The office market in Jakarta is still in a position of rebalancing. Vacant space is increasing and rents continue to decline. Meanwhile, the market still has to face large additional supply in the next two years.
In the future, integrated office buildings with excellent transport links, accessibility to residential catchment areas, affordable rents and retail amenities will be keenly sought after.
Landlords are expected to play an important role in the market recovery; one that is more flexible in responding to market needs, especially considering that lease agreements are likely to become shorter due to continued uncertainty.
Some developers started to introduce their new projects in Q1 2021. Unfortunately, the demand growth in the market remains sluggish, making it hard to revise the asking prices. In addition, the government set out some stimuli for the residential property sector, including the property relaxation norm from the Central Bank coupled with the foreign ownership regulation, which will bode well for developers and property demand. In addition, the VAT waiver will be beneficial for upgraders as well as developers who still have unsold inventories. All in all, we are of the view this year will remain a buyer’s market, and there will be a gradual yet moderate recovery in the market.
The relaxation of large-scale social restrictions and extension of mall operating hours brought some hope to the malls. The pandemic has resulted in many retailers closing stores, and some changes have been made in order to survive. Obviously, with adjusted opening hours, retailers will not generate revenues that compare with the pre- Covid era, but they will perform better compared to 2020.
The limitation in the number of visitors has left quite a few vacant spaces, thus putting landlords in a difficult position, with a need to be more accommodative and flexible in dealing with rental tariffs, discounts and payments. Rents should not be too high, or, at least, landlords should be more flexible in the early stages of leasing. Additionally, for anchor tenants, landlords need to support MEP works, building structure, genset, etc. to reduce the initial investment that the retailer needs to make. Meanwhile, from the tenant side, use of online platforms and social media should be maximized to continue generating sales.
Quite a few industrial landlords had no transactions this quarter, highlighting that the market continues to face hardship. Notwithstanding the hard times, confidence in a better outlook still persists. Landlords generally believe that pent-up demand in the industrial sector is huge. This also explains why some existing and new industrial estates are still focusing on the land development process, despite the limited availability of new land for expansion.
Landlords should anticipate increased interest from the technology-based and logistics sectors. Companies needing data centres are still eyeing industrial locations. Last year, Indonesia had the biggest e-commerce market in Southeast Asia, with a Gross Merchandise Value (GMV) of USD32 billion. This will open up more opportunities in the logistics sector, either for storage or distribution centres.
Occupancy rate is still low but already on a positive trend after gaining momentum from last year’s performance. It has not yet recovered because the industry will need increasing human mobility to liven up the hotel market. Therefore, including hotel, all sectors are expecting effectiveness of the vaccine programme to help the economy recover.
During the slowdown period, hoteliers can capitalise on the time to conduct renovations and ensure preventative measures before returning to a more conducive market with a fresher and attractive look. We suggest hoteliers focus on the FIT market primarily over the next two months (Ramadan fasting month and Eid-Al-Fitr holiday) because the government and corporate market are still holding their spending. MICE activities are already allowed, but those that implement strict health protocols will provide more comfort for guests and visitors.