Property rental rates plunge but leases still down

Property rental rates plunge but leases still down

JAKARTA (JP): A significant drop in commercial property rental
rates in U.S. dollar terms in the second quarter of this year
failed to boost leases, property consultant First Pacific Davis
(FPD) has reported.

The company announced last week that rental rates of
commercial properties in rupiah terms were little changed from
the previous quarter.

However, dollar terms had dropped significantly, it said in a
report published last week.

"We expect prices to remain at current levels or slip
marginally over the second half of 1998," the company said.

As the rupiah's value continued to fluctuate, property owners
were flexible in negotiations with their tenants through setting
fixed rates for the dollar's exchange.

In the office sector, the fixed conversion rate for the third
quarter ranged from Rp 3,000 to Rp 6,000 to the U.S. dollar,
compared to the current rate of about 14,000.

According to FPD, Grade A office projects in the commercial
building district (CBD) were now asking rent of US$10 per square
meter plus service charge of $4.5 per square meter.

The rate, both in rupiah and dollar terms, is on average 6
percent below the previous quarter, the company said.

In the Grade B market, the average rental rate is $7 plus $3.4
in service charge per square meter per month. This averages 10
percent below the rental rates recorded in the first quarter.

FPD said occupancy rates were at a record low, with 726,000
square meters of vacant space, up from 300,000 square meters over
the past six months.

It said owners of retail space set their exchange rates at
between Rp 2,800 and Rp 3,000 per dollar. This reduced the prices
in the first quarter to 5 percent above precrisis levels in
rupiah terms.

The average rental rate of Grade A retail space in the CBD
cost Rp 164,200 per square meter per month at the fixed rate of
Rp 9000 to the dollar. Before the monetary crisis in June last
year, the average rental rate was Rp 155,450.

Even as prices continued to be discounted over the second
quarter, retail occupancy rates were sinking. Shops were deserted
as inflation rates dragged down consumer purchasing power.

By the end of the quarter, the average retail occupancy rate
was 85 percent.

FPD said rental of apartments were also discounted over the
quarter.

The average rental rate of a leased apartment ranged between
$10 and $18 per square meter per month in this year's second
quarter, down from a range of $15 to $23 level in June last year.

Serviced apartments' average rents declined to between $15 to
$20 in the same quarter, from the $17 to $26 level in June last
year.

Apartment occupancy rates continued to drift down in the
second quarter, especially after the May riots which led to a
mass exodus of expatriates, FPD said.

Occupancy rates in leased and serviced apartments in CBD which
have operated for more than a year stood at 84 percent and 64
percent respectively at the end of the quarter.

Vacancies more than doubled compared with the first quarter.

In secondary areas, occupancy rates in leased and serviced
units were more stable.

FPD said room rates of five-star hotels averaged $94 per night
in the second quarter, much lower than $119 in the same quarter
last year. Rates in four-star hotels averaged $43 per night, down
from $74 per night in the same quarter last year.

Rates in three-star hotels averaged $33 per night, from $79
per night in the same period last year.

During the second quarter when the rupiah bottomed out at Rp
15,000 to the dollar, five-star hotels applied a rate of Rp
13,600, while three- and four-star hotels applied rates of Rp
9,700 and 9,400 respectively.

FPD said achievable room rates stood at 22 percent lower than
the published rates in the five-star category.

In the three- and four-star categories, rates received 40
percent and 47 percent discounts respectively.

Although four- and five-star hotel occupancies continued to
fall, three-star establishments had stabilized, it said.

Room rates for three-star hotels even rose in dollar and
rupiah terms, it said. (das)