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)