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27 January 2021 (closed)
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Based on accounts of services providers in Indonesia's property market, demand for office space in Indonesia, and specifically in the capital city of Jakarta, shows good growth starting from the third quarter of 2017. Especially online businesses (for example the e-commerce industry) are showing rising appetite for office space.
Ferry Salanto, Senior Associate Director at Colliers International Indonesia, said such marked growth of office space demand from Indonesian online businesses is somewhat surprising considering people's general perception of online businesses is that these types of companies need limited office space. The reality is, however, that these companies now show high demand for office space in Jakarta. This demand is supported by Indonesia's rapidly expanding e-commerce industry, boosted by the nation's rising Internet and smartphone penetration rates as well as the young population (hence more eager to adapt to online lifestyles than older generations).
Colliers International Indonesia has two divisions: (1) tenant representative and (2) landlord representative. The first division is now handling many new clients (who rent office space) since the start of Q3-2017, while in the preceding quarters investors were mostly only seeking information about office space (but not actually renting), Salanto said.
However, the supply of new office space still outpaces growth of demand in the central business district of Jakarta (this situation is expected to continue until at least the end of the year). It is estimated that in the last quarter of 2017 450,000 square meters of additional office space will become available in Jakarta (while in the first three quarters of the year an estimated 300,000 m2 of office space was added in Jakarta's central business district). Total office space in the business heart of Jakarta now stands at 5.78 million m2.
Meanwhile, Salanto said he expects to see an additional 1.5 million m2 of office space in Jakarta in the 2018-2020 period. This seemingly ever-growing supply (while outpacing demand) continues to put pressure on the average rate for office space. This rate declined 9 percent (y/y) to IDR 223,000 (approx. USD $16.50) per square meter (per month). The occupancy rate now stands at a meager 83.3 percent, the lowest rate since 2009. Moreover, if the above-mentioned forecasts about additional office space are correct, this occupancy rate is expected to fall to 78.5 percent (with the main reason being the huge supply, not so much weak demand).
Bagus Adikusumo, Senior Director Office Services at Colliers, said online businesses have great potential as clients for office space because they are more stable compared to oil & gas tenants that are highly dependent on volatile commodity prices. Low crude oil prices (and the weak investment climate in Indonesia's oil and gas sector) have led to the exit of several foreign oil companies from Indonesia.
Also Helen Hamzah, Associate Director at the Ciputra Group, now detects rising demand for office space (compared to one year ago). For example, Tokopedia, one of Indonesia's biggest online marketplaces, recently expanded its office space from 12,000 m2 to 18,000 m2 in the Ciputra World II Tower in Central Jakarta.
Hamzah also said Ciputra is now giving special attention to the supply of small office spaces, approx. 20-30 m2 (for 4-5 people) as this size is perfect for startup companies.