Shopping mall leasing price to dip by 30%

Agustina Wayansari, The Jakarta Post, Jakarta

With an oversupply of spaces in Greater Jakarta's shopping malls, developers are likely to cut leasing prices by 30 percent over the next two years in order to survive stiff competition in the sector, a property consultant says.

"It's not easy to predict the (reduction) amount, but the price could drop by 30 percent. Several developers are even eager to give spaces free -- as long as their shopping centers are occupied," said Indah Utami, a senior manager at consulting firm Procon Indah.

Utami said the cost of a lease in a Jakarta shopping center was around Rp 660,000 (US$70) per square meter (sqm) per month in the fourth quarter last year, while in Greater Jakarta the same space could cost Rp320,000 per sqm per month.

She said the prices could even dip lower with a general election in 2009, which usually discourage people from starting out new businesses.

Higher inflation, which would undermine people's purchasing power, would also drive the prices down, she added.

Procon's quarterly report shows an abundant supply of retail spaces during the fourth quarter of last year in Greater Jakarta.

Cumulative supply reached 2.85 million sqm, up from 2.7 million sqm in the third quarter last year, while cumulative demand only grew from 2.1 million to 2.2 million sqm.

Procon estimates some 582,000 sqm in new shopping center spaces would enter the market over the next two years, and more than 82 percent of this space is located in Jakarta -- less than 18 percent is in the Greater Jakarta area.

Utami said several malls would be built including Mall of Indonesia in Kelapa Gading, North Jakarta, and the Pluit Junction and Emporium Pluit malls in Pluit, North Jakarta.

In South Jakarta, the Rasuna Epicentrum in Kuningan will also hit the market before the end of 2009.

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.

Jakarta plans to evict more squatters near railways, dam

Mustaqim Adamrah, The Jakarta Post, Jakarta

The government and the Jakarta administration are planning to dismantle more than 15,000 shanties around railways and the Pluit dam in North Jakarta.

State-owned railway operator PT Kereta Api said Friday illegal properties around railways had disturbed its operations.

"We'll be dismantling approximately 5,220 illegal properties around railways in December, in line with the reviving of circle-line train operations," said the company's public relations head for operation district I, Akhmad Sujadi.

"The company and the city administration will work jointly every day on the evictions. Hopefully, all circle-line tracks will be cleared of shanties by the end of the year."

He said squatters occupied spaces alongside circle-line tracks because those spaces had gone unused for two decades due to low demand.

PT Kereta Api removed 120 shanties around Senen train station and Kemayoran train station, both in Central Jakarta, on Thursday, a day before the circle-line train was launched.

The company also dismantled 660 shanties around Gaplok traditional market in Central Jakarta in January this year, said Akhmad.

The circle-line train runs through five municipalities, beginning at Manggarai train station in South Jakarta and stopping at nine other stations.

The Jakarta Public Works Agency said it would "relocate" squatters currently living in the 10,000 shanties around Pluit dam in North Jakarta next year.

"The squatters around Pluit dam have been littering and clogging the dam," said the agency's water resources and coast development division head, I Gde Nyoman Soeandhi.

"The agency wants to relocate all 70,000 squatters living around dams and riverbanks next year because they have disturbed water flow. But we have a limited budget."

The implementation of the relocation plans, he said, would be the North Jakarta mayor's responsibility.

In response to future mass evictions, Urban Poor Consortium director Wardah Hafidz said both the government and the administration had breached the Habitat II Convention signed in Istanbul, Turkey, in 1996, and the Economic and Social Rights Convention, which Indonesia ratified.

The conventions, she said, prohibited governments from evicting squatters before providing them with "beneficial alternatives".

"What often happens is that either the government or the administration evicts squatters and leaves them with more miserable lives," said Wardah.

"Those evicted often are not able to reach the same social and economic levels they once had. They can't afford low-cost apartments either."

Such apartments, she said, were priced between Rp 90,000 (US$9.60) and Rp 190,000 a month, excluding water and electricity.