Tips for survival in the office rental business

Tips for survival in the office rental business

Mahendra Gautama, Contributor, Jakarta

The office building business in Jakarta really started to
flourish when the Indonesian government built the Bank Indonesia
building on Jalan MH Thamrin in 1957. The economic boom in the
1970s, due largely to the extraordinary hikes in oil prices, made
office compounds expand towards Kuningan, Jl. Sudirman and Jl.
Gatot Subroto, an exclusive area now known as the Central
Business District (CBD) of Jakarta.

Banking deregulation that soon followed also prompted the
second economic boom in Indonesia with many new office buildings
springing up in the CBD. This area therefore has secured a firm
position as a business center and the chief supplier of office
space in Jakarta.

However, the economic crisis hit the country in 1997 and hurt
the office building business as well. Bank Indonesia records
show that the average occupancy rate in those years dipped to 75
percent, the lowest ever in the history of the office building
business in Jakarta.

Budget contraction, reduction in the number of employees and
consolidation in local as well as foreign companies as a result
of the crisis were the main reason for this low occupancy rate.
This drop turned the office space market into a tenant's market
and building owners had to work extra hard to lure the
increasingly smaller number of prospective tenants.

In 2003, the office space market in Jakarta has shown a slight
improvement and the CBD remains in its position as the leading
supplier of office space in this city. A market research report
titled "Jakarta Office Market Overview of Q2 2003" issued by a
leading property consulting agency Colliers International shows
that the CBD area contributed 71.6 percent or 2,992,502 square
meters of a total of 4,176,682 square meters of office space in
Jakarta.

Jalan Sudirman and Jl. MH Thamrin accounted for 65 percent, or
1,935,646 square meters, of the total office space in the CBD
area. Next came Kuningan (23 percent or 692,815 square meters)
and Gatot Subroto (12 percent or 364,041 square meters). The
total office space available in the CBD is estimated to rise by
110,000 square meters in 2004, following the completion of the
new Wisma Mulia building.

In terms of building types, which are usually determined based
on the quality of the physical aspect of the buildings, the
building management, facilities and proximity to the CBD, premium
grade buildings took the lion's share (37.1 percent or 1,111,211
square meters), to be followed by grade B buildings (32.1 percent
or 959,543 square meters) and grade A buildings (30.8 percent or
921,749 square meters).

As for the average occupancy rate in Jakarta, a property
commercial survey of the first quarter of 2003 conducted by Bank
Indonesia shows that it stands at 81.01 percent, an increase of
2.23 percent over the figure recorded in the same period of
previous year. The CBD area enjoys a rise of 2.01 percent, while
non-CBD areas registered an increase of 2.84 percent.

This hike is yet to give peace of mind to players in office
space business. Most of them are still worried about the macro-
economic situation of the country and the threat to its security
stability. It is not surprising, therefore, that the majority of
building owners have continued to focus themselves on maintaining
their present tenants by allowing them a discount or other
special incentives.

In fact, allowing a discount is not the only way to survive
during hard times. Take, for example, CEO SUITE, an office
service provider in Jakarta, located at Wisma GKBI and the
Jakarta Stock Exchange. This company was set up in 1997 when
Indonesia was in its acute economic throes. Still, applying its
concept of fully integrated serviced offices, this company has
made itself one of the main players by having secured a sizable
market niche in Jakarta as well as in several countries in the
region.

The company's president director, Ms Mee Kim, said that the
key to their success in competing with similar companies and
conventional office space owners was the company's focus on the
creation of a great customer experience. This, she said, was
based on the company's main business philosophy, among others,
being proactive towards a tenant's needs and sparing no effort or
time to meet those needs, including the availability of
contingency and back-up plans regarding all the facilities in the
building, total flexibility in lease duration, space arrangement
and room design as well as in the use of facilities. Their
dedicated and professional staff with years of service industry
experience are also their plus points.

"Thanks to this customer-oriented philosophy, CEO Suite has
developed its services. You will find even the CEO Suite janitors
speak fluent English. Usually, our staff members can speak other
foreign languages. Besides, we supply state-of-the-art
facilities, including IT devices, sophisticated meeting rooms and
a wide range of office facilities. In short, we wish to satisfy
all our tenants," Mee Kim said.

CEO Suite has its own rather unique view about the role that
marketing can play during hard times. While the majority of such
companies tend to reduce their marketing budget, CEO Suite goes
in the opposite direction. "In bad times, you must be more
aggressive in marketing than before," she said. Cocktail parties,
direct marketing and direct e-mailing are some of the ways that
CEO Suite has often used to get the word out.

As a result, CEO Suite has continued to make progress in this
business. It now has its own office centers in Singapore, Kuala
Lumpur and one opening in October in Shanghai, China. "The key to
the success of CEO Suite is its promotion by word of mouth from
satisfied customers," she added.

In the final analysis, the possibility for a company to score
successes is greater as long as it takes into account what its
customers really need, regardless of whether it is boom or bust
in the general economic condition.