DTZ+Property+Times+Jakarta+Q3+2014

Property Times
Jakarta Q3 2014
Better outlook for office sector
DTZ Research
17 October 2014
Contents
Economic overview 2
Office 3
Retail 4
Residential 5
Definitions 6
Authors
Denan Kaligis
Senior Manager
denan.kaligis@dtz.co.id
Nurul Soraya
Research Analyst
nurul.yonasari@dtz.co.id
Vincent Sutrisno
Research Analyst
vincent.sutrisno@dtz.co.id
Contacts
Lee Lay Keng
Regional Head (SEA), Research
laykeng.lee@dtz.com
Dominic Brown
Head of South East Asia and Australia
New Zealand Research
dominic.brown@dtz.com
Hans Vrensen
Global Head of Research
hans.vrensen@dtz.com
Indonesia’s economic growth continued to slow in Q2 with year-on-year (y-o-y)
growth of 5.1%, as investment and exports growth slowed. Despite political
uncertainty surrounding future government policies and the support that the
new elected president will receive from his cabinet given that it is dominated
by the opposition coalition, Bank Indonesia (BI) still expects overall growth in
2014 to remain in line with the previous projection of 5.1%-5.5%, albeit
inclined towards the lower end of the forecast range.
Despite the uncertainty over future government policies and the wait-and-see
attitude of investors, office demand has picked up after the elections amidst a
continuous influx of foreign investors coming into the country. In the
foreseeable future, with a healthy pipeline supply of office space, office rental
growth in the Central Business District (CBD) area is still likely to be moderate,
until the additional space has been absorbed (Figure 1). In the long run,
business sentiment is more positive, with the imminent implementation of the
ASEAN Economic Community (AEC) in 2015 and the confirmation of Indonesia
as the host venue of the 2018 Asian Games. It is also hoped that the new
cabinet will implement government policies that will support economic growth
and businesses alike.
Average prime retail rents increased 11.6% quarter-on-quarter (q-o-q) in Q3
despite the weakening of the Indonesian Rupiah. No major prime retail
development was completed in Q3, leading to a lack of supply and an increase
in rents. Despite a weaker Rupiah affecting some major retailers, new brands,
such as Sephora and Pumpkin Patch, were introduced in this quarter. However,
should uncertain political conditions continue, this could cause the Rupiah to
weaken further and possibly lowering investors’ confidence, which could slow
growth in the retail sector until the end of 2014.
The average asking price of apartments in the CBD reached IDR 41.8m per sq m
in Q3, growing by a modest 0.9% compared to Q2’s IDR 41.4m per sq m. The
highest q-o-q growth for strata apartments was posted in the upper segment,
which recorded a q-o-q increase of 14.7%.
Figure 1
Prime office rental index
0
50
100
150
200
250
300
Q405
Q406
Q407
Q408
Q409
Q410
Q411
Q412
Q413
Q414
Q415
(Q1 2011 = 100)
Source: DTZ Research

Jakarta Q3 2014
www.dtz.com Property Times 2
Economic overview
Economic growth continues to slow
Based on data from Statistics Indonesia, Indonesia’s GDP
growth decreased slightly from 5.2% y-o-y in Q1 to 5.1% in
Q2 (Figure 2). The slower y-o-y growth in Q2 can be
attributed to slower investment and exports growth and a
fall in government spending due to the delay in the
disbursement of social assistance funds. Going forward,
however, BI expects economic growth to remain moderate
in Q3 while household consumption is lower, reflected by
weaker retail sales and motor vehicle sales. Government
spending is however expected to increase in H2, after a
lower-than-projected budget absorption capacity in H1, due
to the budget savings policy.
Export growth was limited due to sluggish growth in
economies worldwide while import growth continued to
decelerate. At the end of Q3, the trade balance managed to
record a surplus, primarily buoyed by a large non-oil/gas
trade surplus. Looking ahead, non-oil/gas trade balance
performance is expected to be bolstered by an increase in
exports with the recommencement of mineral exports. On
the other hand, with an improving domestic economic
outlook, there continued to be a large influx of foreign
capital. As of August 2014, foreign portfolio capital inflows
to financial markets in Indonesia have reached USD14.4bn.
BI decided to hold the benchmark interest rate stable at
7.50% at their meeting in September. Such policy is
consistent with efforts to control inflation within the target
of 3.5-5.5% in 2014 and 3.0-5.0% in 2015, as well as to
reduce the current account deficit to a more sustainable
level. Inflation eased in August to 4.0% from 4.5% in July, as
post-Idul Fitri price pressures subsided, but went back up to
4.5% in September (Figure 3). Higher prices in September
were due in part to higher administered prices related to
energy subsidies. Core inflation (excluding administered
prices and volatile foods
1
), however, decelerated from 4.5%
(y-o-y) in August to 4.0% (y-o-y) in September, as global
commodity prices fell, domestic demand moderated and
inflation expectations remained subdued.
Indonesian Rupiah depreciated against USD in Q3
Both external and domestic factors contributed to the
weakening of the Rupiah against the USD in Q3 (Figure 4).
External factors stemmed from geopolitical uncertainties
due to unrest in other parts of the world, moderating
growth in the Chinese economy, as well as the possibility of
acceleration in the Federal Reserve normalization policy.
Domestic factors were closely related to the wait-and-see
1
Refers to inflation predominantly influenced byshocksin the foodstuffs category,such as harvests,
disruptions from naturalevents or movements in domestic food commodity prices and international
food commodity prices.
attitude of investors concerning future government policies,
including policies related to energy subsidies.
It may take some time for President-elect Joko Widodo to
be able to enforce his power, as it is not clear if he is able to
garner the support from his cabinet which is dominated by
the opposition coalition. However, BI is mindful to control
the volatility of IDR current exchange rate and has promised
to maintain the stability of the Rupiah in accordance with its
fundamental value.
Figure 2
GDP growth rate and BI rate
-2%
0%
2%
4%
6%
8%
Q211
Q311
Q411
Q112
Q212
Q312
Q412
Q113
Q213
Q313
Q413
Q114
Q214
GDP growth (q-o-q) GDP growth (y-o-y) BI rate
Source: BI, Statistics Indonesia, DTZ Research
*Q3 14 GDP growth figures are not available yet.
Figure 3
Inflation rate
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Q311
Q411
Q112
Q212
Q312
Q412
Q113
Q213
Q313
Q413
Q114
Q214
Q314
Source: Statistics Indonesia, DTZ Research
Figure 4
Rupiah exchange rate, IDR per USD
6,000
8,000
10,000
12,000
14,000
Q311
Q411
Q112
Q212
Q312
Q412
Q113
Q213
Q313
Q413
Q114
Q214
Q314
Source: BI, Statistics Indonesia, DTZ Research

Jakarta Q3 2014
Office
Surge in foreign investments boost office demand
According to the Investment Coordinating Board (BKPM),
total Foreign Direct Investment (FDI) realisation climbed
16.9% y-o-y to IDR78.0 trillion in Q2. This surge of FDI was
likely to have boosted the demand for new office space,
with net absorption increasing to about 21,500 sq m in Q3.
Previously in H1, net absorption was zero.
Occupancy increased slightly to 95.5%
In line with the increase in net absorption, average office
occupancy in the Jakarta CBD area increased slightly from
95.0% in Q2 to 95.5% in Q3, based on a basket of existing
buildings tracked by DTZ Research. Upcoming office
buildings outside the CBD are also filling up very fast,
notably TB Simatupang, as occupiers seek more affordable
office space to accommodate their businesses.
Besides more affordable rents, occupiers will also consider
locations with lifestyle amenities that are away from
congested areas as well as areas with sufficient supporting
infrastructure or easy access. Therefore, the development
of Grade A office towers outside the CBD, especially in the
Puri, Kemayoran, Pluit, and Pantai Indah Kapuk (PIK) areas,
are increasing as developers plan to provide alternative
spaces for the rising number of Small and Medium
Enterprises (SMEs), which could increase further following
the planned implementation of the AEC in 2015.
Meanwhile, hosting the Asian Games in 2018 will mean that
the development of infrastructure and supporting buildings
around Jakarta and Greater Jakarta will be hastened, with
the MRT development expected to be completed prior to
the start of the Games.
Enquiries for new space continued to be strong, especially
from companies expanding or establishing new operations.
For instance, Italian-based insurance company Generali
acquired most of the space in Grand Rubina Park before it is
even completed, renaming it as Generali Tower.
No signs of slowdown in rental growth
In view of the tight supply and increased demand, average
monthly CBD office rents increased by a further 2.7% q-o-q
to approximately IDR309,000 per sq m in Q3 (Figure 5).
Meanwhile, as the electricity tariff is raised as part of the
government’s plan to reduce energy subsidies over time,
landlords could increase service charge by 10% yearly.
High pre-commitment for upcoming office supply
Going forward, at least 100,000 sq m of new Grade A office
space is expected to be completed by the end of 2014, with
another 700,000 sq m to be completed in 2015 (Table 1).
The pipeline supply will be concentrated mainly in the Gatot
Subroto area (Figure 6). Demand for these upcoming Grade
A office buildings is strong, reflected by an average pre-
commitment rate of above 70%.
Figure 5
Prime office rental index
0
50
100
150
200
250
300
Q405
Q406
Q407
Q408
Q409
Q410
Q411
Q412
Q413
Q414
Q415
(Q1 2011 = 100)
Table 1
Major upcoming office developments
Name of
development
Location
Gross area
(sq m)
Est year of
completion
Lippo Kuningan HR Rasuna
Said
31,000 2014
Generali Tower HR Rasuna
Said
33,000 2014
The Convergence
HR Rasuna
Said
36,000 2014
Sahid Sudirman
Centre
Sudirman 146,500 2015
MSIG Tower Sudirman 70,000 2015
The Capital
Tower @St Regis
Gatot
Subroto
91,000 2015
Centennial Tower Gatot
Subroto
148,300 2015
Figure 6
Pipeline office supply, gross floor area, sq m (000s)
-
100
200
300
400
Kuningan Sudirman Gatot Subroto
2014 2015

Jakarta Q3 2014
Retail
No completion in Q3 while average rent increases
No prime retail development was completed in Q3, both in
the CBD and non-CBD areas. Total retail stock in Jakarta
therefore remained the same at about 2.4 million sq m.
The average asking rental rate of Jakarta’s prime shopping
malls increased 11.3% q-o-q to approximately IDR 538,000
per sq m per month in Q3 (Figure 7). This was largely driven
by the lack of new supply as well as strong demand from
mid-upper class retailers, mostly in apparel. New brands
were introduced in Q3, even though some major retailers
were affected by the weakening of the Rupiah against USD.
These new brands included Sephora, a French cosmetic and
body care store now located in Plaza Indonesia and Kota
Kasablanka, as well as Pumpkin Patch, a children’s fashion
brand from New Zealand in Plaza Indonesia. Meanwhile,
average service charge was recorded at about IDR130,000
per sq m per month in Q3, an increase of 22.4% q-o-q. This
was likely due to the increase in electricity tariffs in July and
September.
Going forward, an estimated 14,000 sq m is expected to be
completed in Q4 (Figure 8). This comprises the extension at
Mall Kelapa Gading 3, targeted to finish by the end of
October, and Titanium Square Mall. Pulomas X Venture,
which was originally supposed to be completed this year, is
on hold indefinitely. Other retail malls currently under
construction and expected to be completed in 2015 and
2016 include Pantai Indah Kapuk - Lifestyle Mall, One Bel
Park, Holland Village, SOHO Pancoran Shopping Center, Neo
SOHO, Puri Botanical Mall, Puri Indah Mixed Used
Development Mall and Grand Cipulir (Table 2).
Retail rents expected to continue to grow
Despite political uncertainties that could cause further
weakening of the Rupiah, lowering investors’ confidence
and hence slow down retail sector growth until the end of
2014, the retail market in Jakarta is expected to continue to
grow moderately, driven by the performance of the clothing
apparels and food and beverage sectors. Demand for retail
space will be driven by these retailers, who are expected to
continue their dominance over leasing activity in the next
quarter. Premium quality supermarket operators are also
expected to contribute to retail demand in Jakarta in the
next few months.
In addition, the planned implementation of the AEC in 2015
could attract more investments into Indonesia, including
investments into the retail sector.
Figure 7
Asking rental index of major Jakarta malls
90
100
110
120
130
140
Q311
Q411
Q112
Q212
Q312
Q412
Q113
Q213
Q313
Q114
Q214
Q314
(Q1 2011=100)
Figure 8
Retail supply, sq m (000s)
0
50
100
150
200
250
300
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Completed supply New supply
Table 2
Major upcoming retail developments
Name of
development
Location
Est area
(sq m)
Est year of
Completion
Mall Kelapa Gading 3
Extension
Kelapa Gading 9,000 2014
Titanium Square Mall Pasar Rebo 5,000 2014
Pantai Indah Kapuk -
Lifestyle Mall
Pantai Indah
Kapuk
30,000 2015
Neo SOHO Tanjung Duren 40,000 2015
One Bel Park Fatmawati 28,000 2015
Puri Indah Mixed Use
Development
Puri Indah 60,000 2016
Holland Village Cempaka Putih 50,000 2016
Puri Botanical Mall Joglo 50,000 2016
Grand Cipulir Cipulir 40,000 2016

Jakarta Q3 2014
Residential
Average asking price within CBD increased
According to a basket of existing properties tracked by DTZ
Research, the average asking price of apartments in
Jakarta’s CBD reached IDR41.8m per sq m in Q3, increasing
by 0.9%, compared to IDR41.4m per sq m in Q2 (Figure 9).
In Q3, the highest q-o-q growth in prices for strata
apartments and high-rise apartments was posted in the
upper segment, followed by those in the middle-up
segment.
Only the middle-up and upper segments registered q-o-q
increases in asking prices in Q3. Asking prices of apartments
in the upper segment increased 14.7% q-o-q, while those of
apartments in the middle-up segment grew by a slight 1.2%
q-o-q in Q3.
Going forward, there will be an additional supply of 3,190
units in Jakarta in the period to 2016 (Table 3). The pipeline
supply is mostly located in South Jakarta, with two projects
in Central Jakarta. Most of the upcoming projects are in the
middle-up and upper segments, except for one super high-
end project, Langham Residence, in Central Jakarta.
Modest growth in asking rents
The increase in average asking price was also followed by an
increase in average rents. Overall average monthly rents
grew marginally by 0.3% q-o-q to around IDR217,000 per sq
m (Figure 9). The highest q-o-q increase of 21% in
condominium rents in Q3 was observed in the upper
segment. Within the middle segment, following a q-o-q
increase of 12.5% in Q2, average rents for such apartments
rose by a smaller 1.1% q-o-q to around IDR143,000 per sq m
per month.
Average asking rents are expected to continue to increase
so as to accommodate the rising demand from the possible
surge of FDI and inflow of foreign expatriates when the AEC
is implemented. Asking rents for condominiums are also
likely to rise as landlords pass on the additional costs of an
increase in electricity tariffs to tenants.
Figure 9
CBD apartment asking price and rental indices
50
100
150
200
250
300
Q311
Q411
Q112
Q212
Q312
Q412
Q113
Q213
Q313
Q413
Q114
Q214
Q314
Asking price Asking rent
Table 3
Major upcoming residential developments
Name of
development
Location
No. of
units
Est year of
Completion
Sudirman Suite Sudirman 414 2014
Sudirman Terrace Sudirman 400 2014
Sky Garden Setiabudi 726 2015
Ciputra World II Prof. Dr. Satrio 349 2015
Gayanti City Gatot Subroto 360 2016
Casa Domaine KH Mas Mansur 323 2016
Sudirman Hill Benhil (via
Sudirman)
375 2017
Verde 2 Setiabudi 186 2017
Langham
Residence
SCBD 57 2017

Jakarta Q3 2014
Definitions
Development
pipeline/potential supply:
Comprises two elements:
1. Floor space in the course of development, defined as buildings being constructed or
comprehensively refurbished.
2. Schemes with the potential to be built in the future, having secured planning
permission/development certification.
Net absorption: The change in the total occupied or let floor space over a specified period of time, either positive
or negative.
Net supply: The change in the total floor space over a specified period of time, either positive or negative. It
excludes floor spaces that are not available for occupation due to refurbishment or
redevelopment, but includes new supply.
New supply refers to total floor space/units which are ready for occupation. Ready for occupation
means practical completion, where either the building has been issued with a Temporary
Occupation Permit or Certificate of Statutory Completion (CSC).
Prelet/pre-commit: A development leased or sold prior to completion.
Prime office rent: The highest rent that could be achieved for a typical building/unit of the highest quality and
specification in the best location to a tenant with a good (i.e. secure) covenant.
(NB. This is a gross rent, including service charge or tax, and is based on a standard lease,
excluding exceptional deals for that particular market).
Major malls: Purpose-leased shopping center with Net Lettable area (NLA) of at least 20,000 sq m that have
good tenancy-mix as well as retailers/ brands and developed by reputable developer in Jakarta.
Stock:
Total accommodation in the private sector both occupied and vacant.
Take-up: Floor space acquired for occupation or investment, including the following:
1. Offices let to an eventual occupier.
2. Developments pre-let or sold.
(NB. This includes subleases.)
Take-up also refers to units transacted in the residential market.
Occupancy rate: Total space currently occupied or not available to let as a percentage of the total stock of
floor space. (NB. This excludes shadow space which is space made available for sub-leasing).

Jakarta Q3 2014
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Phone: +62 21 576 3838
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Management
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Consulting and Research
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Residential
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Retail
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