MALAYSIA (IN ASSOCIATION WITH JONES LANG WOOTTON) Malathi Thevendran Executive Director Research +60 3 2161 2522 malathi@jlwmalaysia.com
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3 Jakarta Property Market Review First Quarter 2012
TABLE OF CONTENTS
4 The Economy 5 Jakarta Office Market CBD Office Non-CBD Office 10 Jakarta Retail Market Rental Shopping Mall Strata-Title Trade Centre 14 Jakarta Residential Market Rental Apartment Strata-Title Condominium 18 Jakarta Hotel Market
Cover photo: Sudirman Corridor Copyright Jones Lang LaSalle 2012. All rights reserved. No part of this publication may be reproduced or copied without prior written permission from Jones Lang LaSalle. The information in this publication should be regarded solely as a general guide. Whilst care has been taken in its preparation, no representation is made or responsibility accepted for the accuracy of the whole or any part Property Research Paper
Jakarta Property Market Review First Quarter 2012
4
The Economy
Indonesia continued to exhibit optimism regarding its economic fundamentals, with domestic consumption and investment remaining solid and enabling Indonesia to grow faster than its neighbours. Economic growth in 1Q12 is predicted at 6.5%.
Despite the global economic situation particularly with the slow recovery in US and Euro zone, Indonesia`s exports during the first three months of 2012 increased to around USD 48.5 billion, representing a positive growth of around 6.9% compared to the same period last year.
Meanwhile, inflation continued, but at a decreasing rate, largely as a result of lower food prices. Overall, core inflation and administered price inflation remained stable. By end-March, inflation stood at about 3.9% y-o-y, a slight increase compared to the previous quarter but much lower than in the same period of 2011. Looking ahead, the Central Bank predicted a return to a range of 4.5% %1.0% in 2013.
On the other issue, the current key interest rate of 5.8% was still consistent with inflationary pressure and remained conducive to boosting economic growth. The rupiah value was also relatively stable although under some slight pressure. At end-1Q12, the rupiah was IDR 9,180 to the US Dollar.
Following its sovereign credit rating upgrades at the start of the year, Indonesia is set to enter the global investment community and this is expected to bring more fresh funds and investments to the country.
Going forward, domestic economic activity is expected to remain strong even amidst the global economic slowdown and the prolonged uncertainty in worldwide financial markets. Economic expansion will continue in 2Q12, although at a lower rate than in the first quarter. Meanwhile, export growth is predicted to slow down due to the weakening global economy and the decrease in non-energy commodity prices. The government plan regarding fuel subsidies will temporarily lead to an increase in CPI inflation. However, Bank Indonesia is confident that this will be reduced in line with economic fundamentals after the temporary impact of the plan comes to an end.
Rupiah Exchange Rate 7.000 8.000 9.000 10.000 11.000 12.000 13.000 J a n - 0 5 A p r - 0 5 J u l - 0 5 O k t - 0 5 D e s - 0 5 A p r - 0 6 J u l - 0 6 S e p - 0 6 D e s - 0 6 M a r - 0 7 J u n - 0 7 S e p - 0 7 D e s - 0 7 M a r - 0 8 J u n - 0 8 S e p - 0 8 D e s - 0 8 M a r - 0 9 J u n - 0 9 S e p - 0 9 D e s - 0 9 M a r - 1 0 J u n - 1 0 S e p - 1 0 D e s - 1 0 M a r - 1 1 J u n - 1 1 S e p - 1 1 D e s - 1 1 M a r - 1 2 Source: Bank Indonesia Rupiah Exchange Rate (Rp/USD)
Dec 11 Mar 12 IDR/USD (e-o-p) 9,068 9,180
Inflation and Interest Rate 0% 3% 6% 9% 12% 15% 18% 21% 24% J a n - 0 5 A p r - 0 5 J u l - 0 5 O c t - 0 5 D e c - 0 5 A p r - 0 6 J u l - 0 6 S e p - 0 6 D e c - 0 6 M a r - 0 7 J u n - 0 7 S e p - 0 7 D e c - 0 7 M a r - 0 8 J u n - 0 8 S e p - 0 8 D e c - 0 8 M a r - 0 9 J u n - 0 9 S e p - 0 9 D e c - 0 9 M a r - 1 0 J u n - 1 0 S e p - 1 0 D e c - 1 0 M a r - 1 1 J u n - 1 1 S e p - 1 1 D e c - 1 1 M a r - 1 2 Source: BI & BPS Inflation & BI Rate Inflation 1-Month SBI
Dec 11 Mar 12 CPI % (y-o-y) 3.79 3.97 BI Rate % (e-o-p) 6.00 5.75
Stock Market 0 500 1.000 1.500 2.000 2.500 3.000 3.500 4.000 4.500 0 100 200 300 400 500 600 J a n - 0 5 A p r - 0 5 J u l - 0 5 O c t - 0 5 J a n - 0 6 A p r - 0 6 J u l - 0 6 O c t - 0 6 J a n - 0 7 A p r - 0 7 J u l - 0 7 O c t - 0 7 J a n - 0 8 A p r - 0 8 J u l - 0 8 O c t - 0 8 D e c - 0 8 A p r - 0 9 J u l - 0 9 S e p - 0 9 D e c - 0 9 M a r - 1 0 J u n - 1 0 S e p - 1 0 D e c - 1 0 M a r - 1 1 J u n - 1 1 S e p - 1 1 D e c - 1 1 M a r - 1 2 Source: JSX JSX Composite & Property Index Property Composite
Dec 11 Mar 12 Composite (e-o-p) 3,822 4,122 Property (e-o-p) 229 279 Jakarta Property Market Review First Quarter 2012
5 J akarta Office Market
Supply
Cushioned by the positive performance of the national economy, the Jakarta office market continued to perform well in 1Q12. Around 5,500 sqm of new office space was added to the CBD market during this period with the completion of Parc 18 (Tower D) - a project located in Sudirman Central Business District, comprising five mid-rise towers with a total SGA of around 22,500 sqm.
With this additional supply, the total office stock in the CBD rose to around 4.2 million sqm.
In terms of supply distribution, the Sudirman-Thamrin area, which is perceived as the most prestigious location in the CBD, remains the most popular location and dominates the market with around 60.0% of the total stock, while Kuningan and Gatot Subroto have around 28.2% and 11.8% respectively.
By segment, Grade B buildings have the largest share at around 54.6%, followed by Grade A with about 37.8%, and the remaining 7.6% classified as grade C.
In the non-CBD area, the additional supply came from the opening of Menara Satu Sentra Kelapa Gading in North Jakarta, which added around 18,800 sqm of new office space to the market. The building, which is located in the center of Kelapa Gading boulevard, is offered for lease as well as for sale.
As the result, total stock in the non-CBD rose to around 1.6 million sqm by end-March.
Looking at supply distribution, South Jakarta contributed the highest supply of office space in the non-CBD, accounting for 50.4% of the total, with Central Jakarta following with a 20.4% share, and West and North Jakarta with 17.9% and 10.2% respectively, and East Jakarta 1.1%.
Most of the stock in the non-CBD area is classified as Grade C, which accounts for about 61.1% of the overall stock, while the remainder is considered Grade B. There are no buildings classified as Grade A in the non-CBD area.
Combined, the existing office supply in Jakarta (CBD and Non-CBD) totalled 5.8 million sqm by end-1Q12.
New supply in the CBD office market came from the completion of Parc 18 Tower D, bringing an additional supply of around 5,500 sqm to the market.
In the non-CBD area, around 18,800 sqm of new supply entered the market from the completion of Menara Satu Sentra Kelapa Gading in the North Jakarta area.
CBD Office Supply Distribution (sqm)
Non-CBD Office Supply Distribution (sqm)
Jakarta Property Market Review First Quarter 2012
6 Demand
The office market continued to grow positively in 1Q12 with the vibrant business environment fuelling demand. New enquiries were robust, particularly from those businesses wanting to expand or relocate. During the quarter, corporate activity was on the rise supported by the attractive investment climate. The quarterly figures showed demand for office space at a healthy level of around 72,600 sqm from January- March. This figure was slightly less than the 80,200 sqm recorded in 4Q11 due to the limited available space, predominantly in good quality buildings.
Leasing activity remained upbeat during the review quarter. Occupancy rates in the Grade A buildings continued to climb and some even close to full occupancy. With the limited available space in premium buildings, tenants looked for other alternatives. As the result, demand in Grade B buildings expanded quite impressively. Banking, mining, oil and gas, natural resources and service businesses continued to be active in the market both for new leases and expansions.
Notable deals in 1Q12 involved Qatar National Bank taking about 5,500 sqm en-bloc space in Parc 18 Tower D, BII relocation from BII Plaza in Thamrin area to Sentral Senayan III and taking up around 23 floors in its new premises, and several smaller tenants leasing space in newer buildings such as Tempo Scan Tower and Multivision Tower. Other deals included Samudera Indonesia, which took-up around 800 sqm space and BTPN which took-up approximately 400 sqm, both in Cyber 2. The strata-title Equity Tower also had tenants starting to move in, most of them small-to-medium in size. With the solid leasing activity occurring in the review period, vacancy rates fell to 9.3% from 10.9% in 4Q11.
The non-CBD market also showed positive demand growth. Leasing activity improved in 1Q12, with a majority of the transactions taking place in newly- completed projects such as BCA in Menara Satu Sentra Kelapa Gading and some small-to-medium scale tenants taking strata-space in Grand Soho, Slipi.
Net absorption in the non-CBD area during 1Q12 surged to around 40,300 sqm compared to 35,500 sqm in the previous quarter. Location wise, South Jakarta accounted for the highest take-up in the quarter followed by West Jakarta, which also performed well in the last two quarters. With the market witnessing higher levels of demand than additional supply, the vacancy rate contracted to 15.5% from the 17.0% registered in 4Q11.
The CBD market continued to enjoy strong demand growth. Net absorption in 1Q12 remained healthy at around 72,600 sqm.
Demand in the Non-CBD gradually strengthened with het absorption rising to 40,300 sqm and the vacancy rate declining to around 15.5%.
CBD Office Cumulative Supply and Occupancy
Non-CBD Office Cumulative Supply and Occupancy
Jakarta Property Market Review First Quarter 2012
7 Rent
In view of robust demand, low vacancy and limited new supply, the Jakarta office market enjoyed solid rental growth in 1Q12. Several landlords increased their face rents quite aggressively, particularly for new tenants taking small-to-medium size office space. For large-scale and long-established tenants, landlords were relatively more moderate in negotiating their rental increments.
With growing occupancy and limited available space, rental discounts and concessions were difficult to find except in small average buildings. Only buildings with low occupancy rate were still willing to negotiate on rents and offering attractive rental packages for prospective tenants requiring large office space areas.
By end-March, the average base rent in the CBD picked up by approximately 5.9% q-o-q to IDR 99,960 per sqm per month. On a yearly basis, rents surged by approximately 21.6% compared with the same quarter a year ago. This is a significant growth compared to the average rental growth of 5-10% per annum in the last decade.
Service charges also increased although only around 1.5% q-o-q, to stand at approximately IDR 61,642 per sqm per month. Overall, gross effective rents (base rent plus service charge) rose by 4.2% q-o-q and averaged IDR 161,598 per sqm per month.
Rents in the non-CBD also strengthened on the back of strong demand and lower vacancy. The average base effective rent climbed to IDR 69,095 per sqm per month, while the service charge also increased to IDR 48,072 per sqm per month.
Combined, the current gross effective rents in this sub-market totalled IDR 117,167 per sqm per month, representing an increase of 3.1% from the previous quarter.
Among the sub-markets in the non-CBD area, South Jakarta still outstripped the others in terms of rents. With its good accessibility and the fact that it is generally perceived as the most prominent location for office buildings after the golden triangle zone (i.e the CBD), the TB Simatupang area in South Jakarta continued to gain popularity particularly among foreign and multinational companies looking for alternative office locations outside the CBD. By end- March, the average base rent stood at IDR 76,682 per sqm per month with the service charge averaging IDR 46,659 per sqm per month.
Rents in the CBD rose by around 6% q- o-q on the back of robust demand and low vacancy. Base rents currently averaged IDR 99,960 per sqm per month with service charge rose to IDR 61,642 per sqm per month.
A similar trend also occurred in the Non-CBD area where both base rents and service charges rose, supported by growing corporate expansion.
CBD Office Rupiah Rental Index (net effective base rent)
Non-CBD Office Rupiah Rental Index (net effective base rent)
Jakarta Property Market Review First Quarter 2012
8 Outlook
The Jakarta office market is expected to continue growing positively in view of the optimism surrounding the country's economy and the improved business environment. Robust and steady demand growth is expected to characterise the market in light of the expectations that tenant expansions, relocations and consolidations will continue to grow. Also, new enquiries and pre-leases are numerous. With an optimistic investment climate, demand from corporate tenants to expand in the country is expected to grow quite significantly in the years to come. In the business sector, financial and energy companies along with banking, natural resources, consumer-based products and service companies are predicted to remain active in the market, whether it is for new office set-ups or further expansions. Call centre operators are also identified as eyeing the opportunity to enter the market and set up businesses in a growing country.
In the CBD area, a number of major developments are slated to enter the market in 2012. This will include the AXA Tower at Kuningan City, World Trade Center II and Ciputra World office tower. The H Tower and four towers in Parc 18 are also expected to start accepting tenants soon as they are currently in their finishing stages and undergoing fitting-out. In contrast, in 2013 the office market is expected to receive only a small amount of new supply predicted to come from three projects The City Center of Batavia, Prudential Annex and Menara Prima 2. Overall, new supply by end-2013 is likely to total approximately 467,400 sqm, with some portions of the space already pre-committed.
On the demand side, the net take-up in the CBD area is projected to reach around 400,000 sqm this year, growing at the same pace as in 2011. Demand is predicted to slow between 2013-2014 inline with smaller additional supply during those periods, before picking up again in 2015. As demand is forecast to outpace supply over the next short to medium term, the CBD market is likely to exhibit a healthy performance with rising occupancy and a potentially solid rental growth. The vacancy is expected to drop to below 7-8% by year-end and likely to decline futher to around 4-6% over the next two to three years.
In general, leasing transactions are predominantly concentrated in newer buildings which are of relatively better quality, have attractive rental terms and have more amenities to attract new tenants. However, some landlords from older buildings are also benefitting from the current situation as they have managed to obtain the attention of smaller companies with limited expansion budgets. As demand for larger floor plates has grown while at the same time some of the space in high quality buildings has been taken up, demand is likely to flow to Grade B buildings as well. This is expected to drive their landlords to provide better quality space and offer more attractive rental packages.
In the non-CBD market, potential supply for 2012 is expected to total around 118,300 sqm, which will be generated from the completion of Sovereign Plaza, Wisma Pondok Indah III, Grha 165, Chitatex Tower and Tebet Green Office Tower. Further ahead, 107,500 sqm new office supply is scheduled to enter the market in 2013, including Oleos 2, GKM Tower and Dipo Business Center. Looking at the future supply in the pipeline over the next two years, South Jakarta will take the highest portion, accounting for more than 80% of the total space which will be located mostly in the TB Simatupang strip.
However, contrary to the anticipated trend in the CBD market where demand should be sustained and grow healthily, demand in the non-CBD area is predicted to grow at a more moderate pace. It is expected that net take-up to reach around 90,000-100,000 sqm per annum within the next two years. The entry of massive new supply is also likely to push the vacancy rate upwards to around 17-18% by end-2013.
In terms of occupancy costs, rents in the upcoming years are forecast to continue improving, given that high demand, low vacancy and business expansion should continue taking place. With landlords also looking to benefit from the bullish market and expecting higher capital gains, several prominent projects are predicted to offer higher rates this year, predominantly for new tenants taking small-to- medium size office space.
In the CBD, rental growth is projected to remain in double-digit figures over the next two years before gradually compressing in 2014. Grade A buildings are likely to exhibit a significant growth in rents benefitting from the flight-to-quality trend in the market and very tight available space.
In the non-CBD, rents are predicted to grow at a moderate pace of around 5-10% per annum. However, it is also noted that some areas in this sub-market are likely to perform better than others. Compared to other areas outside the CBD, TB Simatupang in South Jakarta will still be perceived as the most prominent location for corporate offices. It continues to be preferred by high-profile tenants, particularly foreign companies looking for alternative district. As such, rents in the area are also expected to grow more progessively.
(sqm) 18,836 5,540 YTD Completions 1 (sqm) 18,836 4,215,305 Total Stock (sqm) 1,592,331 72,612 Quarterly Net Absorption (sqm) 40,282 72,612 YTD Net Absorption (sqm) 40,282 90.7 Occupancy Rate (%) 84.5 393,404 Direct Vacancy (sqm) 246,419 99,955 Base Rent (IDR/sqm/mo) 69,095 61,642 Service Charge (IDR/sqm/mo) 48,072 161,598 Gross Rent 2 (IDR/sqm/mo) 117,167 Up to 2014: 800,428 Proposed Stock (sqm) Up to 2014: 444,220
1 Year-To-Date completion: additional stock from January to March 2012 2 Estimated achieved (effective) gross rent (including service charge) for typical tenancy lease (i.e. 125500 sqm)
Office Glossary
The CBD sub-market is the commercial area bounded by Jl Sudirman-Thamrin, Jl Gatot Subroto and Jl HR Rasuna Said (Kuningan). The Non-CBD sub-market covers the commercial areas outside the CBD, which are classified by municipality, i.e. Central Jakarta, South Jakarta, East Jakarta, West Jakarta and North Jakarta. The net absorption (take-up) rate refers to the net cumulative increase in space occupied in a particular period. Prime refers to a property that is rated most highly in terms of quality, location, facilities, etc. Vacancy rate refers to the ratio of vacant space to the total stock (leasable area) available. Gross rent refers to the total rental payable by tenants. This is equivalent to the sum of net rental plus outgoings. Base rental is the minimum rental payable for an office space without taking into account any add-ons, such as service charge and after-hours utility costs that make up the total lease package. Service charge is the collective name for the cost of air-conditioning, other services and management charges passed on to tenants. Jakarta Property Market Review First Quarter 2012
10 J akarta Retail Market
Supply
Benefitting from strong consumer spending, a growing middle class and a shift in lifestyle, the retail market continued to remain solid as reflected by higher occupancy rates in most projects and positive leasing activity.
At the beginning of 2012, the retail stock also grew with the additional supply coming from one major retail development with a total area of around 65,000 sqm. The project, namely Kemang Village shopping mall, is a middle-grade shopping mall catering to the South Jakarta area, and part of a prominent mixed-use development. Thus, by end-March, the total stock of leasable space stood at approximately 2.3 million sqm.
Looking at supply distribution, South Jakarta maintained itself as the most prominent location for shopping malls as it had the biggest share at around 41.5% of the total stock. North Jakarta and Central Jakarta accounted for 21.8% and 18.7% of the total supply, respectively. Meanwhile, the remaining portion was distributed in West and East Jakarta, with 14.4% and 3.5% each. Despite having the largest population, the retail supply in West and East Jakarta is much smaller when compared to the other municipalities. This has now been noticed by developers and investors, encouraging them to tap into these new areas as some other districts are seen to posses potential risk from an over-supply situation.
On the strata front, the trade centre market remained quiet as reflected by the lack of new launches. No additional supply came on the market during the review quarter. Thus, the total supply of strata-title retail space in Jakarta remained at 1.5 million sqm.
Strata retail centres are highly concentrated in Central Jakarta, which accounted for about 43.3% of the total stock, followed by North Jakarta, accounting for 21.7%. The remaining portion is distributed throughout the other areas: South Jakarta (13.4%), West Jakarta (11.1%) and East Jakarta (10.5%).
Looking ahead, the retail market is expected to receive a massive new supply of around 476,600 sqm, mostly from proposed rental malls, over the next three years. This future stock comprises 14 rental malls and one strata retail development. Should all these projects be completed, the total market stock is projected to reach over 4.2 million sqm by 2014.
The retail market received additional supply of around 65,000 sqm from the completion of Kemang Village. Total stock stood at around 2.3 million sqm.
The strata market, on the contrary, remained subdued with no project completion. Supply remained at around 1.5 million sqm.
Rental Retail Supply Distribution (by sub-market)
Strata Retail Supply Distribution (by sub-market)
Jakarta Property Market Review First Quarter 2012
11 Demand
Cushioned by robust domestic consumption, the retail market continued to exhibit a positive performance in 1Q12 as reflected in the higher occupancy rates in various projects. Demand grew healthily despite declining slightly from the previous quarters figures.
Leasing activity from January-March was sustained as retailers continued to expand and open new stores. While F&B retailers and specialty stores continued to generate most of the new demand, larger retailers also continued to draw up expansion plans and explore the market for good prospective locations. Between January and March 2012, net take up in the rental retail market totalled around 37,800 sqm, dominated mainly by small-to-medium scale stores as large space became hard to find in the existing projects.
The largest take up during the review quarter was seen in the newly completed Kemang Village with its anchor tenant Hypermart taking up 6,600 sqm retail space. Other notable transactions included ACE Hardware taking around 850 sqm space in Emporium Pluit as well as Muji with its 700 sqm new space in Taman Anggrek Mall and Pondok Indah Mall. Waraku Holdings also took up a large space in Mall Taman Anggrek, and the opening of several F&B stores was seen in newer projects such as Epicentrum Walk, Gandaria Main Street and Plaza Senayan.
The growing middle-class market continued to attract foreign investors to the country. Foreign brand retailers, aiming to capitalise on the growing market potential were also identified as prospective tenants for prime shopping malls. The pre-commitment rates in future retail developments were also strong, as seen in prominent projects located in strategic locations such as Kota Kasablanka and Ciputra World. Overall with the entry of new supply, vacancy rates moved upward to 13.3% from 12.4% in 1Q12.
Meanwhile, the strata market continued to grow albeit at a slower pace than the rental malls. Demand was sourced mainly from tradiitonal mom-and-pop stores and a number of chain retailer (mainly fastfood restaurants). With no new supply, net absorption fell to around 10,500 sqm in the strata market. Meanwhile, the vacancy rate eased slightly to 32.3%.
Rents
In view of the positive leasing activity in the market and the limited available space, the effective base rent in Jakartas shopping malls increased marginally by 1.0% to IDR 422,844 per sqm per month. The service charge also increased by around 2.0% q-o-q to IDR
Leasing activity in the retail market remained healthy, yet net take-up slowed to around 37,800 sqm during January and March period given the limited available space.
Rental Retail Cumulative Supply and Occupancy
Strata Retail Cumulative Supply and Occupancy
Prime Retail Rental Index (net effective base rent)
Jakarta Property Market Review First Quarter 2012
12 71,638 per sqm per month. This resulted in an increase in gross effective rents in 1Q12 to IDR 494,482 per sqm per month.
The tight competition in the market also had an impact on the current rental developments, which in some cases, forced mall owners to offer discounts and incentives to attract prospective tenants. Landlords continued to seek ways to create new and unique concepts for their premises in order to increase the number of visitors which would in-turn encourage more prominent retailers to take space.
Outlook
The retail market is expected to continue strengthening. The positive performance of the economy, the growing middle class and the change in lifestyle which the countrys young is now undergoing, are predicted to continue encouraging retailers to capitalise on the countrys potential. A number of shopping malls continued to receive enquiries and several major proposed projects also generated pre-commitments from prominent retailers. Some retailers are expected to target various market segments, including luxury brands with stores already mushrooming in Jakarta, while others are looking for space in prestigious malls. On top of this, hypermarkets, department stores, entertainment outlets, and fashion stores, are predicted to continue being active in the market.
With big retailers and anchor tenants aggressively introducing expansion plans, smaller retailers are also actively looking for new space. Lifestyle retailers, especially F&B and entertainment operators, are expected to continue playing an important role as they are seen as effective in attracting crowds. As a result of potential solid demand, vacancy rates should fall to around 9-11% in the next two or three years.
On the supply side, the market is slated to receive a large number of new malls over the next few years. Starting with Ancol Beach City and Kota Kasablanka, which are scheduled to open around mid of this year (in total, an additional stock of approximately 221,500 sqm new rental retail space is expected to be delivered this year). A further additional supply of more than 121,000 sqm is predicted to enter the market in 2013. It will then bring the total stock in the rental retail market to around 2.7 million sqm.
Aligned with the positive demand, rental growth is also expected to experience a gradual growth in the short to medium term. Rents are projected to grow at around 4-8% this year and a more gradual rental upswing is expected to take place afterward.
In the strata market, only one project is expected to complete in 2012, namely Cikini Gold Center. It will bring approximately 15,400 sqm of new supply to the market. No other developments are scheduled for 2013 and thereafter. Meanwhile, the vacancy is predicted to continue moving downward to around 21- 24% by 2014 along with the prospects of improving demand. Jakarta Property Market Review First Quarter 2012
0 2,318,501 Total Stock (sqm) 1,481,022 37,783 Quarterly Net Absorption (sqm) 10,529 37,783 YTD Net Absorption (sqm) 10,529 86.7 Occupancy Rate (%) 67.7 307,372 Direct Vacancy (sqm) 478,879 422,844 Base Rent (IDR/sqm/mo) N/A 71,638 Service Charge (IDR/sqm/mo) N/A 494,482 Gross Rent 2 (IDR/sqm/mo) N/A Up to 2014: 461,179 Proposed Stock (sqm) Up to 2014: 15,400
1 Year-To-Date: additional stock from January to March 2012 2 Estimated achieved (effective) gross rent (including service charge) for typical specialty store located in a prime area
Retail Glossary
Rental shopping malls are shopping centres that are offered for lease by the landlord on a monthly basis. The typical lease term for a specialty store is between one and three years. Strata-title trade centres are shopping centres that are offered for sale by the developer. A trade centre mostly consists of small kiosks that typically range from 4-20 sqm. The net absorption (take-up) rate refers to the net cumulative increase in space occupied in a particular period. Prime retail space refers to space in a mall that is located in prime areas (i.e. lobby level up to the first three floors). Vacancy rate is the ratio of vacant space to the total stock (leasable area) available. Gross rental refers to the total rental payable by tenants. This is equivalent to the sum of net rental plus outgoings. Base rental is the minimum rental for a retail space without taking into account any add-ons, such as service charges and after-hours utility costs that make up the total lease package. Service charge is the collective name for the cost of air-conditioning and other services, and management charges passed on to the tenant. Jakarta Property Market Review First Quarter 2012
14 J akarta Residential Market
Supply
As the economy posted solid growth, the residential market in 1Q12 was also seen to be on an upward trend. Developers continued to aggressively introduce new projects targeting various market segments, particularly in the condominium market.
Between January and March 2012, three new condominium projects were launched in Jakarta, with a total of approximately 1,000 units. Two of the projects, Senopati Penthouse and The Cedar Condominium at Ciputra World 2, cater to the upper- market segment and are located in a prime area of Jakarta, while the other, The Hive at Tamansari, which is separated into condominium and condotel portions, is categorised as being in the lower-middle segment and located in East Jakarta.
Meanwhile, only one project was completed in 1Q12, Cosmo Terrace, with 414 units lower-middle-grade condominiums, which brought up the total supply of strata condominiums to around 76,700 units.
By location, the CBD contributed the highest portion of new supply during the review quarter, accounting for 26.4% of the total stock. Outside the CBD, North Jakarta dominated, with around 22.8% of the total stock, while the remainder was distributed among West and Central Jakarta (with 20.9% and 15.6% each), South Jakarta (13.4%) and East Jakarta (0.9%).
By grade, the condominium supply is largely of middle- and lower-middle-grade projects with 49.4% and 43.8%, respectively with only 6.8% classified as upper-class condominiums.
In the rental apartment market, we recorded no service or purpose-built rental apartments being completed throughout the quarter. This left total supply in the market unchanged at approximately 7,814 units.
Location-wise, rental apartments were highly concentrated in the CBD, representing around 42.7% of the total stock. The other 57.3% was distributed in South Jakarta (33.1%), Central Jakarta (9.2%), North Jakarta (8.5%), West Jakarta (5.9%) and East Jakarta (0.6%).
Based on building grade, most of these rental apartments were classified as middle-grade buildings, which represented 61.7% of the total supply, while upper-middle- and lower-middle-grade buildings accounted for 36.9% and 1.4%, respectively.
Three condominium projects were launched during 1Q12. Meanwhile, only one project was completed, adding a total of 414 units to the existing stock.
On the rental apartment market, no new completions were delivered to the market. Total supply remained at 7,814 units.
Rental Apartment Annual Supply (in # of units)
Strata Condominium Annual Supply (in # of units)
Jakarta Property Market Review First Quarter 2012
15 Demand
Triggered by the low interest rate environment, buying demand in the condominium market continued to remain positive during the January-March period. Sales in proposed projects reached 2,039 units, a slight decline from the previous quarter, yet remaining a solid figure. The majority of recent sales took place in projects located in the Non-CBD area, which accounted for around 67.1% of the total sales booked during the quarter.
By end-March, of the total of 27,133 condominium units currently being developed and offered for sale, about 65.5% or around 17,778 units were pre- committed, leaving around 9,355 units available for sale in Jakarta.
A quite similar trend also occurred in the rental apartment market, where leasing demand softened during 1Q12. Quarterly net absorption stood at 164 units, driven mostly by business travellers and families from other provinces travelling to Jakarta. Higher take-ups occurred mostly in newer projects that offered better quality buildings and were equipped with better facilities as well as modern furnishings.
With no additional stock entering the rental apartment market in this period, the vacancy rate fell to 17.5% from 19.6% by end-2012.
Rental and Price
The gradual increase in sales and the optimism towards the residential investment market were considered to be the driving factors for the rising condominium prices in Jakarta in this period. As some developers adjusted their selling prices, the average price of condominiums in Jakarta rose to around IDR 15.3 million per sqm, an increase of 3.2% q-o-q.
Similarly, rents in the apartment market also increased, following the positive trend from the previous quarter. Average effective rents rose to USD 15.1 per sqm per month while the service charge stabilised at USD 3.39 per sqm. Nonetheless, most landlords maintained their current rates and were reluctant to increase them in order to keep current tenants. Increasing rents were mostly found in newer projects which enjoyed higher occupancy rates and provided better quality buildings. Various concessions were still offered, including special rates for longer leases and flexible payment terms.
Sales in the condominium market in Jakarta softened during 1Q12 to around 2,039 units.
Similar conditions were seen in the rental apartment market which experienced a declining net take-up of around 164 units during this quarter.
Apartment Cumulative Supply and Occupancy
Condominium Cumulative Supply & Take-Up
Luxury Apartment Rental Index (net effective base rent)
Jakarta Property Market Review First Quarter 2012
16 Outlook
We continue to expect the residential market to grow at a faster pace, given that the economy should also maintain positive momentum for this year and next. The low interest rate environment and a better economic outlook are expected to generate more buying demand from end-users. This will come predominantly from young families or executives working in the city who have been overwhelmed by the traffic problems of the city and its surroundings. On the development and investment side, the increasing land price in Jakartas prime areas provides the platform for property price appreciation and an optimistic business environment. This, in turn, will potentially lead to the creation of more leasing demand and become the pull factor attracting investors to buy more condominiums, particularly in strategic locations such as within or near the CBD. Furthermore, as the citys lifestyle is changing with many more people living in high rise buildings and as higher incomes result in a growing middle-class developers now have an opportunity to respond to the needs of this middle-grade market segment.
Over the next few years, a large number of new condominium developments are expected. Around 13,800 units are slated to enter the market this year, coming from more than 30 projects in Jakarta, which will be a record high should all projects complete on time. Going forward, another 5,300 units will also coming on stream in 2013 and around 8,000 units in 2014. Thus by end-2014, the total number of proposed condominiums in Jakarta is projected to reach approximately 27,000 units. The competition is therefore likely to be strong, as each project tries to generate more sales through attractive building concepts and facilities.
Demand for strata condominiums is predicted to grow positively in the future, with sales growth in 2012 is seen to be around 10-15% higher than in 2011, supported by, among others, the governments efforts to keep interest rates low and traffic jam in Jakarta which will boost buying demand from end-users.
In the leasing market, enquiries for luxury rental apartments are anticipated to improve gradually along with the increase in corporate activity and improving number of expatriates and business travellers to the country. However, existing rental apartment projects in Jakarta, which consist mostly of older developments, are lacking the amenities that newer condominium developments offer. This will likely lead to the demand being concentrated in select quality projects such as serviced apartments (particularly those managed by international hotel operators) located in or near the CBD.
On this basis, we expect net absorption to reach around 300-350 units in 2012, before fall to around 200-250 units throughout end-2014. With that scenario, the vacancy rate in the rental apartment market is expected to hover around 22-25% per annum over the next two to three years.
In terms of supply growth, seven apartment projects are scheduled for completion by end-2012, including The Grand Hyatt Residence Keraton, Residences at Dharmawangsa Tower 2 and Apartment Plaza Senayan Towers C and D. Furthermore, four more projects will come on stream in 2013, three of them part of the Ciputra World mixed-use development. So far, no projects have been announced for 2014. The proposed projects will bring in a total of more than 1,400 units upon their completion. Thus, the potential supply in the Jakarta rental apartment market to reach more than 9,000 units by end-2014.
Generally, apartment rents are unlikely to experience significant changes over the next two to three years due to competition to individually-owned condominiums and luxury houses. To attract more tenants and retain existing ones, landlords are likely to continue giving various concessions in terms of services, payment terms and length of lease. The anticipated increment in total occupancy costs is likely to be driven by a hike in utilities, which will impact on service charges. More aggressive rental growth is likely only in the longer term, when there is no more significant supply to come on stream. At that time, landlords should be able to increase occupancies and raise their rental rates.
(units) 414 0 YTD Completions 1 (units) 414 7,814 Total Stock (units) 76,723 164 Quarterly Net Absorption (units) 2,039a 164 YTD Net Absorption (units) 2,039 82.5 Occupancy Sales Rate (%) 65.5c 1,370 Direct Vacancy Available (units) 9,355b 15.1 Base Rent (/sqm/mo) - 3.4 Service Charge (/sqm/mo) - 18.5 Gross Rent 2 (/sqm/mo) - - Price 3 (/sqm) IDR 15,321,670 Up to 2014: 1,452 Proposed Stock (units) Up to 2014: 27,133
1 Year-To-Date: additional stock from January to March 2012 2 Estimated achieved (effective) gross rental (including service charge) in luxury apartments (unfurnished) 3 Estimated achieved price of condominiums (all-grade average) a New sales in the proposed projects from January to March 2012 b Total unsold units in the entire proposed projects c The proportion of sold units to the entire proposed projects
Residential Glossary
Condominiums are a form of multi-storey dwelling comprising units that are offered for sale by the developer. Each unit is owned by a different person and the common areas are owned jointly by all such individual owners. Apartments are a type of accommodation (in Jakarta, they are typically in a high-rise residential building) that is built purposely for rent. Net absorption (take-up) rate for apartments refers to the net cumulative increase in the number of occupied units over a particular period; for condominiums, it refers to the net sales in the quarter. Vacancy rates for apartments refers to the ratio of vacant units to the total stock (leasable units) available; for condominiums, it refers to the ratio of total unsold units to the total stock over a particular period. Base rental for apartments refers to the minimum rental for an apartment unit without taking into account any add-ons, such as service charges, that make up the total lease package. Service charges for apartments refers to the collective name for the cost of public utilities and maintenance, including management charges passed on to the tenant. Jakarta Property Market Review First Quarter 2012
18 J akarta Hotel Market
Trading Performance
Jakartas market-wide hotel trading performance has seen a significant improvement in average daily rates (ADR) and a corresponding increase in occupancy from 2010 to 2011. In 2011, market-wide ADR increased 14.0% year-on-year, achieving a record of USD 90 and a healthy occupancy of 71.7%, a 3.8 percentage point increase from 2010.
As at year-to-date (YTD) February 2012, statistics from STR Global continue to indicate an upward trend in ADR and occupancy for upscale and mid- scale hotels in Jakarta. This led to a robust growth in revenue per available room (RevPAR) for the upscale and mid-scale hotel sectors, which achieved year-on- year increases of 22.3% and 19.8%, respectively, in YTD February 2012.
The capital city of Indonesia continues to attract predominantly corporate travellers, and hotel trading performance has grown in tandem with strong domestic demand. International visitor arrivals to Jakarta have shown an increase of 11.1% to 2 million visitors in 2011, according to the Central Statistics Agency (BPS). Improved connectivity between Jakarta and its neighbouring Asian countries was made possible with the proliferation of the low-cost carrier industry and the increase in flight frequencies by these carriers and Indonesias national airline, Garuda Indonesia. Garuda continues to expand its network, opening new flight routes and increasing flight frequencies between the Jakarta and several Asia Pacific cities.
Future Hotel Supply
The upcoming hotel pipeline in Jakarta for the next two to three years is dominated by economy and mid-tier hotels. In 2012 and 2013, hotel supply is anticipated to increase by 5.8% and 3.6%, respectively. This includes a diverse mix of internationally branded hotels, such as Ibis, Mercure, Novotel, Holiday Inn and local hotel chains such as Amaris and favehotel.
Other local chains looking to expand their presence in Jakarta include Whiz hotels. Since land in the central business district (CBD) is limited and costly, the majority of the new hotels are not located in the CBD but are being developed in other central locations and in the southern part of Jakarta.
The market-wide ADR increased 14.0% year-on-year, achieving a record of USD 90 and a healthy occupancy of 71.7%, a 3.8 percentage point increase from 2010.
Jakarta Market-wide Hotel Performance
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% $0 $20 $40 $60 $80 $100 2003 2004 2005 2006 2007 2008 2009 2010 2011 O c c u p a n c y
( % ) A D R / R e v P A R
( U S D ) ADR RevPAR Occupancy (%) Source: STR Global
Jakarta Upscale Hotel Performance
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% $0 $20 $40 $60 $80 $100 $120 $140 $160 Jan-12 Feb-12 YTD Feb 2011 YTD Feb 2012 O c c u p a n c y
( % ) A D R / R e v P A R
( U S D ) ADR RevPAR Occupancy (%) Source: STR Global
Jakarta Mid-scale Hotel Performance 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% $0 $20 $40 $60 $80 Jan-12 Feb-12 YTD Feb 2011 YTD Feb 2012 O c c u p a n c y
( % ) A D R / R e v P A R
( U S D ) ADR RevPAR Occupancy (%) Source: STR Global
Jakarta Property Market Review First Quarter 2012
19 Apart from the economic and mid-tier hotel sectors, there are also several luxury hotels proposed and under construction in the Jakarta CBD, which includes the following hotel brands: W, Raffles, Alila and Fairmont. In addition, a number of hotels are being refurbished or re-branded, such as the Hotel Nikko, which is being renovated into a Pullman. We anticipate that this trend will continue to grow, especially since new hotel districts such as Jalan Simatupang in the south of Jakarta's CBD will provide limited competition in the market.
Outlook
Moving forward, hotel trading performance in Jakarta is likely to continue on the upward trend in the short to medium term, assuming demand, and domestic demand in particular, remains strong. Infrastructural improvements and increases in flight connectivity will also boost inbound tourism to Jakarta and consequently benefit the hotel industry.
Market Wide Hotel Market 2011 Variance vs 2011 % Variance over 2011 ADR (USD) 90 11 14.0% Occupancy 71.7% 3.8pp 5.6% RevPAR (USD) 65 11 20.3%
Jakarta Future Hotel Supply 2012 to 2014 (by location)
Central 43% South 48% West 0% North 2% East 7%
20
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Jones Lang LaSalle Research is a multi-disciplinary professional group with core competencies in economics, real estate market analysis and forecasting, locational analysis and investment strategy. The group is able to draw on an extensive range and depth of experience from the Firms network of offices, operating across more than 100 key markets worldwide. Our aim is to provide high-level analytical research services to assist practical decision-making in all aspects of real estate.
The Asia Pacific Research Group monitors rentals, capital values, demand and supply factors, vacancy rates, investment yields, leasing and investment activity, and other significant trends and government policies relating to all sectors of the property market including office, retail, residential, industrial and hotels. We deliver a range of global, regional and local publications as well as research-based consultancy services.