Increase in the prices of oil in the world market causes an increase in construction cost.
The country's property industry has expanded to follow the progress made in economic development. Many property projects including high rise office buildings, shopping centers, apartment towers and hotels have lined up big streets in large cities notably in Jakarta.
The sharp increase in the prices of oil in the past several months is feared to cause a setback to the property industry as the oil price hikes have been followed with an increase in the prices of building materials. Contractors are forced to recalculate the cost of their projects.
The increase in the construction cost is expected to result in an increase in the selling prices or rent of the property only in 2008. Many developers still choose to wait and see the developments of the oil prices in the world market and the policy to be adopted by the government to cope with impact of the oil price hikes.
Main tenants move from CBD on rise in tariffs.
Development of the main Central Business Districts (CBD) in Jakarta - along the expensive areas of Jl. Sudirman, Thamrin, Kuningan, Gatot Subroto and nearby areas - has continued at rapid rate marked by the emergence of new high rise commercial buildings. An increase in the rents of office spaces in the expensive district have forced users to move to less prestigious districts in the city.
A number of companies including oil, mining and heavy equipment companies have moved from the CBD area to new office buildings such as Ratu Prabu 2, Menara 165, Graha Kanaan 2, and Arcadia Office Park along the Outer Ring Road (such as Jl. TB Simatupang).
A major oil company, ConocoPhillips, has also moved from Menara Mulia at the CBD to Ratu Prabu 2 at Jl. TB Simatupang.
Relocation of major companies from the CBD might cause a setback to the owners of office buildings in that district. Oil companies, contractors, mining companies and heavy equipment companies have been the main tenants of
office building in the CBD. Many companies, however, choose to stay at the expensive district area as that location gives good image and prestige.
Supply of office space continues to increase
Amid the slow growth of the economy as a result of the soaring oil prices, and shortfall in economic achievements many new office buildings have come on stream in 2007 increasing supply of office spaces both in the CBD and non CBD areas.
In 2005, cumulative supply of office spaces totaled 3.19 million sq.m. in the CBD and 1.35 million sq.m. outside CBD. In 2006 the supply rose 5% to 3.35 million sq.m. in the CBD and 1.46 million sq.m. in other areas.
Based on additional supply expected this year, cumulative supply in 2007 will total 3.70 million sq.m. in CBD or an increase of 10%. Meanwhile, supply outside CBD grew faster by 8.2% in 2006 and 17.1 % in 2007.
New supply in 2007, the highest since 1997
The soaring prices of oil followed with an increase in the prices of goods including building materials have no significant effects yet on the sales of office spaces already completed in 2007, the price hikes did not cause much increase in the construction cost for buildings already finished in 2007.
So far the CBD still contributes the largest portion to the increase in the supply of office spaces in Jakarta. The Kuningan area is dominant in floor space completed in 2007 with contribution of 35,000 sq.m. from the Menara Karya building, 60,000 sq.m. from the Satrio Tower, 61,500 sq.m. from the Menara Prima and 44,000 sq.m. from The East tower.
A significant increase of 17% was recorded in supply of office spaces in other areas but not as dominant as in the CBD. The increase exceeded the increase rate of 10.4% in the CBD but much smaller in absolute term.
New supply in office spaces in other areas in 2007 included from CBD Pluit, The Belleza, Mega Glodok Kemayoran, Graha Meruya, Wisma Pondok Indah II, Arcadia Office Park, Menara 165, etc.
The increase in supply of office spaces in 2007, both from the CBD and other areas was the highest per year so far since the crisis began to hit the country in 1997. ........................
INDONESIAN COMMERCIAL NEWSLETTER
List OF Contents
FOCUS: BRACING FOR OIL PRICES TO SHOOT UP TO US$ 100 A BARREL
DEVELOPMENT OF OFFICE BUILDINGS IN JAKARTA 5
Current issue 5
New supply in 2007, the highest since 1997 6
Demand sharply up for office spaces outside the CBD 8
Occupancy rate down in 2007 on increase in supply 8
Marketing aspect 9
Location determinant 9
Facilities determine interest and prices 10
Market size tends to expand 11
Domestic companies main users of new office buildings 12
Developers of office buildings in Jakarta 2007 13
PT Grand Indonesia, largest developer in 2007 14
TB Simatupang new magnet for office area 14
Mixed-use property expanding 16
Policy in property sector 17
Plan to increase supply 17
Prospects and conclusion 17
BUSINESS IN RETAIL TRADE SPACES 19
Current issue 19
Supply in 2007 dominated by property for sales 21
Hypermarkets boost demand for retail trade spaces 22
Demand rising 23
Occupancy rate up again in 2007 24
Seeking to utilize strategic location not fully productive 25
Tenants determines 26
Profiles of users 27
Retailers remain anchor tenants 28
Prospects and conclusion 28
DEVELOPMENT OF INDUSTRIAL ESTATE IN THE GREATER JAKARTA AREA 30
Current issue 30
Location of industrial estate 31
Greater Jakarta area and development of industrial estates in Indonesia 32
Supply of industrial estate, 2005 - 2007 33
Sales declined in 2006 34
Government policy on industrial estates 35
Profiles of major industrial estates in Jabodetabek 40
Foreign investors dominated major industrial estates 43
Prospects and conclusion 43
TRADE AND SERVICES: PROFESSIONAL PROPERTY BROKERAGE INDUSTRY GROWING FAST 44
COMPANY PROFILE: CIPUTRA GROUP 47
FINANCE: BANKS MORE AGGRESSIVE IN FUNNELING FUND TO PROPERTY BUSINESS 52
INDUSTRY: EXPANSION OF PROPERTY SECTOR BOOSTS CEMENT PRODUCTION UP 6% IN 2007 56
PROPERTY: APARTEMENT BUSINESS GROWING OUT OF CONTROL 63
CORPORATE NEWS IN BRIEF:
CMNP to build toll road in Manila, Philippines 73
Indosat to spend Rp 8.5 trillion for network expansion 73
United Tractor to expand operation to mining industry 73
Bakrie asks Daewoo to invest in gas pipeline project 74
Kookmin may take control of BII 74
Garuda makes priority for debt restructuring and transformation 74
Djarum Group to expand business to coal mining industry 75
ACS optimistic to win tender to build USO project 75
Medco to expand business to forestry sector 75
ECONOMIC NEWS IN BRIEF:
Implementation of investment projects hits record high 76
Car sales fell 23.8% in October 76
Coal exports to be restricted with quota 76
Private cars to be banned from using subsidized fuels 77
Foreign airlines serving flights to Indonesia subject to ramp check 77
Anti dumping duty 56.51% imposed on HRC from India 77
APPENDICES: Directory of property and real estate companies in Indonesia 78