Senin, 08/09/2008

Office Market to Flourish Again

-jktproperty.com
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Office Market to Flourish Again

COMPARED WITH residential property, condominiums, and retail property, Jakarta’s office market has achieved its best performance judging from its market absorption and development activities in the first half of 2008. According to Siswanto Widjaja, Chief Executive Officer of PT Procon Indah, based on the current property clock, the Jakarta office market is in the lay up swing position at this time. By end-June 2008, the cumulative supply of office space in Jakarta rose 4 percent from end-December 2007 to 5.87 million sqm. New supply was dominated by new buildings outside CBD notably in South Jakarta.

The office market is predicted to continue developing. Rent office space and strata-title office prices are estimated to continue increasing following the rise in the basic prices of electricity and fuels. Rising basic prices of electricity will cause a hike in operational costs. Similarly, fuel price hikes will push up construction costs. All the cost increases will become a factor behind the rise in office space prices. In the future, new supply of office will increase. However, office space for rents will continue to be active. Office space absorption in the next semester is projected to remain in the positive level.

Until end-2009, total office supply is estimated to reach 6.61 million sqm if all the supply will come on stream according to the original schedule. Still, total supply will be dominated by CBD namely 62 percent or around 478,900 sqm. Of the total supply, 24 percent will be in the Sudirman area, 12 percent in the Kuningan area while the remaining 63 percent will be in the Thamrin and Gatot Subroto areas. In non-CBD areas, total new supply is estimated to reach 265, 500 sqm. Of them, 34 percent will be along TB. Simatupang Road, and the remaining 64 percent will be in the Gandaria and S. Parman areas and in other parts of South Jakarta, Central Jakarta and West Jakarta.

Office space rents in the CBD area will be dominated by expansion and relocation projects. Demands for CBD office space will mainly come from the financial and banking sector and the mining, agribusiness and manufacturing sectors. Meanwhile, outside CBD, the greatest portion of office space demand is from local industries like the manufacturing, mining, trade and transportation sector. Office space rents outside CBD will mainly be in South Jakarta with the operation of Talavera Office Park on Jl. TB. Simatupang. Pre-commitment tenants have reached 97 percent of available office space. They are multinational companies from the pharmaceutical, construction and oil and gas sectors.

Normally, three main things are taken into consideration when people choose office space. They are its accessibility, facilities and capacity. The TB. Simatupang area provides an attractive alternative because it fulfills all the three requirements. Moreover, TB. Simatupang is also close to the residential areas of expatriates. And, office space prices in the TB. Simatupang area are almost the same as the Grade A prices at CBD.

In general, office space rent prices rose in the first semester of this year. At CBD, they increased by 1.5 percent. Meanwhile, outside CBD, they went up by 3 percent. Rent price increase at CBD occurred especially at Grade B and C buildings, in anticipation of fuel prices that have pushed up operational costs. New building operators had strategies for coping with that situation. They did not include electricity costs in their service charges. This was why average service charges at new buildings were very competitive against older buildings.

Current service charges at new buildings are IDR35,000-IDR55,000 per sqm per month. Meanwhile, service charges at older buildings are IDR45,000-IDR65,000 per sqm per month. Lower service charges offered by new buildings are quite attractive to tenants. Not including electricity prices in service charges have encouraged tenants to save electricity. Concerning strata-title office, no building sale transaction was made in the first half of 2008 at CBD and non-CBD areas. The reason for this was big price gaps between sellers and buyers. However, many office buildings will be built at CBD in the next few years considering that quite many development plans have been made.

Indeed, the office market in Jakarta is so enticing. But, compared with other cities in Asia-pacific, Jakarta is not that attractive as a business location. A research conducted by Cushman & Wakefield that was put into a report entitled ‘Asia Pacific Cities Monitor 2008’ said Jakarta was in the 12th position among the 16 cities surveyed. The big five were Shanghai, Singapore, Hong Kong, Beijing and Tokyo. Even, Shanghai and Beijing will be the most favorable places for business expansion in the next five years. Only two respondents said Jakarta was a favorable place for business expansions.

What happens with Jakarta? David Cheadle, Provis Managing Partner Senior Consultant, said many things in Jakarta needed improvement. The capital has not been able to fulfill all the criteria for becoming a favorable business location.

Broadly, the criteria that can make Jakarta a favorable place for business expansion is access to the market and access to the recruitment of reliable staff. Other criteria that also requires serious attention is the selection of business locations including access to transportation; telecommunication quality; location, size, facilities and costs of office space. Also, the language used (notably English). Singapore is viewed as a good location for doing business because it has great concern for healthy environment and has high quality public transportation systems. In addition, Singapore is also known as a research and development center.

Meanwhile, Jakarta has not optimized its efforts of developing facilities that can make it an attractive business place. The complaints often heard of are its lack of supporting transportation systems and heavy traffic congestions that reduce the mobility of business people. (NS)