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INDONESIAN COMMERCIAL NEWSLETTER
MARKET INTELLIGENCE REPORT ON

DEVELOPMENT OF OFFICE BUILDINGS IN JAKARTA

November 2007

Current Issues

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. ........................



MONTHLY REPORT
INDONESIAN  COMMERCIAL NEWSLETTER
       
November 2007

List OF Contents

FOCUS:  BRACING FOR OIL PRICES TO SHOOT UP TO US$  100 A BARREL        

INDUSTRY PROFILE:  

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
  • Location        20
  • 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

ECONOMIC INDICATOR:
  • Economic Indicators        80
  • Export and import        81
  • Gross Domestic Product        82
  • Oil Price and Foreign Exchange        83
  • The Indonesian Economic Trends        84

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