Indonesia Remains Asia's Leading Force in Office Space Development in 2014
Growth in Jakarta's office space sector is expected to continue its upward trend. The Colliers International Asia Real Estate Forecast 2014, released by the leading global commercial real estate company, mentions a significant increase of new rental office space in the capital city of Indonesia. As such, Indonesia's office space sector (which is particularly centered in the big cities on Java such as Jakarta and Surabaya) is Asia's leader in terms of office space growth. However, this year's growth will not be as strong as in 2012 and 2013.
Ferry Salanto, Associate Director at Colliers' Jakarta branch, sees slowing growth in Indonesia's office sector in 2014 due to the sharply depreciated Indonesia rupiah exchange rate (which fell over 20 percent against the US dollar in 2013). As a result, a number of Indonesian property developers have postponed projects as they rely on US-denominated imports for building materials. As (office space) property projects take a few years to realize, the impact of the current slowdown of projects will be felt in 2016. According to Salanto, there will be a 50 percent reduction in the supply of new office space in 2016.
Because property prices in Indonesia (particularly Jakarta) have risen steeply in recent years, tenants have started to shift their focus to alternative locations, instead of premium or strategic locations in the business districts. Moreover, the supply of new offices in the business districts is low as most parts have already been developed. Although subject to variation, generally, office rental rates in Indonesia are expected to increase 3 percent in 2014.
In 2013, Jakarta's office space growth reached 37 percent. This is expected to slow to 13 percent this year. Despite this significant slowdown, Indonesia remains the leader in terms of office space growth in Asia - followed by Manila (9 percent growth) - in 2014.