Office market showing signs of recovery after years of low growth

The office property market, one of the sectors most severely hit by the country's financial crisis in the late 1990s, has begun to show signs of recovery, with both supply and demand revealing healthy growth during the first quarter of this year.

Property consultant Procon Indah reported Thursday that the supply of new office space in Jakarta increased about 300 percent to 82,700 square meters during the first quarter of the year, the highest level since the outbreak of the crisis.

Procon's strategic advisory group senior manager, Arief N. Rahardjo, attributed the sharp increase in new office supply to the coming onstream of three new office blocks in the city.

The new buildings are the Indofood Tower, with total floor space of 31,150 sqm, and Plaza Marein, with total floor space of 18,400 sqm, both of which are on Jl Sudirman, Central Jakarta, and the Karya Tower on Jl HR Rasuna Said, South Jakarta, with 33,155 sqm of total floor space.

As of the end of March 2007, total office space in Jakarta amounted to 5.35 million sqm, comprising 3.27 million sqm in the central business district (CBD) and about 2.10 million sqm outside the CBD area.

According to Procon figures, net take-up increased by 127 percent to 52,200 sqm during the first three months from 41,000 sqm during the corresponding period last year.

""With regard to leasable office space, the take-up is still dominated by existing tenants who are either expanding their businesses or relocating their offices, rather than new tenants,"" Arief explained.

He said that take-up was projected to further increase over the course of the year on the back of an expected increase in new investment.

Procon figures show that the average occupancy rate of the both leased offices and strata-title offices rose slightly by 0.8 percent to 84.5 percent during the first three months from 83.7 percent in the same period last year. However, compared to the last quarter of 2006, it decreased by 0.4 percent due to oversupply.

Unlike leasable office space, the supply of strata-title office space, which are built to be sold, dropped sharply as many office owners preferred to lease their property rather than to sell it.

According to data provided by Coldwell Banker Commercial, the supply of this type of office space suffered a 77.1 percent decrease compared to the first quarter of 2006.

The report showed that only 12,400 sqm of new supply came on the market during the quarter, which brought the total stock of strata-titled office space to 455,810 sqm.

A total of 12,400 sqm of strata-titled office space was sold during the first quarter, up 19.81 percent from the same period last year.

Occupancy levels in the CBD stood at 83.19 percent, whereas in secondary locations it was only 59.9 percent.


SourceThe Jakarta Post, Fri, 04/27/2007