakarta shopping centers and 6,000 square meters in the Bogor-Tangerang-Bekasi area.
Landlords demonstrated greater confidence in the retail market during the fourth quarter of last year by increasing rents by 10 percent to 20 percent on lease renewals and quoting higher rents for new tenants.
In view of the scarcity of supply and continued demand by retailers strict tenant selection was increasingly likely to be adopted by landlords to improve the tenant mix in shopping centers, PwC said.
This year new concepts were also being adopted by landlords in an attempt to re-build center images, it said, citing Ambassador Mal's conversion to an electronic and IT education center, Ratu Plaza's computer specialization, and Karawaci's focus on factory outlets.
"Some landlords will incorporate or focus more attention on entertainment facilities like bowling and ice skating, cafes and restaurants, cinema, and games centers," it said. (tnt)