Property owners fall to tenant demands

Property owners fall to tenant demands

JAKARTA (JP): Indonesia's currency crisis has prompted owners
of office buildings to comply with tenants' request to reduce
their foreign exchange exposure, property consultant Procon Indah
said yesterday.

Procon Indah, in collaboration with Jones Lang Wootton,
reported that property owners had agreed to take some measures to
reduce or eliminate tenants' foreign exchange risks.

"In the first two business weeks of 1998, there was a major
change in people's thinking. Owners realized that to retain or
attract tenants they would have to consider their requests,"
Susan Pranata, a director at Procon Indah, said.

The measures include reducing the rent in U.S. dollars,
pegging the rupiah exchange rate, and charging rent and
maintenance fees in the local currency.

Premium buildings over the first quarter of 1998 reduced their
rent charges by up to 44 percent from US$13.40 per square
meter/month to $7.50 sq.m/month, Procon said.

The company also said rental inquiries for such property had
dropped considerably over the past three months and a number of
tenants were canceling or downsizing their commitments.

Only the multinational market was showing an interest in
premium space, Procon said, adding that local inquiries had all
but ceased as businesses consolidated their organizations and
attempted to reduce their dollar rental exposure.

"Over the last two months, a number of owners have openly
stated their willingness to peg the rupiah conversion rate,"
Procon said, adding that the rates vary on a case by case basis.

It pointed out that the non-strata title exchange rates were
between Rp 3,500 and Rp 6,000, as opposed to strata title
projects where they were averaging Rp 3,000 to Rp 4,000.

The rupiah has been on a roller coaster since August, plunging
to its lowest level of Rp 17,000 to the dollar in January
compared to Rp 2,450 in July. The currency, however, is now
trading at about Rp 8,500.

Procon continued to say that selected owners had given into
pressure from tenants and had began to openly market their
remaining space in either rupiah based rental, rupiah maintenance
charges, or both.

"Buildings that can not offer such flexibility are at a great
disadvantage, and tenants are immediately discounting properties
that don't offer such flexibility," it said. (08)