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MarketBeat Jakarta, Indonesia Office Snapshot - Q4 2011

Apr 06, 2012
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MARKETBEAT
OFFICE SNAPSHOT
JAKARTA, INDONESIA
A Cushman & Wakefield Research Publication

Q4 2011

ECONOMY
Indonesia's economy has continued to strengthen in 2011 and its full year GDP growth is expected to reach 6.5% (from 6.0% in 2010). Other general economic indicators also showed very positive trends during the year, with inflation within government targets and a relatively stable currency exchange rate. Annual inflation for 2011 is expected to be below 5%, lower than the 6.96% recorded in 2010. The Rupiah exchange rate remained relatively stable at around Rp.9,000 per US$1.00, an appreciation of 0.2% over the full year. The stock market also continued its positive performance through the first ten months as evidenced by the composite index which closed at 3,791, an increase of 2.4% over that period.

ECONOMIC INDICATORS
2010 GDP Growth CPI Growth Central Bank-Rate
Source: Government data (BPS, BI, Ministry of Finance), 2011

2011 6.5% 4.5% 6.0%

2012F 6.3 - 6.7% 5.3% 6.0%

6.0% 7.0% 6.5%

NEWLY COMPLETED PROJECTS
PROJECT Allianz Tower K-Link Tower Tempo Scan Tower Multi Vision Tower *
*) Strata-title office.

PRECINCT Kuningan G. Subroto Kuningan Kuningan

GRADE A B A B

SIZE (SQM) 28,000 25,000 43,100 21,000

OVERVIEW LEASING ACTIVITIES
Leasing transactions remained active during the fourth quarter but at lower levels than the third quarter. Most transactions were expansions by existing tenants resulting from business growth during 2011 and an expectation for this to continue into 2012. Oil & mining related companies, IT, and the banking industry were among the most active sectors for office expansions. Larger inquiries of between 400 square meters (sq.m.) and 1,000 sq.m. (compared to only 100 sq.m. and 300 sq.m. seen earlier in the year) were observed during the last quarter of 2011. This is a positive sign that office demand will likely continue at higher levels in 2012 despite potential slower economic growth due to the treat of a worsening of the European economic recession. PROPOSED PROJECTS
PROJECT* SCBD LOT 18 Office The H Tower * Office 8 @ Senopati * The City Center Tower I * AXA Tower * World Trade Center II Eighty8 @Kasablanka * Menara Merdeka Ciputra Tower GRADE B B A A A A A A A SIZE (SQM)** 24,350 7,000 49,800 88,800 60,000 54,000 58,000 38,500 64,000 COMPLETION YEAR Q1-2012 Q1-2012 Q1-2012 Q2-2012 Q2-2012 Q2-2012 Q3 2012 Q3-2012 Q4-2012

DEMAND AND OCCUPANCY
Net take-up of 74,700 sq.m. was recorded in the fourth quarter, bringing the cumulative demand to 3.85 million sq.m. as at December 2011, representing a growth of 9.5% year-on-year. Occupancy levels rose significantly over the year, by 5.5% to 90.7%, with total net take-up of 332,600 sq.m. for the full year, some 63% higher than that recorded in 2010. This net take-up represents the highest annual take-up achieved since the last peak in the office market cycle in 1997. Throughout 2011, Grade A offices continued to enjoy the largest positive take-up of 251,300 sq.m. or 76% of the total CBD office demand, followed by Grade B and C buildings, which saw net take-up of 71,900 sq.m. (21%) and 9,500 sq.m. (3%), respectively. In the business sector, 2011 demand was largely driven by oil-gas and mining companies, as well as the banking and insurance industries.

*) Strata-title office. **) Sizes are approximate numbers and may change over the construction period.

SUPPLY, DEMAND, OCCUPANCY RATE
Sqm 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,000,000 500,000 0 2007 2008 2009 2010 2011 2012(P)
OCCUPANCY RATE

Occupancy 100% 90% 80% 70% 60% 50% 40% 4,662,100 4,197,028 3,404,950 2,898,221 3,685,314 3,204,379 3,932,314 3,314,008 4,127,564 3,517,901 4,244,664 3,850,484 30% 20% 10% 0%

1,500,000

CUMULATIVE SUPPLY

CUMULATIVE DEMAND

SUPPLY
The total cumulative supply of the Jakarta office market increased during the fourth quarter of 2011, with the addition of Multivision Tower comprising 21,000 sq.m. in the Kuningan Persada complex in Jl. H.R Rasuna Said. This brought the total CBD supply to 4.24 million sq.m., as at the end of December, an increase of 2.8%, yearon-year. Office 8 @ Senopati (Jl. Senopati), The H Tower (Jl. HR. Rasuna Said), and SCBD Lot 18 (SCBD, Jl. Jend. Sudirman) are currently in their advanced finishing stage and will be ready for occupation in the first quarter of 2012. These projects will add approximately 81,200 sq.m. of new office space to the market. In addition, a further 336,300 sq.m. of new supply is expected to be completed by the end of 2012. This future supply will be dominated by GradeA office buildings, accounting for approximately 93% of the total.

occupiers (buyers and tenants) take up physical occupancy, given the high pre-commitment levels within most of these buildings completing their construction early in the new year. Gross rentals are expected to continue to increase in 2012, as most landlords are increasingly confident to raise their base rentals due to high occupancy levels in their buildings and outlook for the year ahead.

GROSS RENTAL RATE
LOCAL CURRENCY (RP/SQM/MONTH) SUB-SECTOR CBD Area Grade A Grade B Grade C Q411 157,500 198,000 152,500 129,600 QOQ 2.2% 2.2% 1.9% 2.3% YOY 8.6% 6.8% 8.1% 8.9% EURO/SQM 13.00 16.40 12.60 10.70 US$/ SQFT 1.62 2.04 1.57 1.33 12-MONTH OUTLOOK

RENTAL RATE
The average gross rental (base rental plus service charge) in Rupiah terms increased by 2.2% over the fourth quarter to Rp.157,500 per sq.m. per month (/sq.m./mo). In US$ terms, this average gross rental increased by 1.1% to US$14.95 /sq.m./mo during the same period. Year-on-year, Rupiah gross rentals increased by 8.6%, whilst in US$ terms they increased by 8.1%. A number of landlords increased their base rental rates during the fourth quarter and others are expected do so during 2012, given the continued positive outlook for the rental office market. Service charge levels are likely to see adjustment in the near term as landlords react to expected government announcements regarding utility cost increments, especially electricity, as well as new Regional Minimum Wage (UMR) levels.

Exchange Rate: 4Q11: Rp.9,035/USD1.00, 3Q11: Rp.8,940/USD1.00, 4Q10: Rp.9,000/US$1.00

STRATA-TITLE OFFICE PRICE
PROJECT Multivision Tower The H Tower AXA Tower Eighty8 Kasablanka The City Center Sudirman Center SALABLE AREA 23,300 7,000 60,000 58,000 88,800 80,000 COMPLETION YEAR 2011 2012 2012 2012 2012 2014 ASKING PRICE PER SQM Rp.18 mio Rp.18 mio Rp.26 mio Rp.22 mio Rp.25 mio Rp.23 mio

STRATA-TITLE OFFICE MARKET
Demand for strata-title offices remained high over the final quarter of the year. Natural based resource industries and related companies, as well as consultant companies were seen to be the two most active sectors seeking office ownership during the review quarter. As the availability of strata-title space within the active projects has become limited, the average prices continued to rise and are expected to continue to do so in 2012. As at December 2011, the average price within the CBD area was Rp.19 million /sq.m., an increase of about 6% over the third quarter, and almost 20% on a year-on-year basis.

Exchange Rate: 4Q11: Rp.9,035/USD1.00, 3Q11: Rp.8,940/USD1.00, 4Q10: Rp.9,000/US$1.00

EXISTING SUPPLY BY PRECINCT
OTHER 6%

SATRIO 2% THAMRIN 12%

SUDIRMAN 40%

OUTLOOK
In general, demand for office space in the Jakarta CBD market is expected to continue at high levels in line with the country's economic performance which is projected to reach 6.3% to 6.7% in 2012. The cumulative demand of CBD Jakarta office market is forecast to grow by between 8% and 9% whilst annual net take-up is predicted to reach approximately 350,000 sq.m.. Average occupancy will decrease slightly in the first quarter of 2012 however, due to the larger levels of new supply entering the market, but it will quickly move back to the 90%+ level, as

G.SUBROTO 14%

KUNINGAN 26%

For further information, please contact Research & Advisory Department PT. Cushman and Wakefield Indonesia Indonesia Stock Exchange Building Tw.2, 15/F, Jakarta, Indonesia +62-21 ş 2550 - 9500 www.cushmanwakefield.com

This report contains information available to the public and has been relied upon by Cushman & Wakefield on the basis that it is accurate and complete. Cushman & Wakefield accepts no responsibility if this should prove not to be the case. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. ę2012 Cushman & Wakefield, Inc. All rights reserved.