Slump in office demand, rental rates down

JAKARTA (JP): Weak demand encouraged suppliers of office space in Jakarta to lower rental rates in the third quarter of this year. It has also led developers to delay completion of projects, a property company says.

However, the third quarter saw a higher demand for apartments and retail facilities, PT Colliers Jardine Indonesia said in the latest quarterly edition of its Jakarta Property Market Review.

The review said the slowdown in office space rentals resulted mostly from oversupply while the demand remained weak.

It also recorded that a significant number of project completion dates have been delayed to 1995 due to the low demand.

This year's supply of office spaces is forecast to be some 111,500 square meters, which is the lowest in the last five years. Next year, it is expected to triple to 375,600 square meters.

"An interesting issue is how owners of the existing buildings will cope with the influx of new offices being marketed over the next 12 to 18 months," the review said.

It noted that owners will fight hard to ensure their cash flow with existing tenants is not eroded by the new development.

The review predicted owners offering a reduction in their leasing rates of up to US$2.5 per square meter per month for existing tenants who renew their leases.

Rentals of office space leveled at a low of $10 per square meter per month in the third quarter of this year.

Apartments

Meanwhile, activities in the apartment leasing remained promising, especially for one-bedroom and studio apartments, while for two-room or three-room units the market looked tired.

"This is indicative of a new trend in the profile of expatriates coming to Indonesia. They now tend to be single and are likely to be involved in technical assistance on short-term projects," the quarterly asserted.

However the market is aware of the possible oversupply of proposed apartments. Up to 1996, no less than 76 additional apartment buildings are scheduled for completion.

The review recorded that the average rentals for the last quarter had decreased a few percent to between $15 and $27 per square meter per month.

In the retail sector the average occupancy of prime shopping centers in the city was between 85 percent and 90 percent during the third quarter. "It is envisaged to remain stable as demands continue to be strong."

The review noted that the confidence in the city's retail market is indicated by the high level of interest by foreign retailers and developers to invest their money here.

"However, the main impediment to foreign retailers entering the Indonesian market is that the retail sector is still closed to foreign investment," it said. (rid)