Serviced apartment remain favorite choice for visitors

Rudijanto, Contributor, The Jakarta Post

Equipped with semi-hotel and sometimes full-hotel services and amenities, serviced apartments remain the favorite choice for those seeking cozy living environment during their brief stay in Jakarta.

Occupied mostly by expatriates, the occupancy rate of serviced apartment depends on the influx of foreigners, especially those with deep pockets or strong financial backing.

This is so, since the US$2,000-US$3,000 monthly rental rate of serviced apartments is between 7 percent and 10 percent higher than that of non-serviced apartments.

The services provided are generally similar to those provided by star-rated hotels, both in terms of facilities and quality. This is the main reason why the rates of serviced apartments -- which may also provide breakfast, cleaning and other enticements -- are higher.

Generally run by international hotel chains, Jakarta serviced apartments include, among others, Four Seasons, Plaza Senayan, Plaza Residence, Hilton Residence, Puri Casablanca, Ascott, Pavilion Park, Permata Hijau and Aston.

Colliers International's Manager for Residential Property Aleviery Akbar reveals that the number of serviced apartment is not more than 20 percent of all the apartments in Jakarta.

The occupancy rate of serviced apartment is usually high due to their limited number. This explains why the occupancy rates of most serviced apartment remains relatively high, despite the sharp drop in occupancy rates of the country's non-serviced apartment and hotels.

"We don't see any new serviced apartments coming on the market, even for next year," said Soany Gunawan, Colliers' Manager for Research & Consultancy.

Colliers observed that up to the second quarter of this year, the average occupancy rates for serviced apartments increased slightly to 65.2 percent. But for particularly "sought after" apartments the rate could reach as high as 85 percent.

"This is still lower than performances in the pre-crisis period in 1997, when the occupancy rate was above 85 percent," said Soany.

The average rental rate of serviced apartments in U.S. dollars up to the second quarter, remained the same as the last quarter's figures. Data from PT Procon Indah -- another Jakarta-based property consultant -- shows that rentals in rupiah of serviced apartments decreased over the second quarter due to the strengthening of rupiah against the U.S. dollar by 7.5 percent.

Similar to non-serviced rental apartments, the improvement of serviced apartment's rental rates will continue to rely on the level of Foreign Direct Investment (FDI) in Indonesia.

With the anticipated weak investment level, Procon believes that rentals will continue to remain flat.

Like hotel and entertainment sectors, the serviced apartment market is highly influenced by political and economic factors and the peace-and-order of the country.

"Terrorist attacks, threats to foreign people and Aceh war as well as unstable political and security conditions in Indonesia have negatively impacted the rental apartment market in Jakarta as this market relies on the temporary visit or stay of expatriates and foreign visitors," said Richard Rossiter, Colliers's Managing Director for Indonesia.

Strata apartment sales

If Jakarta's serviced apartment and rental apartment market remains tied up with the political, economic and security situation, the strata-title apartment market remains promising, at least according to sales data up to this year's second quarter.

High risk always entails high gain - that is perhaps the widely held belief that serves as the driving force to keep Jakarta's strata-title apartment market blooming.

While most expatriates think of apartment as comfort zones or "home away from homes", well-to-do Indonesians think of apartments more in terms of alternative and, perhaps, more profitable investments.

Anxious to find better investment alternatives, many rich Indonesians have opted to purchase strata-title apartments. Prior to the JW Marriott blast, the market for apartments and town houses had been climbing.

Last month's JW Marriott blast leaves the whole nation in waiting for another possible attack. The alleged suicide bombing that devastated JW Marriott hotel lobby and killed around 10 people and injured many others has opened the eyes of many that Bali bomb was not the last. No one dares to speculate that JW Marriott blast should be the last one either.

Procon reveals that the sales and net take up of strata-title apartments and townhouses in the second quarter of 2003 jumped to 320 units. This figure comprised of 311 strata-title apartment units and 9 strata-title townhouse units. Such a figure was 74 percent higher than that of the last quarter.

It was also significantly higher than the figure in the same period last year, which recorded net take up of only 84 units.

Generally, property consultants forecast that market absorption for new apartment projects is still high.

PT KOLL IPAC, another Jakarta-based property consultant also believes that there is a renewed confidence in the apartment market.

"This is in line with the high occupancy rates for luxury units, and reflected by a number of high end apartment projects being launched and marketed as strata-title with a total of 1,737 units being offered," said Ipung Rachmaningtyas, KOLL's Manager for Research & Consulting Division.

Colliers observed that instead of investing in US dollar or bank deposits, many Indonesians now prefer to put their money into the property sector.

"Strengthening of the rupiah, lower inflation, lower bank interest rates and the improvement in overall investment climate have made strata-title apartments one of the more attractive investment options," said Soany of Colliers.

But all of those encouraging developments in the apartment market had occurred prior to the JW Marriott hotel blast. The current optimism of some property consultants is based on the country's seemingly quick recovery from the damages caused by last year's Bali bomb.

"We do not yet have research results of the impact of the JW Marriott blast. Perhaps, there were declines in the number of inquiries a week or two weeks after the blast. But we do not have the data and we cannot reveal something that is not based on our research," said Dharmesti Sindhunatha, Procon's Senior Manager Marketing and Communication.

Based on the encouraging results of the second quarter, most consultants still look optimistically at the market. "The impact of JW Marriott was less significant than expected as several transactions resumed for residential leasing," Ipung said.

"Of course, there were cancellations immediately after the blast but when the people see the situation is returning to normal, they push through with the transactions," said Aleviery.

Colliers even issued an optimistic report earlier this month with the title "Jakarta Residential Market Starts Blooming." The report shows that Jakarta is on the road to recovery, as illustrated by the growing number of apartment buildings being erected here.

In spite of this welcome optimism, possible terrorists' attack still constitutes a serious threat to the nation's economy. With next year's presidential elections not far away, Jakarta's apartment sector -- particularly the more vulnerable serviced apartment and rental apartment market -- has legitimate reasons to worry.

While the strata-title market will always find risk-taking buyers wanting to earn more profits, serviced and rental apartment sub sectors can only hope for the best.