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Title: Prices of Jakarta office buildings set to remain stagnant until next year
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Prices for strata-title office buildings in Jakarta are expected to remain stagnant until next year as demand is expected to stay flat am...

Prices for strata-title office buildings in Jakarta are expected to remain stagnant until next year as demand is expected to stay flat amid sluggish growth of new investments in the country, according to a property consultant.

"The average office price tends to be flat or moderate, at least until the end of 2020, even though the supply is limited," Eko Arfianto, Indonesia senior research manager at Colliers International, told the Jakarta Post last week.

Prices for strata-title office buildings in Jakarta fell by eight per cent year-on-year in the second quarter of this year due to sluggish demand, he said, adding that since January, sales have totalled 15,000sqm.

The sluggish growth is partly due to weak growth in new investments. According to the Investment Coordinating Board, the realisation of total investments in the country rose only 5.3 per cent year-on-year to 195.1 trillion rupiah ($13.95 billion) in the second quarter of this year.

Of the total, domestic investment rose 14.1 per cent year-on-year to 76.4 trillion rupiah, while foreign investment dropped 0.9 per cent to 107.9 trillion rupiah.

According to Colliers' research data, based on available space, including sales prices in the secondary market, the average selling price has been relatively similar over the past few years, ranging from 40 million rupiah to 100 million rupiah per square metre.

On average, selling prices in the Central Business District (CBD) were between 54 and 55 million rupiah per square metre, and between 38 and 40 million rupiah in less elite areas.

After a period of excess supply from 2015 to last year, the number of office buildings is expected to grow moderately over the next three years. Including newly operating buildings, total office supply during the 2019-2021 period is projected to reach 900,000sqm, about 30 per cent lower than the total supply in 2015-2018.

"We expect the sales volume to be modest, so price increases will be mainly triggered by the influx of new strata-title buildings with higher quality and prices," Ferry Salanto told a press briefing.

Colliers stated that it had yet to record any new office projects that began construction during the first six months of this year. Thus, supply in the CBD until 2021 will be contributed by office buildings that are under construction.

Since the downturn period in 2015, the average occupancy rate in the CBD has been relatively steady over the past few years. Occupancy has been relatively stable at around 82.5 per cent in the first quarter of this year. And despite a large projected supply in the second half of this year, occupancy levels are expected to stand at 82 per cent up to the end of the year.

However, Colliers expects an additional 190,000sqm in the next semester. By the end of this year, the total office supply in the CBD will grow by 5.6 per cent year-on-year.

The occupancy of premium and Grade A office buildings is currently about 80 per cent, about six per cent lower than Grade B and C buildings. The current market situation helps tenants move to new buildings that provide more competitive rent.

According to Colliers research data, some premium and Grade A office buildings slowly experienced a decline in tenants due to tighter competition. As of the second quarter of this year, the average rent in the CBD was registered at 284,866 rupiah per square metre, a 2.1 per cent drop quarter-on-quarter.

"As the annual supply projection decreases from previous years, rent in the CBD might improve, albeit slightly," Ferry said.

Meanwhile, outside the CBD, the average rent stood at 194,652 rupiah per square metre in the second quarter, a 0.6 per cent decline quarter-on-quarter. Because mostly Grade B office buildings started operating in the same period, rent is forecasted to drop 1.5 per cent to two per cent year-on-year at the end of this year.

Total office space inventory stood at 3.3 million square metres without any office buildings being completed in the second quarter of this year. However, a supply pipeline of around 300,000sqm is waiting to be operational in the second half of the year. THE JAKARTA POST

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