The office building market in Jakarta is to likely continue to show sluggish growth this year amid pressure from a global economic slowdown and plunging commodity prices, analysts suggest.
Coldwell Banker Commercial Indonesia strategic advisory director Tommy H. Bastamy said the country’s capital was seeing an oversupply in its office rental market, providing opportunities for tenants to rent office space at very competitive prices.
“We have already entered the tenant market condition, meaning that the bargaining power of tenants is bigger than that of landlords,” he said on Wednesday.
According to the firm’s study on 100 office rental transactions in Jakarta from early 2015 to the first quarter of this year, the average rental rate stood at below Rp 300,000 (US$22.2) per square meter (sqm) per month, and almost 50 percent of transactions were sealed at below Rp 200,000 per sqm per month.
The study also found that business areas on Jl. TB Simatupang, South Jakarta, and in Slipi, West Jakarta, are offering relatively low rental rates of below Rp 200,000 per sqm per month, compared to those in the Central Business District (CBD) area, such as in Kuningan, South Jakarta, and Central Jakarta’s Sudirman area, where office spaces are offered at between Rp 200,000 to Rp 300,000 per sqm per month.
Approximately 40 percent of the 100 transactions studied by Coldwell Banker were made because of respective companies relocating due to budget cuts, the firm’s vice president of strategic advisory, Dani Indra, said.
“Businesses related to the mining, and oil and gas sectors are among those who had to relocate [their offices] due to financial constraints,” he said, adding that the remaining rental contracts had been made to accommodate business expansion or the establishment of new companies.
Last month, Cushman & Wakefield found that office building vacancy rates in Jakarta’s CBD soared in the January to March period to 18.6 percent or more than 1 million sqm, which is equivalent to over 100 soccer stadiums. This is compared with 8.12 percent in the same period last year.
“The ongoing fall of global oil prices has forced oil and gas-related businesses to reduce office space or close down,” said Arief Rahardjo, a Cushman & Wakefield director of research and advisory services.
The outlook is not bright. Cushman & Wakefield predicts the vacancy rate in the CBD to continue climbing, while Jones Lang LaSalle expects occupancy to rebound in late 2019 or 2020.
Coldwell Banker’s data, however, shows that 55 percent of the rental transactions in its study involved grade-A and grade-B office spaces in the CBD area,
“Many office buildings in the CBD are now offering fairly competitive prices, making existing tenants think twice to moving out,” Dani said.