WATARU SUZUKI, Nikkei staff writer
JAKARTA -- After years of rapid growth, the rental office market here in Indonesia's capital is slowing down as companies hold back on expansion amid the weak economy, property watchers say.
The occupancy rate of offices in Jakarta's central business district, where thousands of foreign companies are based, declined by more than two percentage points from 94.5% at the end of 2014 to 92.1% as of June, U.S. property consultant Cushman & Wakefield says in its latest research report. Given that office developers plan to put an additional 816,000 sq. meters of office space on the market this year, the occupancy rate could fall to 83% by the end of the year, the report says.
Monthly rental rates for offices in Jakarta's prime locations, which surged from about $22 per sq. meter in 2011 to $39 in 2014, have also declined, to $32 as of June, the report says.
Jakarta's office market has in the past seen robust growth due to demand from companies looking to capitalize on Indonesia's growing economy. But in the face the recent economic slowdown, which saw growth dipping below 5% in the first quarter, Cushman's Indonesia head of research Arief Rahardjo said that many foreign companies are now holding back on relocating to bigger offices to cut costs, or are waiting for growth to pick up before opening new offices.
Ciputra Property, a subsidiary of Ciputra Development that operates the Ciputra World complex, and Alam Sutera are among the developers selling office space in central Jakarta. With weak demand, these companies might postpone new sales until next year to keep rents from falling, Rahardjo said.
Anindya Saraswati, a property analyst for local brokerage Danareksa Sekuritas, said the impact of weak office sales is not significant for major developers because most of their revenue still comes from residential projects. But a prolonged economic slowdown may affect players expanding in the office sector. Last year, Singapore's sovereign wealth fund GIC partnered with Indonesian conglomerate Rajawali Group to invest $500 million in office towers and other properties in Jakarta's prime locations.
An exception to the weak demand is e-commerce companies, which are expanding rapidly with massive financial backing from investors. Online shopping mall operator Tokopedia, which received $100 million in funding from Softbankand other investors last year, has relocated to bigger offices multiple times and is currently planning to build its own headquarters in Indonesia.
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