Vacant office space up 60% in the first quarter

JAKARTA (JP): Vacant office space for lease in prime and secondary areas here rose 60 percent in the first quarter of the year after many firms shut down or relocated to cheaper buildings, a property consultant reports.

PT First Pacific Davies said the vacant space now measured about 488,000 square meters, up from 300,000 square meters previously.

Most rental payments are based on the U.S. dollar, and the sharp depreciation of the rupiah against the greenback has made rentals exorbitantly expensive for many firms.

The rupiah, which plummeted to a historic low of 17,000 against the dollar in January, is currently trading at about 8,500.

This still constitutes a depreciation of about 70 percent from July of last year when the crisis hit.

The company said office rental rate in the central business district (CBD) averaged US$24 per square meter per month before the crisis.

That was equivalent to about Rp 60,000 using the rupiah-dollar rate of 2,450 in July last year, the company said.

"But now the rental price ranges between Rp 50,000 and Rp 80,000 per square meter in rupiah terms based on the project location," First Pacific Davies said.

The company said most property projects, which maintain dollar-denominated rents, were offering discounts of up to 30 percent of the rental price and had reduced the service charge by as much as $3 per square meter per month in the prime grade A area.

"With such reductions, rents now average $17 million per square meter per month, including a service charge, or equal to Rp 170,000 using the rupiah-dollar rate of 10,000," the company said.

The average rental price in prime areas categorized as grade B has fallen to $13 from $20 per square meter per month, or Rp 130,000, the company said.

"Despite such rental discount rates in grade B, office spaces in the central business district are losing tenants."

The firm said most tenants occupying grade B office space were involved in trade, finance and as building contractors, and this had directly contributed to them moving out.

"It is these sectors which are directly affected by the monetary crisis," First Pacific Davies said. (aly)