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Serviced apartment remain favorite choice for short-term 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.