RumahHokie.com (Jakarta) – Around 1.8 million sqm of office space is expected to enter the Jakarta CBD market between H2 2017 and 2020, according to a new report by Savills World Research Indonesia.
This includes 600,000 sqm of new office will be delivered over the balance of this year. On the other hand, the vacancy will likely continue to increase next year, along with the influx of new supply.
Of the upcoming supply, 57% is categorized as Grade A developments, 40% is Premium Grade buildings and another 3% is Grade B buildings.
“No Grade C projects are identified, implying improving tenant preference for prestige and better quality,” said Anton Sitorus, Director Research Consultancy of Savills Indonesia.
Based on location, he added, 53% of the future supply is located in Sudirman area, 29% is in Rasuna Said and the rest is distributed equally between Thamrin and Gatot Subroto area.
Pick-Up in 2020
Generally, we still see downside risks in the CBD office market. Aside from the abundant development pipeline, the 2019 presidential election will affect the investment and business climate.
“As such, we are of the view that landlords should secure any reasonable deals and replace expiring leases before 2019,” Anton explained.
In terms of rents, we expect the market to soften further before starting to pick-up again in 2020 when less supply will be delivered. For forecasting purposes, we project rents using three scenarios: optimistic, moderate, and pessimistic.
“By the end of this year, average rents are projected to decline by 3% to 5% in an optimistic scenario, 8% to 15% in a moderate scenario, and 15% to 22% in a pessimistic scenario,” Anton said.
Softening rents are estimated to reach their bottom in 2019. This is reflecting a drop of around 20% over 2016 rents based on Savills’ moderate scenario forecast.
Looking forward, we predict robust growth in the technology-based sector as some well-established e-commerce companies have recently secured new funds from overseas investors, Traveloka and Go-Jek are examples.
These companies are potential tenants for CBD offices as prime and strategic locations may be considered. As such, landlords should be more creative to attract these tenants to relocate to their buildings.
In the first semester of 2017, Tokopedia, a leading local e-commerce company moved to Ciputra World 2 Jakarta in Satrio district. The company formerly occupied space at Wisma 77, Slipi in West Jakarta.