Industrial estate prices 'to remain stable'

Agustina Wayansari, The Jakarta Post, Jakarta

The price of industrial estates is likely to remain stable in Jakarta and Greater Jakarta this year due to slow demand, recent research shows.

"Considering demand is likely to remain slow this year, prices are expected to remain stable at around Rp 554,000 (approximately US$61.5) per square meter," PT Property Advisory Indonesia (Provis) associate partner Arief Rahardjo told reporters Monday.

Citing Provis' first publicized research results, Arief said industrial property in Jakarta was becoming limited and as a consequence industrial estates in Bekasi, Karawang and Purwakarta may develop new clusters expected to enter the market in 2008.

The report said demand for industrial estates after the 1997 economic crisis had slowed, showing a decline since 2006, and may remain weak this year.

The research also indicated the net purchase of industrial land in Greater Jakarta stood at 130 hectares in 2007, down some 32 percent from the previous year at 192 hectares.

"The demand slowed in 2005 with total purchases amounting to 200 hectares, and then declined to 192 hectares in 2006," said Wira Agus, the senior manager for strategic consultancy at Provis.

Arief said industrial land was generally used by automotive and steel-related industries, while industrial buildings were largely absorbed by the logistics industry.

Arief said transactions involving large industrial plots would also remain low in 2008 due to limited foreign investment, while small-scale demand had room to grow.

From 7,800 hectares of available land in 2007, the report indicated that the market only absorbed about 70 percent or 5,500 hectares.

Arief said local investors were likely to remain the main purchasers of land and buildings, followed by investors from Japan, Germany and France.

According to the report, demand for offices increased in the Greater Jakarta area last year, with demand from the telecommunications, banking, finance and insurance sectors the greatest, especially in terms of lease arrangements.

Managing partner David Cheadle said net purchasing in 2007 reached 203,600 square meters, an increase of 63 percent from 124,908 square meters the previous year.

"Most companies have leased the same buildings for some 12 years and now they want to move to better offices. Some companies may also be looking for new places due to business expansion," said Cheadle, adding that it was the right time for businesses to relocate as there were many Grade A buildings in the market.

As of December 2007, Provis reported that cumulative demand for office properties in the Central Business District (CBD) reached 2.9 million square meters, with an occupancy rate of 85.2 percent.

The report indicated that cumulative supply stood at 3.42 million square meters and the total net take up for CBD offices stood at 203,600 square meters over the year, which is the highest figure since the economic crisis in 1997.

Cheadle said the rental rate was relatively stable in the fourth quarter last year, standing at Rp 129,665 per square meter. He said the rate would most likely increase in 2008 as most landlords had decided to raise base rental and service charges by between 5 and 10 percent.