JAKARTA (TheInsiderStories) – Research by property consultant Jones Lang LaSalle (JLL) shows that virtual and co-working space absorbed 33 percent of total office space requests in 2018. The absorption in fourth quarter (4Q) are 20.500 square-meters in the Central Business District (CBD) and 15.500 square-meters in non-CBD areas.
JLL Head of Research James Taylor reported, that throughout 2018 there was an increase in the area of land used as a co-working space of 60 percent to 120.000 square-meters. The number of operators also increased, both locally and internationally to 41 operators, or up by 8 percent compared to a previous year.
“As one of the sectors that is currently developing, there are 120.000 square-meters office space in the CBD which is operated as a service office and co-working space. Demand for this space is dominated by startups and tech firms,” Taylor said at the press conference in Jakarta on Wednesday (02/13).
For service operators, he added, was dominated by international and local groups located in class A buildings, while the co-working space was dominated by local groups, mostly located in class B and C.
“However, since second quarter-2018 we have begun to see the co-working space being operated, both international and local groups are very active in class A buildings,” he said.
Meanwhile, the total absorption of 2018 for all classes is 189.000 square-meters, indicating that demand for office space remains high. However, the large number of building supplies built over the past few years has caused occupancy to remain depressed at 78 percent for the CBD area average.
Taylor estimates that there will be an additional supply of 565.000 square-meters which was completed in the CBD area during 2019. As a result, the total supply of office space in Sudirman-Gatot Subroto-Kuningan in central Jakarta became 6.05 million square-meters. This condition will cause the occupancy rate to continue to be depressed until 2020 and begin to increase in 2021.
At the same time, the net take-up space is only around 21.000 square-meters. Taylor explained, some companies did not continue to rent space contracts, especially in class B and C buildings. Most tenants moved to class A or premium buildings. The supply of this segment does dominate the market today, reaching 38 percent.
The shift in interest in tenants from middle-class office buildings to class A and premium does not necessarily reflect the skyrocketing economic conditions or improved financial performance of tenants. The decline in premium class office rental prices and A is the main driver.
The average rental price of office space per month in the CBD fell 0.5 percent to Rp205.000 (US$14.64) per square-meters. Since the end of last year, the rental price of class A offices has been the same as rental office quality B, from Rp211.000 at the end of 2017 and Rp210.000 in the first quarter of 2018. It is relatively stable. But, compared to 2016, this rental fee has dropped 9.09 percent.
Actually, the downward trend in rental prices has emerged since 2014, occurred in all segments, except class C offices. The rental of this segment was relatively stable, even slightly up from Rp198.000 to Rp199.000.
Pressure on rental prices is expected to continue until the end of this year to stabilize and increase in the following years. Because, a lot of supply has just entered the market. Meanwhile, the 2019 elections and economic growth that have not been too strong make companies tend to put a brake on expansion.
Until the end of this year, the total take-up of office space in the CBD was estimated at only 400.000 square-meters and the supply will increase by around 1.1 million square-meters, of which 625.000 square-meters will enter this year. After that, the addition of new supplies until 2021 is only around 600.000 square-meters.
Of the total 1.7 million square-meters of new supply, 53 percent are class A buildings and 41 percent are premium class. The rest or 6 percent is class B.
While for non-CBD offices, the demand for buildings in areas outside the CBD is quite good at 73.000 square-meters during 2018. However, over supply conditions are unavoidable. Although there is no new supply in the third quarter of 2018, the vacancy rate is still at 22.8 percent.
Just like the CBD area, the trigger is none other than an increase in supply that is not balanced with demand. It is estimated, until the end of 2021, new stocks will be around 690.000 square-meters. Most of them, entered this year and next year. Each of them is around 310.000 square-meters and 240.000 square-meters.
Concerning prices, meanwhile, rents in non-CBD areas are relatively stable, in the range of Rp127.000 per square-meters per month. However, similar to the CBD region, rental prices are estimated to be depressed until the end of 2019.
Moreover, the development of office buildings does not only occur in the center of the business district. The TB Simatupang in South Jakarta’ corridor has also been the area of its offices for giant companies engaged in the oil, gas and mining sectors.
In addition to the quality of competitive buildings, Simatupang is a traffic jam free area. Even, currently access to transportation is getting better with the completion of the mass rapid transit project, add to existing toll roads.
The occupancy rate of the Simatupang area in the 4Q od 2018 was 76 percent. Other regions, West Jakarta 75 percent, East 92 percent, North 60 percent, South 80 percent, and Central 90 percent.
Written by Lexy Nantu, Email: firstname.lastname@example.org