Growing commercial activity to up demand for office space

The Jakarta Post, Jakarta

Growing commercial activity resulting from the overall improvement in the economy appears set to spur demand for office space in Jakarta.

In its latest report, Jones Lang LaSalle says the demand for office space is expected to grow in line with increasing activity in such sectors as oil and gas, telecommunications, banking, insurance, and information and technology.

The property consultancy firm said that the new demand would partly come from the relocation of companies to Jakarta's central business district (CBD), while areas outside the CBD would likely attract new tenants looking for cost efficiency and security.

Jones Lang LaSalle Indonesia senior executive Lucy Rumantir said that besides demand resulting from relocation, additional demand would arise due to business expansion.

The total net take-up in the first nine months of 2006 declined slightly to 28,650 square meters (sqm) from 38,620 sqm in the same period last year.

A total of 19 projects were scheduled for completion over the next three years in the CBD, while seven projects were slated for completion over the next two years in the non-CBD area.

She said that for 2007, it was expected that over 400,000 sqm involving 11 projects would come on the market, while another 388,000 sqm would be completed between 2008 and 2009. Meanwhile, for the non-CBD area, the total potential supply from new projects was estimated at around 186,600 sqm next year.

Given the existing supply, Lucy said, there would be no significant increase in rentals next year as the developers would focus on off-loading unoccupied space.

As of the end of September 2006, the average net effective rent in the CBD stood at approximately Rp 69,619 (US$7.73) per sqm per month, while service charges continued to average Rp 50,112 per sqm per month.

Commenting on rental rates, Jones Lang LaSalle's Asia Pacific CEO, Peter Barge, said that Indonesia offered very competitive leases compared to those in other Asian countries.

Comparative figures for net effective rents in major Asian cities showed that in 2006 Indonesia offered the lowest average rental rate at $111 per sqm per year, as compared to $992 in Hong Kong, $785 in Tokyo, $494 in Shanghai and $431 in Singapore.

Barge said with the improvement in the economy, more foreign investors would come to Indonesia, which would in turn help increase the demand for office space. (09)
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