We expect a correction in Jakarta’s rents in 2019, as some upcoming office buildings begin to reduce their base rents to encourage occupancy. We recommend building owners be meticulous in managing incentives and rental discounts to have the best opportunity to secure tenants. The agility spaces model will likely become a win-win solution for both landlords and tenants as it provides flexibility. With this model, landlords are changing the previous model of offering their entire building for lease and instead only allocate about 60% of the space for direct leasing to end-users, while allowing the remainder to be managed by flexible workspace operators, or by the landlords themselves.
Notwithstanding a 2.5% increase in 2018, the price of apartment units actually underwent negative growth since it was below inflation rate. The pace of absorption has been relatively stagnant throughout 2018, despite the fact that the number of newly launched projects was limited. We estimate annual apartment price growth to remain flattish at about 3.0%. We do not expect a significant price increase, unless the economy expands at a more rapid rate and overall confidence in the economy scales a new high. In the currently sluggish market when price growth is stuck, individual investors should consider selective projects that potentially provide better yield.
2018 continued to be a tenant market, as the working contracts of long-term expatriates expired and the number of expatriates working in sectors that were previously well-populated by them diminished. As a result, most of the landlords, particularly owners of stand-alone houses, are becoming more cooperative and more accommodative in offering flexible lease terms and entertaining additional requests related to the renovations, improvements and inclusive features of the house. On the other hand, the significant influx of Chinese expatriates did not have a noticeable impact on the overall rental market, because most Chinese workers normally come to Indonesia alone, leaving their families overseas and preferring to live in individual apartments or even kost-kostans (low cost, small rental houses) near their workplace.
Retail demand is increasingly coming from millennia's, according to the Indonesian Shopping Centre Management Association. This huge potential market is a chief opportunity for retailers, and both landlords and retailers must adapt to the characteristics that attract this market segment including using social media to introduce products. To catch up with this dynamic market, landlords need to downsize their underperforming anchor tenants and shift their tenant balance to focus on selling fashion products and cosmetics. Additionally, we recommend adding more specialty stores and F&B as favorable additions to draw more people into malls.
Total transactions in 2018 has yet to surpass those concluded in 2017. The total transaction of 186.4 hectares in 2018 was about 11% below the total deals made in the previous year. Unlike in 2017 when most transactions (61%) were mainly propelled by impressive sales of a few industrial estates in Bekasi, the general market performance in 2018 was more evenly contributed by the top three regions, which are Bekasi, Karawang and Serang.With the upcoming elections in Q2 2019, industrial landlords have to move swiftly in approaching potential industrial users, because the wait-and-see attitude will end as companies will have to make decisions by then
Generally, the second semester of 2018 was highlighted by higher occupancy. ADR performed well only in the months when the Asian Games was held in Jakarta. In anticipation of slower business activities particularly in the Q2 2019 (after the general elections in April, the fasting month of May and Idul Fitr in June), hoteliers should focus on maintaining corporate accounts. Meanwhile, promoting more MICE activities would complement room revenues. Hoteliers may benefit from making good use of available technology. Online booking through the corporate website will help promote customer loyalty, as the internet could much effectively soft sell, grasp communities and promote the hotel.