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)