Monday, July 9, 2012

High occupancy, rentals in Jakarta's office towers

Straits Times: Mon, Jul 09

JAKARTA - Office rentals in Jakarta are rising at their fastest rate since the 1997 financial crisis, as occupancy rates cross the 90 per cent mark in the central business district, property consultants say.

In Jakarta's central business district, rental rates are at their highest in history, 29 per cent higher than during the 1997 financial crisis, wrote analyst Sarina Lesmina of equity broker CLSA.

The office occupancy rate in the area hit 91 per cent in the first quarter of the year, a rise from 89 per cent in the previous quarter.

Rental rates in the best buildings are soaring largely due to the lack of good quality office space.

New players keep coming in. Mr Satish Raj, a Dubai-based developer who has been coming to Jakarta every three months to scout for land for office buildings, said: 'We see a low base and prices are still competitive enough, but it is a matter of getting a good piece of land in the right area.'

Rental rates have soared to 170,000 rupiah (S$23) per sq m, up from 100,000 rupiah per sq m in the previous quarter, said a report by Jones Lang LaSalle.

Its Indonesia country head, Mr Todd Lauchlan, told The Straits Times that companies are expanding and seeking more space, especially with the influx of investors and new businesses in the booming sectors of oil and gas, mining and consumer goods.

Mr Lauchlan said he expects rental prices to stabilise over the next few years as more office buildings are being constructed to meet demand.

Meanwhile, another 305,000 sq m of office space is being built in Jakarta from now till the end of the year, 9 per cent more than last year, according to a Cushman and Wakefield report.

But this increase will not dampen demand, says Colliers International (Indonesia), as most of the buildings targeted for operation this year have as much as 80 per cent commitment from tenants.

The property consultancy also predicted a 5.6 per cent growth in mall space, based on licences given out before a moratorium on construction, noting that the growth of residential areas in the suburbs will propel retail demand.

The Jakarta municipal government last November halted the granting of licences for mall construction until the end of this year, saying there are too many shopping centres and that they obstruct traffic.

Property watchers say Indonesia's rosy prospects are luring land developers from Dubai and China to contact local real estate consultancies.

Is a property bubble forming? Not yet, say market players.

'The demand for property in Jakarta is still healthy, both the residential and commercial sectors. Besides, property prices didn't soar by an unhealthy level, like 50 per cent,' said Jones Lang LaSalle Indonesia's chairman Lucy Rumantir.

Property watchers say Indonesia's rosy prospects are luring land developers from Dubai and China to contact local real estate consultancies.

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