Enquiries and searches for office spaces continue to arrive despite low transaction activities. We still expect to see some potential tenants to either relocate to newer buildings or extend their current occupancy. Relocation will generally occur within the same area, which would therefore have little impact on the overall occupancy rate. Whilst some building owners have become increasingly aggressive in securing tenants, a few landlords opted to wait for the right tenants to fill up their spaces. The supply pipeline from 2020 to 2022 will be a good basis in evaluating any plan for new developments. Having said that, it is very important to secure upfront commitments with big tenants prior to placing any construction plans going forward.
Our standpoint on Jakarta’s apartment market in the short to medium term is that it becomes perplexed with the correction in the country’s economic outlook. Heightened uncertainties also continue to undermine confi- dence with the anticipation of a global economic slowdown, which will indirectly impact the apartment market. We are still in the impression that investor- buyers may hold back from making a purchase in the short term. Given that, the high-rise residential market will significant- ly depend on genuine home- buyers, who are spoilt for choice given a bunch of projects. We think that the market will require more time to absorb unsold units. In addition, depressed rental yield may also further discourage investors from entering the market, exacerbating the already weak market sentiment.
To some extent, the pressure on the retail industry still remains. Some big stores continued to close, as a result of dwindling sales performance. On the brighter side, some retailers are actively expanding. According to Oxford Economics, private consumption is stabilising although the growth is expected to plateau at around 5.3% in 2019-2020. They also expect more accommodative monetary policy to support spending. The Bank Indonesia Consumer Survey in August 2019 also said consumer optimism has been maintained in the optimistic zone. We recommend mall owners to consider reconfiguring their existing spaces and optimising tenancy mix in order to improve rent. Incorporating co-working spaces within a mall may be a way to lure more people and improve the lifestyle concept.
Foreign direct investments from China mainly flew to Vietnam or other peer countries, not Indonesia as mentioned by the recent World Bank report. This is not good news for Indonesia’s industrial market. Nevertheless, the industrial market in the greater Jakarta area (Bogor, Bekasi, Tangerang, Karawang and Serang) continues to benefit from the expansion activities of their existing tenants. For some years, industrial companies have generally performed quite well, underpinned by big consumers in the country, particularly from the expansion of companies that need more warehouses or logistical support for their storage and distribution, as well as consumer goods that are being consumed daily in Indonesia, which is the fourth-most populous nation in the world.
After a slow performance in H1 2019, the hotel market started to pick up decently in Q3 2019. Business activities in both the government and corporate market resumed. Nonetheless, we still consider the situation as moderate, without any big push. Jakarta’s hotel market definitely requires significant stimuli from MICE activities, otherwise the pattern is always foreseeable. To keep up with new hotels, old hotels need to start renovating and refreshing their brands. Hotels that have outlets, restaurants or bars may optimise such as additional posts of revenue. Meanwhile, interesting packages remain to be effective marketing gimmicks.
The issue in airfare has really impacted the influx of local visitors, thus affecting local tourism in Bali. On the other hand, the number of international visitors seem to have also dropped due to the weakening of the world economy. The volume of Chinese tourists, the biggest overseas market, has lessened due to China’s economic slowdown. As a result, some hotels aim at millennials, catering to a more specific target and thoroughly implementing this new concept in their hotels to grab this market. Attracting millennials not only means applying technology in the booking process, but also providing interesting spots in the hotels where they can take photos of themselves and broadcast their visit.