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Property Market Report | Q2 2020 Jakarta All Sector

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Office:

From a supply standpoint, the already highly competitive market (for landlords) will further see more pressure this year and next with substantial supply projection. With rent tariff and occupancy anticipated to decline, tenants should benefit from it, but it is not always easy for them as well. Due to the pandemic, many companies will not entirely return to the previous business model. The new system, which combines office and remote work, will become more common. The current health crisis may also have implications on the operation and design of alternative working space arrangements.

As businesses move towards more flexible options that will reduce traditional office spaces at the time when they would renew the lease period, an agile office layout will be more highly preferred. We think landlords should be more accommodative of such changes and focus on achieving or maintaining break-even in occupancy level to cover maintenance costs.

Apartment:

The effect of COVID-19 on the apartment sector is twofold: the immediate impact on sales activity and the long-term recovery. We believe that the main cause of today’s sluggish apartment market can be attributed to the negative sentiment of investors due to low yield. On top of that the coronavirus struck, putting sales activity on ice, and resulting in a greater level of uncertainty, leading buyers to delay purchase decisions and adopt a wait- and-see approach.

Weakening business prospects coupled with the worsening economic environment and its effect on job security could deter people from making buying decisions. We, however, believe that developers with a proven track record of timely project completion will be able to ride out the crisis.

Retail:

There is no doubt that both retailers and shopping centres will change post COVID-19. Survival depends upon adaption by accelerating physical and digital integration. As large scale social restrictions to be loosened and businesses to reopen, retail community is determined to maintain the highest safety standards possible. However, social distancing will be associated with more investment on capital expenditure and maybe uneconomic for some retailers, with others expected to fail.

As many are becoming very concern over health, landlords need to consider implementing integrated touchless technologies in public areas. Landlords has to also anticipate that tenants would ask to negotiate for rental discounts and revenue-sharing or profit-sharing schemes should be viable as well. Meanwhile, retailers should be willing to offer discounts and other gimmick for certain purchases in order to bring consumers back to the malls.

Industrial:

As predicted earlier, the total number of transactions recorded this quarter was smaller than in Q1. Indications were expansion activity would shrink from the beginning of the quarter, and this marked the general situation experienced by most companies.

We still see opportunity in a bounce back of the industrial sector, particularly in the growing e-commerce sector, which has the potential to create more inquiries for logistics and warehouse facilities. Landlords should keep an eye on specific sectors like food and health, as they have remained firm and performed well during the pandemic.

Hotel:

When the first case of COVID-19 was officially announced, the hotel market was immediately affected by headwinds, highlighted by the diminishing number of guests and business activities. The situation became worse during the last quarter with temporary hotel closures. Some hotels have already minimised operational costs by selectively utilising the main function of the premises. AOR hit its lowest point at 15.8% in April and this was, obviously, also translated into declining ADR figures.

During the hardship period, hoteliers have to find other creative ways to still benefit from the outbreak such as utilising the hotel for self-quarantine facilities. It is advisable for hoteliers to continue to implement health protocols and, more importantly, increase management quality and implement technology which minimises physical contact.


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Property Market Report | Q2 2020 Jakarta All Sector

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Ferry Salanto

Senior Associate Director

Research

Jakarta

As Head Research Department, Ferry is in charge in providing property market knowledge for internal purposes and for clients. The scope of sectors covered in the quarterly market report comprises office, apartment, retail, hotel and industrial estate.

In regional tasks, the Heads of Research of each country work together in providing regional market reports covering the Asia Pacific region and globally. Currently Research Department is not only operating as a cost-centre department, as he and his team have been assigned by the Central Bank to provide monthly market information.

On the consulting front, the task involves providing a wide range of advisory services to our clients. Working closely with Consulting Department, we help clientsby preparing feasibility studies to determine whether their property projectsare viable from both financial or marketing aspects. 

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