Jakarta Property Market Report - Colliers International

Jakarta Property Market Report

Research & Forecast Report

3rd Quarter 2015

Accelerating success.

2 Research & Forecast Report | 3Q 2015 | Highlight | Colliers International

Office SectorPoorer performance at newly operating office buildings brought occupancy in the CBD to 92.7% as of 3Q 2015, down moderately by 3% YoY. Occupancy rates in the CBD are projected to plunge to 78% by 2018 due to the huge upcoming supply and lower GDP growth. Following the mandatory use of rupiah, Grade A and Premium office buildings previously charging in US dollars converted to the local currency and average asking rents denominated in rupiah soared by 35.5% YTD as a result.

Apartment SectorDespite the weight of multiple downside pressures like sluggish economic growth and lackadaisical demand, overall apartment prices still witnessed a minor increase of 3.4% QoQ or 11.2% YoY to IDR29.87 million/sq m. This increase is the result of the price adjustments developers often make due to take-up as their projects near completion. The average take-up rate in 3Q 2015 for under construction and completed projects was relatively stable at 85.8%, down only moderately from the previous quarter.

Retail SectorThe recent sluggishness of economic growth and newly opened shopping centres in DKI Jakarta with low occupancy brought occupancy rates down modestly by less than 1% YoY to 85.3% as of 3Q 2015. Meanwhile, average asking rents at shopping centres in Jakarta climbed 6.1% YoY to IDR542,221 sq m/month as of 3Q 2015. This is due to the limited amount of available premium retail space together with mall upgrading caused some shopping centres to introduce an increase in asking rents QoQ.

Highlight Hotel SectorThere are several hotel projects that are expected to delay their openings. This quarter, new hotel rooms became available in four 3- and 4-star hotel projects, providing a total of 881 new hotel rooms. Overall, hotel occupancy in Jakarta area dropped slightly by 1.2% QoQ to 57.2%, while occupancy in the CBD alone slumped 2.5% to 58.6%. In line with the declining trend in occupancy, the Average Daily Rate (ADR) of hotels in Jakarta dropped quite a bit. Luxury class hotels in the CBD saw the biggest drop of 2.4% to USD191.90, midscale class and midscale class+ hotels fell by almost 2% to USD66.60 and upper-class hotels were down 1.4% to USD76.50.

Industrial Estate SectorTotal industrial land sold during the quarter was recorded at 89.86 hectares, bringing the total sales up to 2015 YTD to 322 hectares representing 73% of the total sales in 2014. Major transactions this quarter were concluded at GIIC – Kota Deltamas and Modern Cikande by automotive and metal-related companies respectively. Prices in all industrial estates remained stable.

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3 Research & Forecast Report | 3Q 2015 | Office | Colliers International

OFFICE SECTOROffice Spaces Offered For Lease

Supply

CBD

Cumulative Office Space Supply in the CBD

Source: Colliers International Indonesia - Research

Cumulative Office Space Supply on the CBD Main Thoroughfares

Source: Colliers International Indonesia - ResearchTwo office buildings, namely AIA Central (in Jalan Sudirman) and Noble House (in Mega Kuningan), have begun operations and brought 92,000 sq m of new additional office space to the CBD as of 3Q 2015. At the same time, an office building in Jalan Thamrin (Wisma Kosgoro) was officially closed temporarily due to fire. The three office buildings mentioned above brought the cumulative supply in the CBD to 4.98 million sq m as of 3Q 2015, growth of only 4.3% YoY.

The progress of construction work on office buildings in the CBD is continuing. The additional supply projected for 2015 to 2018 in the CBD as of 3Q 2015 is less than when it was forecast at the end of 2014. Including newly operating office buildings in 2015, as of 3Q 2015, it is expected that 2.16 million sq m of new additional office space will be completed by the end of 2018. This projected additional supply will be around 10% lower than when it was announced at the end of 2014. This is due to some projected office buildings, that were previously projected to be operating in 2018, having rescheduled their completions to 2019.

0 1,000,000 2,000,000 3,000,000 4,000,000

Thamrin

Sudirman

Rasuna Said

Mega Kuningan

Gatot Subroto

Satrio

sq m

Existing Supply (2015YTD) Future Supply (2015 - 2018)

Although the majority of future office buildings show construction progress , there is still the possibility that some office buildings will postpone their completion dates and reschedule for several months in the future, particularly in anticipation of the recent sluggish market. Based on the progress monitored in the field, some office buildings need to accelerate construction work because there is only one quarter remaining for those buildings to meet the deadline of completion and be operational by the end of 2015.

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2010

2011

2012

2013

2014

2015

YTD

2015

F

2016

F

2017

F

2018

F

sq m

Existing Supply Annual Supply





Annual Future Office Space Supply in the CBD


There was no additional new office space in the outside CBD during the quarter and thus, the total remained at 2.58 million sq m as of 3Q 2015. In the short term, this helps regulate the already large supply in the market during tough times. In the long term, it is projected that the cumulative supply in the outside CBD by the end of 2018 will grow by more than 50% compared to the total existing supply as of 3Q 2015. This projected growth will be higher than in the CBD. Most of the future office supply is located in West, Central and South Jakarta, and West and Central Jakarta will contribute 20 and 18%, respectively, of the total projected supply in the outside CBD by the end of 2018. Overall, the total future office supply in all other municipalities in Jakarta is smaller than in South Jakarta. The total new additional office space in South Jakarta is expected to contribute 54.4% of the total projected supply in the outside CBD in 2015F - 2018F. The cumulative supply is projected to reach almost 2 million sq m in South Jakarta by the end of 2018.

Half of the total projected additional office space in South Jakarta will be located in TB Simatupang, where it is anticipated that 10 future office buildings will bring 362,932 sq m of new supply by the end of 2018. Around 70% of that projected office space is under construction and only three office buildings are still in the planning stages as of 3Q 2015.

Distribution of Office Space in the Outside CBD Area


0

100,000

200,000

300,000

400,000

500,000

600,000

2012 2013 2014 2015F 2016F 2017F 2018F

sq m

For Lease For Sale In Planning

Strata-title offices were quite in demand, particularly before the recent economic turmoil. Buying strata-title offices became preferable for investors because rental rates had become high. The current condition of a huge upcoming supply of offices for sale (strata-title offices) actually began during the office market’s boom time in around 2011 - 2012). Almost 1 million sq m of new office supply for sale is expected on the market from 2015 to 2018. That additional space will be similar to the amount of existing supply of strata-title offices as of 3Q 2015.

Outside CBDCumulative Office Space Supply in the Outside CBD


0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

2010

2011

2012

2013

2014

2015

F

2016

F

2017

F

2018

F

sq m

Outside CBD excluding TB Simatupang TB Simatupang

Central Jakarta

18%

South Jakarta42%

North Jakarta

5%

East Jakarta

4%

West Jakarta

14%

TB Simatupang

17%

Should all of those future office buildings be completed, the cumulative supply in TB Simatupang will exceed one million sq m in 2018. As of 3Q 2015, the cumulative office supply in TB Simatupang was 739,343 sq m, representing 28.7% of the total supply in the outside CBD.





Annual Supply in the Outside CBD


Progress of Construction Work in the Outside CBD


Since 2012, the number of strata-title offices for sale has mushroomed in TB Simatupang. Four office buildings for sale have been operating in there in 2014 - 2015YTD. However, the projected additional office space for sale will shrink and only provide around 40,000 sq m for the rest of 2015 and there will be no office space for sale in 2016 - 2018.

In other areas of outside the CBD, Kemayoran (Central Jakarta) and Puri Indah, including Kebun Jeruk (West Jakarta) will be the main areas for office supply for sale by the end of 2018. Those areas will provide around 40% (almost 170,000 sq m) of the total additional office space for sale in the outside CBD, excluding TB Simatupang.

0

50,000

100,000

150,000

200,000

250,000

300,000

2010

2011

2012

2013

2014

2015

F

2016

F

2017

F

2018

F

sq m

Outside CBD excluding TB Simatupang TB Simatupang

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

TB Simatupang Outside CBD

sq m

Under Construction In Planning

Office Building Development in the Pipeline

projected completion office building name location Sga marketing Scheme StatuS development

cbd

2015 Sinarmas MSIG Sudirman 75,000 For Lease Under Construction

2015 Cemindo Tower Rasuna Said 60,995 For Lease Under Construction

2015 Telkom Landmark Tower II Gatot Subroto 65,000 For Lease Under Construction

2015 Bank Muamalat Tower (Satrio Square) Satrio 24,600 For Lease Under Construction

2015 BTPN Tower (Bahana Office Tower) Mega Kuningan 50,000 For Lease Under Construction

2015 Wisma Mulia 2 Gatot Subroto 65,000 For Lease Under Construction

2016 Convergence Rasuna Said 36,367 For Lease & Sale Under Construction

2016 International Financial Center 2 Sudirman 50,000 For Lease Under Construction

2016 Menara Pertiwi Mega Kuningan 41,456 For Sale Under Construction

2016 Capital Palace (Office Tower @ ST Regis) Gatot Subroto 90,511 For Lease Under Construction

2016 Menara Palma 2 Rasuna Said 50,000 For Lease Under Construction

2016 Centennial Tower Gatot Subroto 100,000 For Sale Under Construction

2016 Ciputra World Jakarta 2 Satrio 70,000 For Lease & Sale Under Construction

2016 Satrio Tower Satrio 31,604 For Lease Under Construction

2016 The Tower Gatot Subroto 56,492 For Sale Under Construction

2016 Lippo Thamrin Office Tower Thamrin 16,500 For Sale Under Construction

2016 T Tower Gatot Subroto 24,000 For Sale Under Construction

continued





projected completion office building name location Sga marketing Scheme StatuS development

continuation

2017 Mangkuluhur Tower Gatot Subroto 53,000 For Lease & Sale Under Construction

2017 Sequis Tower Sudirman 78,000 For Lease Under Construction

2017 Prosperity Tower @ Distict 8 Sudirman 71,545 For Sale Under Construction

2017 Treasury Tower @ District 8 Sudirman 139,000 For Sale Under Construction

2017 Sopo Del Tower A Mega Kuningan 80,000 For Lease & Sale Under Construction

2017 Sopo Del Tower B Mega Kuningan 40,000 For Lease In Planning

2017 Office Tower Lot.10 SCBD (PCPD Tower) Sudirman 90,600 For Lease Under Construction

2018 Sudirman 7.8 (ex Nugra Santana) Sudirman 52,000 For Sale Under Construction

2018 Tower Two at The City Center Sudirman 101,260 For Sale Under Construction

2018 World Trade Center III Sudirman 70,000 For Lease Under Construction

2018 Tower 2 @ Ciputra World Jakarta 1 Satrio 70,000 For Lease & Sale Under Construction

2018 Thamrin Nine Thamrin 97,500 For Lease Under Construction

2018 The Hundred Mega Kuningan 45,000 For Lease Under Construction

outSide cbd eXcluding tb Simatupang

2015 Menara Sentraya Blok M 52,072 For Sale Under Construction

2015 St Moritz Office Tower Puri Indah 19,500 For Sale Under Construction

2015 The Suites Pantai Indah Kapuk 13,200 For Sale Under Construction

2015 Harton Tower Kelapa Gading 8,000 For Lease Under Construction

2015 Nariba Office Suites Mampang 4,200 For Lease Under Construction

2016 Puri Indah Financial Tower Puri Indah 38,500 For Sale Under Construction

2016 One Belpark Office Pondok Labu 17,400 For Lease Under Construction

2016 Gallery West Kebun Jeruk 29,000 For Sale Under Construction

2016 L'Office Pasar Minggu 41,597 For Sale Under Construction

2016 Sky 18 Tower Pasar Minggu 27,500 For Sale Under Construction

2016 Soho Capital Slipi 36,000 For Sale Under Construction

2016 Altira Sunter 40,000 For Sale Under Construction

2016 Tamansari Parama Wahid Hasyim 10,800 For Sale Under Construction

2016 BKP Office Tower Sunter 16,000 For Lease Under Construction

2017 Soho Pancoran Pancoran 30,000 For Sale Under Construction

2017 One Tower Kemayoran 21,400 For Sale Under Construction

2017 Ciputra Business District Kemayoran Tower 1 Kemayoran 40,000 For Sale Under Construction

2017 MNC Tower II Kebon Sirih 20,000 For Lease Under Construction

2017 Ciputra Business District Kemayoran Tower 2 Kemayoran 40,000 For Lease Under Construction

2017 Hermina Office Building Kemayoran 20,000 For Sale Under Construction

2017 Lippo Tower Holland Village Cempaka Putih 27,000 For Sale In Planning

2017 Ciputra International Puri 1 Phase 1 Puri 15,000 For Lease In Planning



2018 Kota Kasablanka Office Tower 2 Casablanca 90,000 For Lease Under Construction

2018 Jakarta Box Tower Kebon Sirih 36,000 For Lease In Planning

2018 Ciputra International Puri Phase 2 Puri 15,000 For Lease In Planning


2018 Ciputra Internatinal Puri 2 Phase 3 Puri 15,000 For Lease In Planning

continued







Occupancy Changes in the CBD3Q 2014 YoY 3Q 2015 QoQ 2Q 2015

95.4% -2.7% 92.7% -1.0% 93.7%

Demand

CBD

Cumulative Amount of Office Space Absorbed vs Vacant Space in the CBD


Poorer performance at newly operating office buildings brought occupancy in the CBD to 92.7% as of 3Q 2015, decreasing moderately QoQ. Based on grade, the occupancy at Premium and Grade A office buildings declined more than at other classes. Businesses that are slowing due to the current economic conditions also impacted some tenants that are starting to reduce their operational costs. Tenants will face the difficult choice of staying at existing office buildings with high rents or relocating. However, tenants also have to consider higher fit-out budgets to move to other office buildings. Therefore, some tenants prefer to renew and renegotiate their leases due to the comfort of staying at their existing office space, although there are options for lower rents. Those conditions are expected to help the projected occupancy to stay at a healthy level, although it is expected to continue decreasing in the future.

Average Occupancy Rates in the CBD


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2007 2009 2011 2013 2015YTD

Grade A & Premium All Class

projected completion office building projectS name Sga marketing Scheme StatuS development

continuation

tb Simatupang

2015 Graha MRA 13,000 For Lease Under Construction

2015 South Quarter Tower 1 40,778 For Sale Under Construction

2015 South Quarter Tower 2 40,778 For Lease Under Construction

2016 South Quarter Tower 3 40,778 For Lease Under Construction

2016 Zuria 6,584 For Lease Under Construction

2016 Cibis Tower 60,800 For Lease Under Construction

2017 The Sima 60,000 For Lease Under Construction

2017 Beltway Office Park Tower 4 30,839 For Lease In Planning

2018 Arkadia Tower G 30,000 For Lease In Planning

2018 The Manhattan Square Tower 2 39,375 For Lease & Sale In Planning

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

YTD

sq m

Space Absorbed Vacant Space

global financial crisis

economy slowdown





Office Space Pre-leased at Future Office Buildings for Lease in the CBD


0 90,000 180,000 270,000 360,000 450,000

2015F

2016F

2017F

2018F

sq mSpace Absorbed Space Unabsorbed


Occupancy Changes in the Outside CBD3Q 2014 YoY 3Q 2015 QoQ 2Q 2015

92.0% -0.8% 91.2% -0.5% 91.7%

Outside CBD

Cumulative Office Space Absorbed vs Vacant Space in the Outside CBD



Occupancy Changes in TB Simatupang3Q 2014 YoY 3Q 2015 QoQ 2Q 2015

86.0% 0% 86.0% 1% 85.0%

TB Simatupang

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

YTD

sq m

Space Absorbed Vacant Space

Occupancy rates in the CBD are projected to weaken from now until 2018. The office market is anticipating a huge upcoming supply and further lower Gross Domestic Product (GDP) growth and this may cause a further decline in the occupancy rate. As mentioned above, around 540,000 sq m of new additional space per year will be on the market in 2015 - 2018. At the same time, GDP growth is forecast between 5.6 and 5.8%, and using this as the basis for projecting future demand, it is expected that there will be an annual demand for around 280,000 sq m until 2018. Given the huge annual supply projection, we estimate that the occupancy between 2015 and 2018 will gradually decrease and may reach around 80% in 2018.

The chart above illustrates that space absorption at office buildings projected to be in operation during 2015 - 2016 is still far from the projected total annual supply for each year. In the remaining three months of this year, finding tenants for the vacant 226,500 sq m will be arduous. The CBD also anticipates large vacancy at spaces previously marketed for sale because buyers of strata-title office space will not automatically be converted into occupiers of the space they bought.

After an increase in the previous quarter, occupancy for outside the CBD saw a moderate slump as of 3Q 2015. The average occupancy in Central and North Jakarta dropped QoQ and there were new vacant spaces above 1,000 sq m at some office buildings located in both municipalities. That in West Jakarta was also lower, although the average occupancy only decreased minimally.

Occupancy in TB Simatupang climbed 1% QoQ to 86% as of 3Q 2015. However, the large projected additional supply will create a challenge in keeping the occupancy high in TB Simatupang for the remainder of 2015. Furthermore, TB Simatupang still anticipates abundant new additional office space in 2015 - 2016, which can restrain the growth of occupancy rates in TB Simatupang.





Average Occupancy Rates in the Outside CBD & TB Simatupang


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2007 2009 2011 2013 2015YTD

Outside CBD TB Simatupang

Office Space Pre-leased at Future Office Buildings for Lease in the Outside CBD


0 60,000 120,000 180,000 240,000 300,000

2015F

2016F

2017F

2018F

sq mSpace Absorbed Space Unabsorbed

Asking RentsAverage Asking Rental Rates at Offices in the CBD


Average Asking Rental Rates at Offices in the Outside CBD


USD 0.00

USD 5.00

USD 10.00

USD 15.00

USD 20.00

USD 25.00

IDR 0

IDR 60,000

IDR 120,000

IDR 180,000

IDR 240,000

IDR 300,00020

10

2011

2012

2013

2014

2015

YTD

IDR Average (IDR) USD

USD 0.00

USD 8.00

USD 16.00

USD 24.00

USD 32.00

USD 40.00

IDR 0

IDR 100,000

IDR 200,000

IDR 300,000

IDR 400,000

IDR 500,000

2010

2011

2012

2013

2014

2015

YTD






Gap of Asking Rental Rates of Different Grades of Building QoQ


Average Asking Rental Rates at Offices in TB Simatupang


USD 0.00

USD 5.00

USD 10.00

USD 15.00

USD 20.00

USD 25.00

IDR 0

IDR 60,000

IDR 120,000

IDR 180,000

IDR 240,000

IDR 300,00020

10

2011

2012

2013

2014

2015

YTD


IDR 0

IDR 100,000

IDR 200,000

IDR 300,000

IDR 400,000

IDR 500,000

IDR 600,000

Premium Grade A Grade B Grade C

3Q 2015 2Q 2015

In order to curb the dwindling rupiah value against the US dollar, Bank Indonesia issued a publication to explain the recent Central Bank regulation about the mandatory use of rupiah for any transactions done in the country. Bank Indonesia is authorised to ask for reports related to the obligation to use rupiah, and for the price of goods and/or services in rupiah. Bank Indonesia also explained about the penalty for breaching this regulation.

Due to the abovementioned regulation, the majority of office buildings that previously offered rents in US dollars have converted to quoting rents in rupiah. There are some cases where they ask for rent in US dollars but convert it using the prevailing rate when the transaction occurred. Some developers that continue to ask for rent in US dollars are even using an above-market exchange rate to hedge against further rupiah deterioration. All in all, the policy to maintain high rental rates is perplexing for developers because on one side they have to maintain their investment return but on the other, the market is down and competition is becoming tougher.

Since most of the buildings, particularly in the CBD, have converted from quoting in US dollars to rupiah, from 3Q 2015 onward, our reports will only show asking rental rates in rupiah.

Since the regulation has been released and completed by publication, more office buildings previously charging in US dollars converted to the local currency. As a result, average asking rents in rupiah soared 35.5% YTD. In general, the buildings that were offered in US dollars were better quality and therefore were more expensive than those quoted in rupiah. As of 3Q 2015, the average asking rent in the CBD was IDR342,581 sq m/month. Some Grade A and Premium office buildings have registered their asking rents between IDR500,000 and 870,000 sq m/month currently. At Premium Grade office buildings, the average asking rent was IDR444,454 sq m/month as of 3Q 2015. In fact, the average asking rent at Premium Grade buildings dropped significantly by 31% QoQ. Average asking rents at Grade A office buildings also showed a decrease QoQ, albeit a moderate one. Landlords that own or are developing Grade A and Premium office buildings are seemingly considering more flexibility in their asking rents to keep their occupancy rates at a healthy level. Some newly operating and future office buildings also charged asking rents at the market average. Moreover, with slowing inquiries for office space at least in the last two years, landlords have started offering large discounts in asking rents particularly for sizeable occupation areas.

The growth of asking rents outside the CBD also showed a similar trend to the CBD. As of 3Q 2015, office buildings in South Jakarta have revised the overall rental cost that brought the average asking rents in the outside CBD to IDR211,950/sq m/month, growing 10.5% YTD. Average asking rent in South Jakarta itself was higher than that outside the CBD at IDR253,642 sq m/month. There is a big gap in asking rents between South Jakarta and West Jakarta, which ranked the second highest, at IDR176,931 sq m/month as of 3Q 2015.





There were still high asking rents in South Jakarta at office buildings in TB Simatupang and surrounding areas. As of 3Q 2015, asking rents in TB Simatupang were IDR259,805 sq m/month, decreasing 6% QoQ. The decreased asking rents in TB Simatupang were due to some office buildings that lowered their rents by converting to rupiah after previously charging in US dollars.

Similar to offices for lease, strata-title demand is expected also to face tough conditions in the future. It was reported that space absorption has been slowing down, particularly since mid-2015. However, including absorption at a newly operating office building during 2015, as of 3Q 2015, the unsold space is only 48% of around 1 million sq m of the total supply of future offices for sale in the CBD until 2018. By expecting a more conducive economy, the pre-commitment take-up rate has made a good start towards accelerating absorption in the future.

Slowing demand caused asking prices to only grow modestly to IDR51.6 million/sq m in the CBD as of 3Q 2015. Most future offices for sale currently charge prices between IDR50 and 65 million/sq m. In the secondary market, some large vacant spaces (2,000 to 8,000 sq m) are still marketed with asking prices between IDR55 and 75 million/sq m.

The biggest office leasing transaction of almost 15,000 sq m was recorded at an office building in Rasuna Said involving a telecommunications company.

Service ChargesRange of Service Charges in the Three Main Areas in Jakarta


0

30,000

60,000

90,000

120,000

150,000

CBD Outside CBD TB Simatupang

On the contrary, average service charges dropped significantly. The decreasing trend of the average service charges in the CBD was caused by the ceasing of operations of an office building in Thamrin that previously charged a higher than average maintenance fee. Several office buildings lowered their service charges QoQ, between IDR3,000 and 10,000 sq m/month together with the newly operating large-scale office buildings that quote service charges below the market average. The average service charge was IDR85,439 sq m/month (aggregate IDR and USD) as of 3Q 2015, which is lower by 11% QoQ.

Service charges outside the CBD were IDR67,327 sq m/month, and IDR65,461 sq m/month in TB Simatupang. These service charges remained relatively flat QoQ.

Strata-title OfficePre-Committed Take-up Rates of Future Strata-title Offices for Sale in the CBD


0 50,000 100,000 150,000 200,000 250,000

2015F

2016F

2017F

2018F

sq m

Space Absorbed Space Unabsorbed





Areas outside the CBD, excluding the TB Simatupang area, also showed high absorption for office space for sale. Around 545,000 sq m is anticipated as the total additional supply in 2015 - 2018 of which almost 60% was absorbed as of 3Q 2015. However, even with high demand, it is seemingly difficult to raise the average asking price any higher, and it was still around IDR26 million/sq m.

Most office supply for sale outside the CBD in 2015 was concentrated in the TB Simatupang area (58.3%). Up to 72% of around 180,000 sq m of space for sale in TB Simatupang has been absorbed and helped to bring the asking price to IDR33.6 million/sq m as of 3Q 2015, a growth of 4.6% QoQ.

Pre-Committed Take-up Rates of Future Strata-title Offices for Sale Outside the CBD


0 50,000 100,000 150,000 200,000 250,000

2015F

2016F

2017F

sq m

Space Absorbed Space Unabsorbed

Average Asking Prices of Strata-title Office Space in Several Areas in Jakarta


IDR 0

IDR 10,000,000

IDR 20,000,000

IDR 30,000,000

IDR 40,000,000

IDR 50,000,000

IDR 60,000,000

2010

2011

2012

2013

2014

2015

YTD

CBD Outside CBD exclude TB Simatupang TB Simatupang





Apartment SectorApartment for Strata-title

Supply

Newly Completed Projects during 3Q 2015name of development location region developer no. of unitS

Setiabudi Sky Garden (tower 1) Jl. Karbela Selatan CBD Jakarta Setiabudi International 426

Raffless Residence Jl. Satrio CBD Ciputra 88

The H Residence Jl. MT Haryono East Jakarta Hutama Karya Realtindo 383

Bassura City (Tower Flamboyan) Jl. Basuki Rahmat East Jakarta Synthesis Development 1,000

Senopati Penthouse Jl. Senopati Kav 45 South Jakarta Senopati Aryani Prima 63

Providence Park Jl. Kalimaya - Iskandar Muda South Jakarta PT Sinar Pamaronda 114

Satu8 Residence Jl. Pilar Komp. Delta, Kedoya West Jakarta PT Karya Cipta Sukses Selaras 168

Capitol Park (Tower Safir) Jl. Salemba Raya Central Jakarta PT. Wikaraga Sapta Utama 976


The completion of seven projects contributing an additional 3,218 units increased the inventory of strata-title apartments in Jakarta to a total of 152,358 units; up by 2.2% QoQ or 9.4% YoY. The majority of the new completed projects were brand-new projects, except for the Bassura City project with its new tower called Flamboyan Tower (an extension of the first completed tower, Geranium Tower). Of the 3,218 newly available units this quarter, Bassura City is the project with the highest number of units. 79% of the 3,218 units are categorised as middle-class apartment including Bassura City itself together with The H Residence, Satu8 Residence and Capitol Park (Tower Safir). Other than the Basura City project, there are mainly projects with limited units, suggesting the exclusivity of the development. This includes projects like Setiabudi Sky Garden, Senopati Penthouse and Providence Park which represent 19% of the total newly operating units this quarter. The completion of Raffles Residence will add more units in the category of luxury apartment in the CBD area.

Despite undergoing downside pressure on sales activity, developers still set positive expectations on the property market, especially for residential projects, largely in view of the mature demographic profile and rising middle-class. In addition, Jakarta City is anticipating massive improvements in infrastructure development including LRT (Light Rail Transit), MRT (Mass Rapid Transit) and toll roads which are expected to boost demand for residences within the catchment area, as well as the value of properties in the surroundings.

Eight strata-title apartment projects, consisting of 3,308 units, were also launched or introduced between July and September 2015. These projects are slated for completion from 2018 to 2020.





Newly Introduced/Launched Apartment in 3Q 2015

name of development location regioneXpected

completion time

aSking price/SQ m* no. of unitS

The Elements Epicentrum (2 towers) Rasuna Said CBD 2018 IDR36,000,000 372

Menteng 37 Menteng Central Jakarta 2018 IDR47,000,000 99

The Linq Kemayoran Central Jakarta 2019 IDR22,600,000 922

Ratu Prabu 3 Residences TB. Simatupang South Jakarta 2018 to be announced 61

Fatmawati City Center (1st phase) Fatmawati South Jakarta 2019 IDR 35,000,000 900

Royal Park Kebayoran Cipulir South Jakarta 2019 IDR 25,000,000 630

Ammi Residence Dharmawangsa South Jakarta 2019 IDR 46,000,000 136

The Residence Gatot Subroto Gatot Subroto South Jakarta 2020 IDR 35,500,000 188

Quite a few future projects (58% of the total future apartments) will be located in South Jakarta. In line with massive commercial development in TB Simatupang and surrounding areas, more new apartment projects are under construction and in planning, including Ratu Prabu 3 Residences and Fatmawati City Centre that cater to the middle- to upper-class segment. In the south, a crème de la crème residential area, Dharmawangsa will see an upscale project called Ammi Residence, complementing the other existing upper-class projects in the neighbourhood. Other future apartment projects being launched this quarter are Royal Park Kebayoran, located in Cipulir, and The Residence Gatot Subroto; both are targeted at the middle class.

Prime area like Menteng still continue to be a preferred location for upper-class residences, despite having limited land to develop. Pikko Land and PT Wijaya Wisesa will develop a joint venture apartment project called Menteng 37, aiming at upper-class buyers. With a similar target market, Sinar Mas Land will build The Elements in Rasuna Epicentrum business compound, comprising two towers, with 2- to 3-bedroom units. Another newly launched project, The Linq, will be located in the Kemayoran area. This project is targeting the middle-class market segment and will be developed by KG Global Development, the same developer that built The City Tower, TCC Batavia, Tamini Square and the future Mangkuluhur project.

During 2015YTD, a total of 18,317 units have been introduced to the market, a large proportion of which are new projects in the South Jakarta area. By number of units and number of projects, South Jakarta has 30 and 52% of the apartment supply, respectively, followed by West Jakarta, with 17 and 25%. South and West Jakarta continue to be growing residential areas, taking advantage of established and good accessibility to the downtown as well as better infrastructure and facilities. These include access to the toll road, airport, international schools and shopping centres. East Jakarta continues to be the choice of both investors and end-users in the middle-lower segment.

Total Number of Units Being Introduced or Launched During 2015YTD in Each Region


0

1,000

2,000

3,000

4,000

5,000

6,000

CBD Central Jakarta

South Jakarta

North Jakarta

East Jakarta

West Jakarta

units

The government has recently released a stimulus package aimed at luring more investment to Indonesia. One of the policies includes investment in the property sector. The government will push to provide housing accommodation for low-income households, while widening investment opportunities in the domestic property sector, which allows foreign ownership of luxury condominiums priced at a minimum of IDR10 billion (approximately USD700,000)/unit. This plan sounds like a positive endorsement for developers, especially those who build upscale projects. However, we expect that the regulation will have little impact on the overall sales activities because the market share of this segment only represents less than 1% of the total 96,781 units in the market that are offered at IDR10 billion/unit.

*Exclude VATSource: Colliers International Indonesia - Research




15 Research & Forecast Report | 3Q 2015 | Apartment | Colliers International

Total Number of Projects Being Introduced or Launched During 2015YTD in Each Region


Future Supply Units (2015 - 2020) Based on Class


CBD7%

Central Jakarta

17%

South Jakarta

52%

North Jakarta

3%

East Jakarta

4%

West Jakarta

17%

Low5%

Middle-Lower47%

Middle-Upper36%

Upper11%

Luxury1%

Apartment Development in the Pipeline (2015 - 2019)apartment name location region no. of unitS

2015

The Grove (Empyreal + Masterpiece) Jl. HR Rasuna Said CBD 438

Ciputra World - Luxurious Raffles Residences Jl. Prof Dr Satrio CBD 64

Setiabudi Sky Garden (tower 1) Jl. Karbela Selatan CBD 426

Setiabudi Sky Garden (tower 2) Jl. Karbela Selatan CBD 160

Elpis Residence Gunung Sahari Central Jakarta 790

Capitol Park Apartment (Tower T) Jl. Salemba Raya, Menteng Central Jakarta 727

Capitol Park Apartment (Tower U) Jl. Salemba Raya, Menteng Central Jakarta 976

The Mansion at Dukuh Golf Residence (Aurora Tower) Jl. Benyamin Sueb Kemayoran Central Jakarta 522

The Mansion at Dukuh Golf Residence (BellaVista Tower) Jl. Benyamin Sueb Kemayoran Central Jakarta 612

The Royal Springhill (Lotus Tower) Jl. Spring Hill Residence Kemayoran Central Jakarta 192

The Royal Springhill (Bouvardia Tower) Jl. Spring Hill Residence Kemayoran Central Jakarta 120

Casablanca East Residence (2 Twr) Jl. Pahlawan Revolusi East Jakarta 1,904

The H Residence MT Haryono East Jakarta 383

Bassura City (Tower Flamboyan) Jl. Basuki Rahmat East Jakarta 1,000

Bassura City (Tower Edelweiss) Jl. Basuki Rahmat East Jakarta 1,000

Bassura City (Tower Dahlia) Jl. Basuki Rahmat East Jakarta 1,000

Titanium Square Jalan Raya Bogor Kav. 27 Pasar Rebo East Jakarta 725

Bassura City (Tower Geranium) Jl. Basuki Rahmat East Jakarta 900

Pluit Seaview (Tower Maldives) Pluit North Jakarta 940

Northern Ancol Residence Jl. Laksamana R.E. Martadinata, No. 26 North Jakarta 800

Teluk Intan (Tower Saphire) Jl. Teluk Gong North Jakarta 1,100

Callia Apartment Jl. Perintis Kemerdekaan North Jakarta 560

The Oak Tower (2 Towers) Jl. Perintis Kemerdekaan North Jakarta 821

Green Bay Pluit (Sea View) Jl. Pluit Karang Ayu North Jakarta 2,072

The Royal Olive Residence (Tower I) Jl. Buncit Raya South Jakarta 297

Senopati Penthouse Jl. Senopati Kav 45 South Jakarta 63

continued





apartment name location region no. of unitS

continuation

Senopati Suites 2 Jl. Senopati South Jakarta 81

LA City Apartment (Tower A) Jl. Raya Lenteng Agung, Jagakarsa South Jakarta 980

La Maison Barito (Tower 1) Barito South Jakarta 80

Nine Residence Warung Buncit South Jakarta 246

Providence Park Jl. Kalimaya - Iskandar Muda South Jakarta 114

Kencana Residence Jl. Sultan Iskandar Muda South Jakarta 173

Niffaro Apartment (Ebony Tower) Jl. Kalibata Raya South Jakarta 288

La Venue - South Tower Jl. Pasar Minggu South Jakarta 341

Botanica Apartment (3 Towers) Simprug, Kebayoran Baru South Jakarta 626

Woodland Park (Trambesi tower) Jl. Kalibata Raya South Jakarta 221

Belmont Residence (Tower Montblanc) Jl. Meruya Ilir West Jakarta 350

Green Palm Residence @ Puri Jl. Kosambi West Jakarta 1,000

Metro Park Residence Kebon Jeruk West Jakarta 1,451

St. Moritz (New Presidential Tower) Jl. Puri Indah West Jakarta 159

Satu8 Residence Jl. Pilar Komp. Delta, Kedoya West Jakarta 174

The Nest Apartment Jl. Raden Saleh Raya, Meruya Utara West Jakarta 1,100

19 Avenue Apartment 9 (Tower A) Daan Mogot West Jakarta 338

2016

The Residence (CWJ 2) Jl. Prov Dr Satrio Kav 6, Kuningan CBD 119

The Orchad Satrio (CWJ 2) Jl. Prov Dr Satrio Kav 6, Kuningan CBD 349

Gayanti City (2 Towers) Jl. Gatot Subroto CBD 318

T - Plaza Residence (Tower A) Jl. Penjernihan I Kav.1 Pejompongan Central Jakarta 307

Sentosa Residence Cempaka Putih Central Jakarta 687

Sudirman Hill Residence Jl. Karet Pasar Baru Central Jakarta 255

The Green Pramuka (Tower Orchid) Jl. Jenderal Ahmad Yani Central Jakarta 1,000

The Green Pramuka (Tower Penelope) Jl. Jenderal Ahmad Yani Central Jakarta 1,000

The Green Pramuka (Tower Scarlet) Jl. Jenderal Ahmad Yani Central Jakarta 1,000

Capitol Suites Jl. Prapatan Raya Central Jakarta 327

The H Residence Kemayoran (Amethyst) Jl. Rajawali Selatan Central Jakarta 800

The Royal Springhill (Bulgari Tower) Jl. Spring Hill Residence Kemayoran Central Jakarta 192

Holland Village (Phase II) Cempaka Putih Central Jakarta 230

Signature Park Grande Jl. MT. Haryono East Jakarta 1,100

Bassura City (Tower Cattleya) Jl. Basuki Rahmat East Jakarta 600

East Park Apartment (Tower C) Jl. KRT Radjiman East Jakarta 550

Bassura City (Tower Alamanda) Jl. Basuki Rahmat East Jakarta 600

Sentra Timur Residence (Tower Tosca) Pulo Gebang East Jakarta 133

Pluit Seaview (Tower Belize) Pluit North Jakarta 300

Pluit Seaview (Tower Ibiza) Pluit North Jakarta 500

Pluit Seaview (Tower Bahama) Pluit North Jakarta 650

Marina The Coastal Ancol North Jakarta 1,500

La Venue - North Tower Jl. Pasar Minggu South Jakarta 253

Kemang Village (The Bloomington) Jl. P Antasari South Jakarta 150

Senopati Suites 3 Jl. Senopati South Jakarta 54

1 Park Avenue (3 Towers) Jl. KHM Syafi'I Hadzami (terusan gandaria) South Jakarta 279

Pakubuwono Terrace Grand Tower Kebayoran Lama South Jakarta 435

District 8 (Tower Eternity) Jl. Senopati South Jakarta 400

District 8 (Tower Infinity) Jl. Senopati South Jakarta 280

continued






continuation

Izzara Apartment (South and North Tower) TB. Simatupang South Jakarta 542

Lexington Rersidence Pondok Pinang South Jakarta 275

Apartment Pejaten Park Residence Jl. Warung Buncit Raya No.21 South Jakarta 560

The Aspen Peak at Admiralty (Tower C) Jl. Fatmawati South Jakarta 322

Four Winds Jl. Permata Hijau Raya No.1 South Jakarta 122

Bellevue Place MT Haryono, Tebet South Jakarta 240

Kebayoran Icon Jl. Ciledug Raya South Jakarta 256

One Casablanca Residence Jl. Pal Batu South Jakarta 215

Grand Dhika Mansion Pejaten (Sector 1) Jl. Siaga Raya South Jakarta 44

Sapphire Residence Lebak Bulus South Jakarta 37

Woodland Park (Mahogany Tower) Jl. Pahlawan Kalibata South Jakarta 218

St Moritz (The New Ambassador Suite Tower) Jl. Puri Indah Kembangan West Jakarta 200

The Windsor (Tower II) Jl. Puri Indah West Jakarta 164

Gianetti Apartment Jl. Kebon Jeruk Raya, Kemanggisan West Jakarta 500

Gallery West Jl. Panjang No 5 West Jakarta 280

Green Park View (Tower G) Jl. Daan Mogot West Jakarta 1,200

Belmont Residence (TowerAthena) Jl. Meruya Ilir West Jakarta 193

Puri Mansion Apartment (Tower Amethyst) Jl. Lingkar Luar Barat, Puri Kembangan West Jakarta 900

Madison Park Tanjung Duren West Jakarta 1,200

Veranda Jl. Pesanggrahan Raya, Kembangan West Jakarta 174

2017

Sudirman Suites Jl. Sudirman CBD 380

Domaine Jl. Jend. Sudirman Kav 1 CBD 186

Verde Two (Tower East) Jl. Rasuna Said CBD 182

Anandamaya Residences (3 towers) Jl. Jend Sudirman CBD 500

Central 88 (2 Towers) Jl. Trembesi, Kemayoran Central Jakarta 612

Menteng Park Jl. Cikini Raya No.79 Central Jakarta 756

Holland Village Cempaka Putih Central Jakarta 400

Royal Suites Kemayoran Central Jakarta 450

The Green Pramuka (Tower Nerine) Jl. Jenderal Ahmad Yani Central Jakarta 1,000

Green Signature Apartment Jl. MT. Haryono East Jakarta 800

Podomoro Park Jl. I Gusti Ngurah Rai, Klender East Jakarta 3,000

Sentra Timur Residence (Tower Brown) Pulo Gebang East Jakarta 605

Bassura City (Tower Jasmine) 2 tower Jl. Basuki Rahmat East Jakarta 2,000

Bassura City (Tower Heliconia) Jl. Basuki Rahmat East Jakarta 700

La Terrasse Jl. Deplu Raya No.12 South Jakarta 111

The Foresque Pasar Minggu, Ragunan South Jakarta 660

The Langham Residences Senopati South Jakarta 57

Antasari Heights Jl. Pangeran Antasari No.8 South Jakarta 360

The Batik @ Pejaten Jl. Siaga Raya South Jakarta 137

La Foret Vivante Jl. Limo, Permata Hijau South Jakarta 253

Selatan 8 (Tower Sultan) Kebayoran Lama South Jakarta 336

The Hamilton Jl. KHM Syafi'I Hadzami South Jakarta 112

Puri Orchad (3 Tower) Jl Raya Adicipta West Jakarta 3,000

Maqna Residence Jl. Meruya Ilir No. 88 West Jakarta 312

Vittoria Residence (3 tower) Jl. Daan Mogot West Jakarta 1,100

continued






continuation

Wang Residence Jl. Panjang No 18 West Jakarta 250

Taman Anggrek Residence (6 towers) Tanjung Duren West Jakarta 3,000

19 Avenue Apartment (Tower B) Daan Mogot West Jakarta 416

Sycamore Suites Puri Botanical West Jakarta 125

Regatta London Tower Jl. Pantai Mutiara North Jakarta 186

2018

Verde Two (Tower West) Jl. Rasuna Said CBD 152

Lavie Jl. Denpasar Raya CBD 302

South Hill Jl. Denpasar Raya CBD 611

Le' Parc Jl. Thamrin CBD 100

Regent Residences (tower 1) Semanggi CBD 100

The Hundred Residence Mega Kuningan CBD 100

The Elements (2 towers) Rasuna Said CBD 372

Core Sky Residence Pulo Gebang East Jakarta 282

Sahid Garden Residence Ciracas East Jakarta 476

Menteng 37 Menteng Central Jakarta 99

Regatta Apartment (Tower New York) Pantai Mutiara North Jakarta 186

Sedayu City (Tower Berlin) Jl. Pegangsaan Dua Raya North Jakarta 912

The Kensington Royal Suites (4 Tower) Kelapa Gading North Jakarta 790

Jaya Ancol Seafront - Oceana Tower Pademangan, Ancol North Jakarta 524

Gold Coast Apartment (Bahama Tower) Pantai Indah Kapuk North Jakarta 600

Gold Coast Apartment (Carribean Tower) Pantai Indah Kapuk North Jakarta 600

Gold Coast Apartment (Honolulu Tower) Pantai Indah Kapuk North Jakarta 600

Grand Marina Ancol Ancol North Jakarta 672

Gold Coast Apartment (Atlantic Tower) Pantai Indah Kapuk North Jakarta 568

The Aspen Peak at Admiralty (Tower D) Jl. Fatmawati South Jakarta 322

Casa Grande Residence 2 (Tower Angelo) Jl. Casablanca South Jakarta 350

Casa Grande Residence 2 (Tower Bella) Jl. Casablanca South Jakarta 350

Casa Grande Residence 2 (Tower Chianti) Jl. Casablanca South Jakarta 350

Pondok Indah Residences (3 Towers) Pondok Indah South Jakarta 880

Selatan 8 (Tower Prabu) Jl. Raya Ulujami South Jakarta 344

45 Antasari (2 Tower) Antasari South Jakarta 1,924

Arzuria Apartment Jl. Tendean South Jakarta 210

Pakubuwono Spring (2 towers) Jl. Teuku Nyak Arief No.9 South Jakarta 545

Branz Simatupang (2 tower) TB. Simatupang South Jakarta 381

Synthesis Residence Kemang Jl. Ampera Raya South Jakarta 1,100

The Ease Brawijaya Jl. Taman Brawijaya III Kebayoran Baru South Jakarta 54

Royal Olive Residence (Tower 2) Jl. Buncit Raya South Jakarta 231

Kemang Penthouse Kemang South Jakarta 262

Ratu Prabu Residence 3 TB. Simatupang South Jakarta 61

Ciputra International Puri Indah (Tower Amsterdam) Jl. Lingkar Luar Barat West Jakarta 412

Grand Madison Park Tanjung Duren West Jakarta 300

Citra Lake Suites (Tower Rosewood) Jl. Raya Kresek West Jakarta 104

Citra Lake Suites (Tower Greenwood) Jl. Raya Kresek West Jakarta 126

Citra Lake Suites (Tower Oakwood) Jl. Raya Kresek West Jakarta 117

Citra Lake Suites (Tower Sherwood) Jl. Raya Kresek West Jakarta 122

Aerium Taman Permata Buana Taman Permata Buana West Jakarta 550

continued






continuation

Ciputra International Puri Indah (Tower Barcelona) Jl. Lingkar Luar Barat West Jakarta 335

Puri Mansion Apartment (Tower Crystal) Jl. Lingkar Luar Barat, Puri Kembangan West Jakarta 700

West Vista (2 towers) Jl. Lingkar Luar Barat No.8, Duri Kosambi West Jakarta 2,840

Citra Living Apartment (Somerset Tower) Jl. Citra 7, Kalideres West Jakarta 312

2019

Menara Jakarta (Tower Equinox) Kemayoran Central Jakarta 396

Menara Jakarta (Tower Azure) Kemayoran Central Jakarta 860

Orient Residence Jl. Yos Sudarso, No 76 North Jakarta 225

Green Sedayu Apartment (Tower Pasadena) Jl. Kamal Raya, Cengkareng West Jakarta 896

Fatmawati City Center (1st phase) Fatmawati South Jakarta 900

Royal Park Kebayoran Cipulir South Jakarta 620

The Linq Kemayoran Central Jakarta 922

Ammi Residence Dharmawangsa South Jakarta 136

The Residence Gatot Subroto Gatot Subroto South Jakarta 188


DemandThe first semester of 2015 was a hardship period for the apartment market. In general, the apartment market during 3Q 2015 remained challenging. The continuing rupiah depreciation against the US dollar and slower economic growth (which has been below 5%) has been the main cause of the slowdown in sales. Potential buyers, particularly investors, are now becoming more cautious and prudent in spending their money.

Overall, the average take-up rates in 3Q 2015 remained at 85.8%, down moderately from the previous quarter. The table below shows that the existing apartment market recorded a positive sales trend, albeit moderate, while the pre-sales of under-construction apartments slipped by less than 1% compared to the previous quarter. Additionally, the softening demand in pre-sales activity is also due to the wait-and-see attitude of investors waiting for further conducive measures from the government regarding a number of proposed regulatory changes, including land and building tax, foreign ownership and luxury tax (PPnBM).


Take-up Rate Performance of Existing and Under- construction Projects

2Q 2015 3Q 2015 QoQ

Existing Projects 95.8% 96.0% 0.2%

Pre-Sales Rates (of under construction projects)

69.0% 68.6% -0.4%

Average (existing and under construction projects)

85.9% 85.8% -0.1%

Bank Indonesia’s relaxed policy through the new LTV regulation has yet to have a direct positive impact on the pre-sales activity and mortgage demand, in our opinion mainly because the interest rate is still high. As a result, developers / companies continue to offer longer in-house financing (cash instalments) and balloon payment to the buyers. In our view, despite the fact that Bank Indonesia has raised the loan-to-value ratios (from 30% : 70% to 20% : 80%), the prevailing regulation that bans on indent mortgage contributed to the slowdown in demand, especially for the under-construction projects.

For some time, the CBD has remained the preferred location and with limited land to be developed, this area continues to record the highest average take-up rate of 96.8% compared to the other areas. This figure suggests a modest increase of 2.1% from the previous quarter or 1.5% YoY as a result of continued absorption of both existing and under-construction apartment units, besides the fact that there is only a limited number of projects being offered in CBD. Similarly, the apartment market in the non-prime area also recorded an upward trend, albeit a moderate one, during the reviewed quarter. As part of investment instruments, the property sector, in particular apartments, remains attractive for domestic investors. With relatively reasonable prices, apartment projects in the non-prime areas have appealed to individual investors who hope to protect their wealth in the midst of a dismal economy.

In the other favourite home location, South Jakarta, sales performance has weakened since the beginning of 2015, largely affected by the influx of abundant new projects (52% of the total newly introduced/launched projects) which was not counterbalanced by the same absorption rate.





Average Take-up Rate Performance in Three Major Areas


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1Q 2013

2Q 2013

3Q 2013

4Q 2013

1Q 2014

2Q 2014

3Q 2014

4Q 2014

1Q 2015

2Q 2015

3Q 2015

CBD Non-prime South Jakarta


Take-up Rates of Under-construction Projects in Three Major Areas

2Q 2015 3Q 2015 QoQ

CBD 85.5% 87.6% 2.1%

Non-prime Area 68.1% 68.9% 0.8%

South Jakarta 66.9% 63.6% -3.3%

In the middle of September, the Ministry of Finance indicated that the luxury tax (PPnBM) of 20% is only imposed on property transactions for houses and apartments worth more than IDR10 billion (approximately USD700,000). The threshold for the super-luxury tax (PPH 22) was revised during 2Q 2015 from IDR10 to 5 billion. At this stage, we are still waiting for a comprehensive regulation so that the luxury tax and super-luxury tax will not overlap. In general, such an incentive would stimulate the residential property market to further move forward.

Another hot issue but remains uncertain is to allow foreign ownership of Indonesian property in a bid to boost tax revenue as well as the domestic property industry. This will enable foreigners (expatriates) to buy, own, inherit and trade luxury apartments that have a minimum value of IDR10 billion on a “right to use” or “hak pakai” title. The IDR10 billion minimum value of the luxury apartments has not yet formally decided. Nevertheless, in our opinion such a regulation would not significantly accelerate sales activity because there are only a few apartment projects with units valued above IDR10 billion (circa 1% from the total of under-construction units).

Asking PriceUnder the weight of multiple downside pressures like sluggish economic growth and lackadaisical demand, the overall apartment price still witnessed a minor increase this quarter. The average price increased by 3.4% QoQ or 11.2% YoY to IDR29.87 million/sq m (based on hard-cash payment scheme excluding VAT). However, the figures below show that the pace of increase in prices continued to slow, evidenced by the current annual growth that is lower than the average growth in the last four years.

Annual Apartment Asking Price During 2011 – 2015


0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

3Q 2011 3Q 2012 3Q 2013 3Q 2014 3Q 2015

Ave

rage

Pri

ce/s

q m

(ID

R) + 15% CAGR

Price adjustments during the quarter are mainly triggered by continuing construction progress that maintains market confidence. Projects approaching the hand-over stage seem to have limited available units, which also led to the adjustment in prices. Another factor that stimulates price adjustments is that some apartment projects offer semi-furnished units, equipped with stove, kitchen cabinets, water heater and air-conditioner, which force prices higher.

Although there might be a sizeable pool of potential investors or buyers waiting on the side-lines, these buyers are now more selective and will only commit if desired projects have a competitive price. Furthermore, in the middle of slowing economic conditions, psychologically, buyers or investors might be reluctant to make a purchase now.


Average Asking Price (in IDR) in Three Different Regions

3Q 2014 2Q 2015 3Q 2015 QoQ YoYCBD 41,759,,611 45,279,368 46,322,208 2.3% 10.9%

Non-prime area 20,320,645 21,646,375 22,429,188 3.6% 10.4%

South Jakarta 31,241,685 33,469,503 34,699,316 3.7% 11.1%





Apartment For Lease SupplyFor the last two consecutive quarters, Jakarta has not seen any new projects of apartments for lease, after Ascott Kuningan began operation in the last quarter of 2014. During the reviewed quarter, one serviced apartment building started operations, namely Ra Residence, developed by Lembonghouse, which is renowned for its service in providing houses for expatriates. Located in a growing business district in South Jakarta, TB Simatupang, Ra Residence consists of 110 units, ranging from studios to 3-bedroom apartments.

With the completion of Ra Residence, the cumulative supply of apartments for lease increased by 1.3% QoQ to 8,629 units. Of these, 59% are serviced apartments. There was no significant change from last quarter in terms of location, where apartments for lease in Jakarta are mainly scattered around the CBD and South Jakarta areas, at 44 and 35%, respectively. There are currently three serviced apartment projects in the pipeline which are expected to be completed in 2015 - 2016.

Distribution of Apartments for Lease


CBD44%

Central Jakarta

10%

South Jakarta

35%

North Jakarta

5%

West Jakarta

6%


Detail Unit in Ra ResidencetYpe Size (SQ m) no. of unit

Studio30 1132 4840 13

1BR 64 322BR 96 43BR 128 2


Serviced Apartment in the Pipelinename of development location Year of operation operator no. of unitS

Fraser Place at Setiabudi Sky Garden Jl. Karbela Selatan 2015 Frasers Hospitality 150 Fraser Suites at Ciputra World Jakarta 2 Jl. Prof Dr Satrio 2016 Frasers Hospitality 200 Oakwood at District 8 Senopati Jl. Senopati 2016 Oakwood 180

Occupancy RateAs of 3Q 2015, the overall occupancy rate of apartments for lease in Jakarta experienced a slight decrease compared to the previous quarter. In terms of location, the CBD area recorded a modest increase of 0.1% over the previous quarter to 79.5%. The increase was mainly due to short-term leases for serviced apartments, which constituted about 20 - 30% of the total occupied units. There was no change in the overall occupancy rate in nonprime areas. On the other hand, the new operating Ra Residence is the main reason for the sluggish occupancy rate of serviced apartments, particularly in the South Jakarta area.


QoQ Occupancy Performance Based on Region (%)area 2Q 2015 3Q 2015 QoQ

CBD 79.4% 79.5% 0.1%

Non-prime Area 70.0% 70.0% 0.0%

South Jakarta 76.4% 73.1% -3.3%

The main cause of the decreasing occupancy rate is the expiration of employment contracts, as reported by most apartment buildings. Another issue that likely affects the overall occupancy rate is tenants’ relocation from Jakarta to industrial areas, particularly apartment building that have a large number of Japanese tenants.





Rental RatesAccording to the Bank Indonesia regulation on the mandatory use of the rupiah (IDR) in every transaction within Indonesia, apartments for lease (both serviced and non-serviced) have started to charge rents in IDR since June of this year. So far, the response from expatriates has been quite positive. They welcome the regulation and so far there is no confusion among the companies from which the tenants originate.

We found a case where apartments for lease, both serviced and non-serviced, are still using US dollars as the basis for rents because the majority of their tenants are expatriates who find it easy to conceptualise the number in US dollars. Despite quoting in US dollars, at payment time, it should be in rupiah and therefore there are some possible mechanisms to decide the basis for the conversion. This includes using a floating rate, a bookkeeping rate or a fixed rate. The widely applied system is the floating rate, which always refers to the prevailing exchange rate on the date of transaction. In our view, this floating rate system is similar to paying in US dollars because the amount of rupiah that the lessee has to pay is similar to the value of US dollars on the date of transaction. The other system is the booking rate, which is fairly similar to the floating rate, except that the rate is valid for one month ahead regardless of the daily fluctuation in the exchange rate. The latest system is the fixed rate where the value of conversion is contractual in advance for at least one year despite the volatility in the exchange rate.

Occupancy Rate of Serviced Apartments and Non-serviced Apartments


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007 2009 2011 2013 2015YTD

Non-serviced Apartment Serviced Apartment


Overall Rental Rate Based on Areaarea rental rate (/SQ m/month)

CBD IDR 362,471

South Jakarta (incl. Non-prime) IDR 211,067


Rental Rate for Serviced Apartmentsarea rental rate (/SQ m/month)

CBD IDR 434,488



Rental Rate for Non-serviced Apartmentsarea rental rate (/SQ m/month)

CBD IDR 227,439



Average Rental Rates (IDR/sq m/month) for Different Types of Apartments for Lease

cbdSouth jakarta (incl. non-prime

areaS)

Average Rent for all Leased Apartment

IDR 362,471 IDR 211,067

Serviced Apartment IDR 434,488 IDR 337,351

Non-serviced Apartment IDR 227,439 IDR 175,636

Concluding ThoughtIn order to boost a sagging economy, the government has recently initiated some economic stimulus packages. Stimulus measures that are related to the property sector are foreign ownership of Indonesian property and a revision of the luxury tax regulations that will likely change the threshold to IDR10 billion for apartments to incur a 20% tax. These regulations are focused on attracting overseas capital to boost domestic growth and to spur new business.

However, the proposal is not yet final, leaving uncertainty in the apartment market and likely leading to a further slow-down in sales in the upcoming quarter. Moreover, if there is no revision of the Super Luxury Tax there will be a conflict with the newly proposed luxury tax, since the price threshold for super-luxury (IDR5 billion) is lower than for luxury properties (IDR10 billion). All in all, the government needs to clarify the ruling to remove the uncertainties among investors and developers in the market.




23 Research & Forecast Report | 3Q 2015 | Retail | Colliers International

Supply

Jakarta

Cumulative Supply of Retail Space in Jakarta


RETAIL SECTOR Cumulative Supply of Retail Space in Jakarta Based on Marketing Scheme


After almost a year without additional space, Jakarta again saw a new shopping centre as of 3Q 2015. Although only softly launched, some stores have opened at One Belpark. This shopping centre, located at Fatmawati (in South Jakarta) provides 23,650 sq m of additional space.

At the same time, around 6,000 sq m has been removed from the existing supply due to the cessation of operations of a small retail facility within a mixed-use project also in South Jakarta. Issues regarding licensing or permission from the government caused this retail centre to be sealed in early July 2015.

This contrary condition contributed by some retail centres has brought moderate growth of the cumulative supply YoY to 4.45 million sq m as of 3Q 2015. Jakarta is expecting to see another shopping centre by the end of 2015. Pantai Indah Kapuk Mall is in the final stages of construction, and is expected to be completed soon.

Jakarta will continue to see modest growth in the cumulative supply. Three retail centre developments that are integrated with apartments projects, will contribute additional retail space in 2016. The three retail centres are also showing significant development progress, and are seemingly able to achieve completion during the first half of 2016.

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

2010

2011

2012

2013

2014

2015

YTD

2015

F

2016

F

2017

F

2018

F

sq m


0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

2010

2011

2012

2013

2014

2015

YTD

2015

F

2016

F

2017

F

2018

F

sq m

For Lease For Sale





Greater Jakarta Area (BoDeTaBek - Bogor, Depok, Tangerang, Bekasi)

BoDeTaBek Cumulative Retail Space Supply


Aside from those under construction, more upcoming retail centres have been announced. After POIN Square became operational in 2005, TB Simatupang area will see additional retail spaces again. A new shopping centre is expected to become part of a massive development developed by Agung Sedayu in TB Simatupang. As of 3Q 2015, this project, together with the six other future projects scattered in other parts of Jakarta, are still in the planning stages. It is expected that they will be completed in 2017 - 2018.

The moratorium on shopping centre development in DKI Jakarta has reduced the number of new development permits. Among shopping centre landlords, this has brought the concept of rejuvenating the existing shopping centres. The majority of old retail premises underwent low occupancy performance and declining shopper traffic, and a capital expenditure is needed to rejuvenate shopping centre in order to boost performance, and as a result to quote higher rents. This is also evident for malls with high occupancy levels, in order to step into the next level of service quality. We have witnessed several old and less-performing shopping centres being revived with new looks and new tenancy to transform into better retail space in the midst of the limited retail supply in Jakarta.

More foreign retail investors are eyeing the Indonesian market due to the huge market opportunity particularly in the Greater Jakarta area, which is the second most populous metropolitan area in the world, with circa 30 million people. The latest, Aeon from Japan, has penetrated Indonesia. After operating in Tangerang, Aeon will soon commence construction of a shopping mall project in Cakung, East Jakarta.

Jakarta Cumulative Retail Space Supply Based on Area


Together with West Jakarta, East Jakarta is expected to become the largest contributor of additional retail space by 2018. Aeon Mall Cakung itself, which will be developed within Jakarta Garden City estate in East Jakarta, is projected to become the largest mall in Jakarta with a total area of around 90,000 sq m.

The ongoing and future infrastructure projects such as toll roads, MRT (Mass Rapid Transport) and LRT (Light Rail Transit) are expected to become a main driver for property sectors, including retail, to grow. The under-construction MRT line will mainly serve the business area in the south of Jakarta and the downtown while the newly initiated LRT project will serve the fringe of Jakarta and will be integrated with the MRT and other transport links. Jakarta citizens are increasingly becoming aware of their easy access to shopping centres. Developers are benefiting from the infrastructure plans to provide easier access, yet the infrastructure projects trigger an increase in the land value.

0 200,000 400,000 600,000 800,000 1,000,000

CBD

Central Jakarta

South Jakarta

North Jakarta

East Jakarta

West Jakarta

sq m

Existing Supply as of 2015YTD Future Supply in 2015 - 2018F

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2010

2011

2012

2013

2014

2015

YTD

2015

F

2016

F

2017

F

2018

F

sq m


The absence of a new shopping centre has caused the cumulative supply in BoDeTaBek to register a figure similar to that in the previous quarter of 2.34 million sq m. Based on construction progress, it is again projected that no new shopping centres will enter the market by the end of 2015, bringing the growth of the cumulative supply to only 3.3% YoY. Later, the number of additional space at retail centres in BoDeTaBek will be larger and will register an average growth of the cumulative supply at 6.6% in 2016 - 2018.





The less-popular trade mall concept or strata-title retail will still be found in BoDeTaBek, despite only in small amounts of retail space. Retail space for sale will contribute less than 15% of the total additional supply in BoDeTaBek by the end of 2018.

BoDeTaBek Cumulative Supply Based on Marketing Scheme


0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2010

2011

2012

2013

2014

2015

YTD

2015

F

2016

F

2017

F

2018

F

sq m

For Lease For Sale

The growing infrastructure development in the city could lead to the implementation of the Transit Oriented Development (TOD) concept. The TOD, is a type of community development that includes a mixture of housing, offices, retail space and/or other amenities integrated into a walkable neighbourhood and located within a short distance of quality public transport like the MRT or LRT. The TOD will also drive people to opt for urban remigration by developing buffer zones as prime areas for working and shopping activities. Furthermore, remigration will distribute the load in Jakarta to BoDeTaBek or to new surrounding areas such as Lippo Karawaci, Jababeka, Sentul City and South Tangerang (BSD City, Alam Sutera and Summarecon Serpong) or east, west and south of the town. Currently, we can see that the developments in BSD City are still growing rapidly. Aside from Aeon, which will soon begin operating, a shopping mall called Q-Big has been under construction since early 2015. This shopping centre will bring a power centre* concept and will be occupied by selected tenants with areas of 5,000 - 10,000 sq m. (*A power centre is an unenclosed shopping centre that usually contains three or more big box retailers and various smaller retailers with a common shared parking area).

PT Plaza Indonesia Jababeka formally started its mixed development, namely, Mayfair Estate & Parklands in Jababeka City. This project will be built gradually in four development phases. A shopping centre will be built during the first and second phases of development. This shopping centre project will be aimed at a middle upper-class community with many expatriates who work and live in Jababeka industrial estate. This shopping centre is going to bring international chains of department stores, supermarkets, theatres and fitness centres. This retail project will also be supported by an international five-star hotel.

In addition to the one in Jakarta, Aeon will commence other projects in Deltamas and Sentul. In Deltamas, similar to the project in Jakarta, Aeon will develop a shopping centre that is larger than the existing mall in BSD City. In Sentul, Aeon, together with Sentul City, will also start construction of a mall around the end of 2015 that is expected to open in 2018.

The developer is actively looking for a lot of potential land to be developed, without inquiring whether the locations are in non-prime areas provided that it is within an area with considerable purchasing power . Overall, most future shopping centres in BoDeTaBek are in the planning stage as of 3Q 2015 and more additional space in BoDeTaBek is expected be completed in 2018.

BoDeTaBek Retail Space Cumulative Supply Based on Area


0 300,000 600,000 900,000 1,200,000

Bogor

Depok

Tangerang

Bekasi

sq m

Existing Supply as of 2015YTD Future Supply in 2015 - 2018F





Retail Centre Development in the Pipelineretail centerS name location region developer nla (SQ m) development StatuS

Jakarta

2015

Pantai Indah Kapuk Mall Pantai Indah Kapuk North Jakarta Agung Sedayu 30,000 Under Construction

2016

Shopping Mall @ Pancoran Pancoran South Jakarta Agung Podomoro 8,000 Under Construction

Neo SOHO Mall (Podomoro City) Slipi West Jakarta Agung Podomoro 40,000 Under Construction

Mall at Bassura City East Jakarta Synthesis Karya Pratama 15,000 Under Construction

2017

New Harco Plaza Glodok West Jakarta Agung Podomoro 60,000 Under Construction

Holland Village Mall Cempaka Putih Central Jakarta Lippo Karawaci 40,000 In Planning

2018

Mall @Green Pramuka City Pramuka North Jakarta Duta Paramindo Sejahtera 30,000 In Planning

Pondok Indah Mall 3 Pondok Indah South Jakarta Metropolitan Kentjana 60,000 In Planning

Mal Puri Indah 2 Puri Indah West Jakarta Antilope Madju Puri Indah 50,000 In Planning

Shopping Mall at Podomoro Park Buaran East Jakarta Agung Podomoro 40,000 In Planning

Aeon Mall Garden City Cakung East Jakarta Aeon 90,000 In Planning

BoDeTaBek

2016

Bekasi Trade Center 2 Bulak Kapal Bekasi Gapura Prima 56,000 Under Construction

Q Big BSD City Tangerang Sinarmas Land 69,000 Under Construction

2017

Metropolitan Mall Cileungsi Cileungsi Bogor Metropolitan Land 25,000 Under Construction

Grand Dhika City Mall Bekasi Bekasi Adhi Persada Realty 24,000 Under Construction

2018

Plaza Indonesia Jababeka Jababeka Bekasi Plaza Indonesia & Graha Buana Cikarang

55,685 Under Construction

Vivo Sentul Lifestyle Cibinong Bogor Megapolitan 30,000 In Planning

Vivo Sentul Trademall Cibinong Bogor Megapolitan 13,000 In Planning

AEON Mall Deltamas Deltamas Bekasi Aeon 90,000 In Planning

AEON Mall Sentul Sentul Bogor Aeon 100,000 In planning

Embarcadero Bintaro Tangerang Lippo Karawaci 30,000 In Planning

Living World Jababeka Jababeka Bekasi Kawan Lama 18,000 In Planning

Hollywood Central Cikarang Bekasi Graha Buana Cikarang 25,000 In Planning

Kota Harapan Indah Bekasi Bekasi Hasana Damai Putera 51,000 In planning






Occupancy

The occupancy rate in Jakarta still looks erratic, albeit in a modest way. In fact, since 2H 2014, the occupancy has climbed, although moderately. However, the sluggishness of economic growth recently and newly operating shopping centres brought the occupancy down modestly QoQ to 85.3% as of 3Q 2015. Middle- to low-class shopping centres seemingly have been most affected by the slowing economic growth. The occupancy rate at this class of shopping centre was only at 77.7% as of 3Q 2015, falling 2.8% QoQ. Purchasing power is generally weakening and this has led to vacated spaces at middle- to low-class shopping centres that were used by fashion and accessories stores. Fashion consumption has become a secondary option. On the other hand, food and beverage retailers still attract more visitors as meeting points during both working and after office hours.

We have witnessed the tendency of people to be more frugal when visiting shopping centres and spending money shopping. Also, shoppers are generally becoming less interested in visiting old-fashioned shopping centres, with less attractive tenancy mix, and bad accessibility both for vehicles and pedestrians and minimal parking. In addition, the shopping centre development moratorium has also opened opportunity for developers to revamp the building and re-layout the existing tenancy mix to attain higher occupancy and rental rates.

Weakening or slowing purchasing power also has an impact on upper-class shopping malls. Although not as prevalent, the aggregate vacant space during the quarter has caused the occupancy at upper-class shopping centres to slightly decrease to 90.8%. However, some new, committed tenants are ready to occupy space at some upper-class shopping centres in Jakarta.

Occupancy

Source: Colliers International Indonesia - Research Some foreign retailers are continuing to look for space to open their next stores. Uniqlo (fashion retailers from Japan) will open their latest store around October 2015 and occupy around 2,000 sq m at Pondok Indah Mall 2.

Local fashion chain retailer, Matahari Department Store is also expanding actively in Jakarta by opening at Pasaraya, both at Blok M and Manggarai, in South Jakarta. This department store plans to open more stores this year to increase their sales.

Some other upper-class shopping centres will optimise their tenancy mixes to create a new atmosphere within the mall. In 2017 - 2018 quite a few retailers plan to open and replace existing tenants at shopping centres around Senayan, Central Jakarta. Similarly, this will happen at upper-class shopping centres in Thamrin, Central Jakarta. More luxury brands will come and occupy space, such as Phillip Lim, Mulberry, A. Testoni, Stella McCartney, Weekend Maxmara, Keds, Carl Zeiss, The Shoe Dept, Living Soul and Michael Kors.

Among wealthy Indonesians, the younger generation is quite enthusiastic in trying new products from foreign brands and this is another reason for fashion retailers to expand their stores in Jakarta.

In contrast, the occupancy level of shopping centres in the BoDeTaBek area was better than in Jakarta. Some shopping centres owned by reputable developers helped move the occupancy upward by 2% QoQ to 83.6%. Those shopping centres that have been operating since 2013 - 2014 currently have less than 5,000 sq m of vacant space each. A shopping centre operating for less than half a year in Tangerang reports that more than 50% of their stores have already opened.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012 2013 2014 2015YTD

Jakarta BoDeTaBek

Jakarta Occupancy Based on Mall Grade


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012 2013 2014 2015YTD

Upper Classes Middle Classes Middle Low Classes





Occupancy Rates in BoDeTaBek


H&M will launch their new store by occupying around 650 sq m at Supermal Karawaci in an attempt to attract young people and an upper level community living in Karawaci, Tangerang. Currently, they are working on fitting out and it is estimated that they will open around November 2015.

The occupancy in Tangerang and Bekasi is trending upward, while in Depok and Bogor it was stagnant QoQ. The occupancy rates in Tangerang and Bekasi were 83.4 and 85.4%, respectively, as of 3Q 2015. However, in general, the competition among shopping centres in Bekasi remains high.

Depok and Tangerang also showed a similar trend. Some shopping centres in the outside main areas will be quite hard to compete with. Several areas in Tangerang such as Cimone, Dadap and Pamulang are mainly populated by typical neighbourhood malls that serve a smaller catchment area with occupancy below the market average. Those located in the main city of Tangerang, which covers a wider market, had better occupancy rates. In other cases, like in Bogor, the old shopping centres continue to see challenges from the development of single retail buildings such as hyperstores.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012 2013 2014 2015YTD

Bogor Depok Tangerang Bekasi

Asking Rents

Average Asking Rents on Typical Floor of Retail Centre in Jakarta and BoDeTaBek


IDR 0

IDR 100,000

IDR 200,000

IDR 300,000

IDR 400,000

IDR 500,000

IDR 600,000

2010 2011 2012 2013 2014 2015YTD

Jakarta BoDeTaBek

Average asking rents at shopping centres in Jakarta climbed 6.1% YoY to IDR542,221 sq m/month as of 3Q 2015. Limited available space and mall repositioning caused some shopping centres to introduce an increase in asking rents QoQ. Average asking rents in South Jakarta showed the highest growth of 4.6% QoQ to IDR586,898 sq m/month. Despite showing moderate growth, average asking rents in Central Jakarta still remain the highest at IDR764,732 sq m/month. In other areas, the average asking rents were between IDR300 and 500,000 sq m/month.

Average Asking Rents on Typical Floor of Retail Centre in Several Regions in Jakarta


IDR 0

IDR 100,000

IDR 200,000

IDR 300,000

IDR 400,000

IDR 500,000

IDR 600,000

IDR 700,000

IDR 800,000

IDR 900,000

2010 2011 2012 2013 2014 2015YTD

CBD Central Jakarta South Jakarta

North Jakarta East Jakarta West Jakarta





Higher rents both in Central and South Jakarta were influenced by shopping centres in the CBD area. Asking rents at shopping centres in the CBD itself were IDR829,652 sq m / month as of 3Q 2015 and climbed 6.3% YoY.

Average Asking Rents on Typical Floor of Retail Centre in the CBD and Outside of CBD


IDR 0

IDR 100,000

IDR 200,000

IDR 300,000

IDR 400,000

IDR 500,000

IDR 600,000

IDR 700,000

IDR 800,000

IDR 900,000

2010 2011 2012 2013 2014 2015YTD

CBD Outside CBD

The highest asking rents in the CBD were also contributed by middle- to upper-class shopping centres. Some upper-class shopping centres even have reached more than IDR1,000,000 sq m/month on average. Those shopping centres helped to bring the average rents for upper-class shopping centres to IDR1,031,383 sq m/month as of 3Q 2015, climbing 6.2% YTD. Asking rents at upper-class shopping centres also widened the gap from the lower class, which are between IDR280,000 and 400,000 sq m/month. The adjusted asking rents at lower-class shopping malls have become a dilemma for landlords and developers, especially with the recent slowing economy in Indonesia. Landlords at lower-class shopping malls prefer to maintain occupancy rather than adjust the rents. However, in order to raise revenue, landlords possibly will adjust rents by re-positioning their shopping centres and rearranging their tenancy mix.

Average Asking Rents on Typical Floor of Retail Centre Based on Mall Grade


In BoDeTabek, asking rents jumped more significantly than in Jakarta, by 12.5% YTD to IDR346,769/sq m/month. Asking rents at shopping centres in Bekasi and Tangerang are still the highest as of 3Q 2015. Despite being lower than Tangerang, asking rents in Bekasi showed significant growth QoQ. Two shopping centres owned by well-known developers contributed to bringing the asking rents in Bekasi to IDR343,341/sq m/month, jumping 20.1% YoY.

As reported earlier, asking rents in Bogor also jumped significantly YTD due to revamping and available space at some shopping centres. Depok has become an area that shows very moderate growth of asking prices YoY.

Average Asking Rents in BoDeTaBek


IDR 0

IDR 80,000

IDR 160,000

IDR 240,000

IDR 320,000

IDR 400,000

2010 2011 2012 2013 2014 2015YTD


IDR 0

IDR 200,000

IDR 400,000

IDR 600,000

IDR 800,000

IDR 1,000,000

IDR 1,200,000

2010 2011 2012 2013 2014 2015YTD






Service Charge

Average Service Charges in Jakarta and BoDeTaBek


Average service charges continue to increase in Jakarta. As of 3Q 2015, the average service charge was IDR114,537 sq m/month, climbing 11.8% YTD. In the CBD, the average service charge was IDR143,580 sq m/month, and IDR107,211 sq m/month in the outside CBD.

High service charges in the CBD area were mainly contributed by upper-class malls with service charges between IDR110,000 and 280,000 sq m/month. However, at two middle class-shopping centres service charges were more than IDR100,000 sq m/month.

IDR 0

IDR 20,000

IDR 40,000

IDR 60,000

IDR 80,000

IDR 100,000

IDR 120,000

2010 2011 2012 2013 2014 2015YTD

Jakarta BoDeTaBek

Average Service Charges in Several Regions in Jakarta


IDR 0

IDR 30,000

IDR 60,000

IDR 90,000

IDR 120,000

IDR 150,000

2010 2011 2012 2013 2014 2015YTD

CBD Central Jakarta South Jakarta

North Jakarta East Jakarta West Jakarta

Since jumping significantly in the previous quarter, the average service charge in BoDeTabek showed moderately growth to IDR85,464 sq m/month as of 3Q 2015. Increasing service charges were due to yearly adjustments at some shopping centres.

Average Service Charges Based on Mall Grade


Most service charges at shopping centres in BoDeTaBek are between IDR50,000 and 100,000/sq m/month. Only a few shopping centres have service charges below IDR50,000/sq m/month. Commonly, those are old shopping centres. Service charges at some popular shopping centres were above IDR100,000/sq m/month.

Average Service Charges in BoDeTaBek


IDR 0

IDR 20,000

IDR 40,000

IDR 60,000

IDR 80,000

IDR 100,000

2010 2011 2012 2013 2014 2015YTD


IDR 0

IDR 25,000

IDR 50,000

IDR 75,000

IDR 100,000

IDR 125,000

IDR 150,000

IDR 175,000

2010 2011 2012 2013 2014 2015YTD





31 Research & Forecast Report | 3Q 2015 | Hotel | Colliers International

Hotel SectorHotel SupplyThe slowdown in business activity characterised the overall hotel market in Jakarta with supply growth only moving forward modestly. There are several hotel projects that are expected to delay their openings. This quarter, new hotel rooms were provided by four 3- and 4-star hotel projects, providing a total of 881 new hotel rooms.

Santika Group, the biggest local hotel operator, introduced their latest 4-star hotel project named Santika Premiere Hayam Wuruk with a total of 271 rooms. This hotel is located in at Jl Hayam Wuruk Central Jakarta providing five meeting rooms, and a restaurant in addition to other supporting facilities. Swiss-Belhotel Group opened their new 4-star hotel in Jakarta called Swiss-Belresidence Kalibata. Located in the South Jakarta area, this hotel has 212 rooms with one restaurant and bakery, eight meeting rooms and one ballroom, a spa and a gym as their supporting facilities. Another new 4-star hotel in South Jakarta area is Grandhika Hotel, owned by one of the state-owned enterprises in Indonesia. This hotel has 239 rooms with eleven meeting rooms, five restaurants and lounges, business centre, swimming pool, spa and gym as their supporting facilities. In total, the total supply of 4-star hotels in Jakarta is 15,046 rooms at 65 hotels.

In the 3-star hotel category, Swiss-Belhotel Group added another 159 rooms in the TB Simatupang area, called Swiss-Belinn Simatupang. Having four meeting rooms, this hotel targets corporations operating in TB Simatupang and surrounding areas. The operation of this new hotel increased the cumulative number of 3-star hotel rooms in Jakarta to 9,773 at 75 hotels. The TB Simatupang area already has a 3-star hotel, Swissbell and a 4-star hotel, Aston Priority Simatupang Hotel & Conference in 2015.

Cumulative Supply of Star Rating Hotel Projects in Jakarta


0

20

40

60

80

100

120

2010

2011

2012

2013

2014

2015

YTD

2015

F

2016

F

2017

F

2018

F

2019

F

3-star 4-star 5-star

Jakarta has a total of four hotels as of 3Q 2015 at three operating hotel projects. Two hotels are operated by Swiss-Belhotel Group, one hotel is operated by Santika Indonesia Hotels & Resorts, and one hotel is operated by Grandhika.





Cumulative Supply of Star Rating Hotel Rooms in Jakarta


Hotel Developments in Pipeline

hotel name Star rating

Str global eQuivalent

ratelocation region roomS

projected completion

time

Holiday Inn Express Cikini 3-star Upper Midscale Class

Cikini Raya,Cikini Central Jakarta 372 2015

Harper Cawang Hotel & Conference Center 3-star N/A Cawang East Jakarta 108 2015

Hotel @ Tanjung Duren 3-star N/A Tanjung Duren West Jakarta 150 2015

Hotel Santika Rawamangun 3-star Upper Upscale Class

Rawamangun East Jakarta 140 2015

Ibis Style Jakarta Sunter 3-star Midscale Class Sunter North Jakarta 150 2015

Menteng Square Hotel 3-star N/A Menteng Central Jakarta 180 2015

Santika TB Simatupang 3-star Upper Upscale Class

TB Simatupang South Jakarta 145 2015

Whiz Prime Hayam Wuruk 3-star N/A Hayam Wuruk Central Jakarta 100 2015

Whiz Prime Satrio 3-star N/A Satrio CBD 100 2015

Zuri Express Menteng 3-star N/A Menteng Central Jakarta 159 2015

Holiday Inn Hotel & Resorts Jakarta Gajah Mada 3-star Upper Midscale Class

Gajah Mada Central Jakarta 447 1Q 2016

Yello Hotel Hayam Wuruk 3-star N/A Hayam Wuruk Central Jakarta 372 3Q 2016

A One Hotel Jakarta 3-star N/A Wahid Hasyim Central Jakarta 200 2016

Horison Ciputat Jakarta 3-star N/A Ciputat South Jakarta 100 2016

Big Hotel (Extention) 3-star N/A Sawah Besar North Jakarta 75 2016

Ibis Styles Jakarta Bangka Raya 3-star Midscale Class Kemang South Jakarta 200 2016

Ibis Styles Jakarta PIK 3-star Midscale Class Pantai Indah Kapuk North Jakarta 200 2016

Prima Hotel 3-star N/A Salemba Central Jakarta 150 2016

Holiday Inn Express Simatupang 3-star Upper Midscale Class


Hotel @ Tanah Abang 3-star N/A Tanah Abang Central Jakarta 225 2017

Prasanthi Kebon Jeruk 3-star N/A Kebon Jeruk West Jakarta 200 2017

Quest Menteng 3-star N/A Menteng Central Jakarta 199 2017

Citizen M 3-star Upscale Class Mega Kuningan CBD 112 2018

Continued

0

3,000

6,000

9,000

12,000

15,000

18,000

21,00020

10

2011

2012

2013

2014

2015

YTD

2015

F

2016

F

2017

F

2018

F

2019

F

3-star 4-star 5-star





Source: Colliers International Indonesia - Research and STR Global

hotel name Star rating

Str global eQuivalent

ratelocation region roomS


time

Continuation

Grand Whiz Hotel Sunter 4-star N/A Sunter North Jakarta 160 2015

Aston Titanium Cijantung 4-star Upscale Class Cijantung East Jakarta 236 2015

Aston Kemayoran 88 4-star Upscale Class Kemayoran Central Jakarta 200 2015

Mercure Jakarta Matraman 4-star Upscale Class Matraman East Jakarta 180 2015

Swiss-Belhotel Rasuna Epicentrum 4-star Upscale Class Rasuna Epicentrum, Rasuna Said

South Jakarta 323 2015

Grand Clarion 4-star Upscale Class Cipinang East Jakarta 272 2015

Holiday Inn (ex Metropolitan Land office) / Metland Premier Hotel Jakarta

4-star Upper Midscale Class

Cawang East Jakarta 156 2015

Mercure Jakarta Kelapa Gading 4-star Upscale Class Kelapa Gading North Jakarta 156 2015

Grand Whiz Poin Square 4-star N/A Lebak Bulus South Jakarta 132 2015

Aston Gajah Mada Hotel & Convention Center 4-star Upscale Class Gajah Mada Central Jakarta 192 2015

Swiss-Belhotel Cikini 4-star Upscale Class Cikini Central Jakarta 168 2015

Harris Hayam Wuruk 4-star Upscale Class Hayam Wuruk Central Jakarta 238 3Q 2016

Swiss-Belhotel Kirana Avenue - Kelapa Gading 4-star Upscale Class Kelapa Gading North Jakarta 300 2016

Indigo Kemang 4-star Upscale Class Kemang South Jakarta 150 2016

Aston Sunter Hotel 4-star Upscale Class Sunter North Jakarta 150 2016

Ancol Courtyard Marriott Hotel 4-star Upscale Class Ancol North Jakarta 310 2016

Holiday Inn & Suites Simatupang 4-star Upper Midscale Class


Horison Ultima Jakarta 4-star N/A Cawang East Jakarta 182 2016

Grand Orange Pasar Baru Mansion 4-star N/A Pasar Baru Central Jakarta 222 2016

Suite Novotel Jakarta PIK 4-star Upscale Class Pantai Indah Kapuk North Jakarta 220 2016

aloft Kebon Jeruk 4-star Upscale Class Kebon Jeruk West Jakarta 140 2017

aloft Wahid Hasyim 4-star Upscale Class Wahid Hasyim Central Jakarta 170 2017

Hotel Santika Premier Yos Sudarso 4-star Upper Upscale Class

Yos Sudarso North Jakarta 257 2017

Hotel @Perintis - South Tower 4-star N/A Mega Kuningan CBD 112 2018

Sheraton Jakarta Gandaria City 5-star Upper Upscale Class

Gandaria South Jakarta 293 4Q 2015

Alila - SCBD lot 11 5-star Luxury Class SCBD CBD 250 2015

Grand Mercure Jakarta Kemayoran 5-star Upscale Class Kemayoran Central Jakarta 505 2015

JW Marriott @Kemang Village 5-star Luxury Class Kemang South Jakarta 275 2015

The Westin Jakarta@Cemindo Tower 5-star Luxury Class Cemindo Tower, Rasuna Said CBD 250 1Q 2016

St Regis 5-star Luxury Class Gatot Subroto CBD 125 2Q 2016

InterContinental Jakarta Pondok Indah Hotel & Residences

5-star Luxury Class Pondok Indah South Jakarta 470 2016

JW Marriott @St Moritz 5-star Luxury Class Puri Indah West Jakarta 208 2016

Ammi Jakarta 5-star N/A Darmawangsa South Jakarta 180 2016

The Langham District 8@Lot 28 SCBD 5-star Luxury Class SCBD CBD 500 2017

W Hotel @Ciputra World Jakarta 2 5-star Luxury Class Ciputra World 2, Satrio CBD 126 2018

Four Seasons (after renovation) 5-star Luxury Class Rasuna Said CBD 250 2018

Regent 5-star Luxury Class Mangkuluhur City, Gatot Subroto

CBD 365 2018

Rosewood Jakarta 5-star Luxury Class Satrio CBD 200 2018

Waldorf Astoria 5-star Luxury Class Thamrin CBD 181 2018

Bellagio Hotel @Signature Tower 5-star N/A SCBD CBD 290 2020





Budget HotelDuring 3Q 2015, there were several new budget hotels opening, including one under Archipelago International called Favehotel Zainul Arifin with a total of 84 rooms. As of this quarter, the budget hotels in the Jakarta area have 4,818 rooms, an increase of 9.6% compared to the end of 2014.

Within the next couple of years, Archipelago International will expand their business operations by developing more budget hotels under several brands including Favehotel and NEO. So far, these two hotel brands will be the biggest competitor for Tauzia Management with their existing brands like Harris, Yello and Pop!.

For the remainder of this year, should all of the under-construction projects be completed as scheduled, there will be 591 new rooms in the budget hotel category in the Jakarta hotel market.

Cumulative Supply of Budget Hotels (Economy Class) in Jakarta


0

5

10

15

20

25

30

35

40

45

50

2010

2011

2012

2013

2014

2015

YTD

2015

F

2016

F

2017

F

2018

F

2019

F

Source: Colliers International Indonesia - Research and STR Global

Budget Hotel Development in the Pipeline

name of development Str global eQuivalent rate location region no. of

roomS


time

Whiz - Cipete N/A Cipete South Jakarta 180 2015

Whiz - Hayam Wuruk N/A Hayam Wuruk Central Jakarta 180 2015

@HOM - Cawang N/A Cawang East Jakarta 80 2015

Amaris - TB Simatupang Economy TB Simatupang South Jakarta 151 2015

POP! Hotel Pasar Baru N/A Pasar Baru Central Jakarta 112 1Q 2016

Neo TB Simatupang N/A TB Siamtupang South Jakarta 170 2017

MaxOne Hayam Wuruk N/A Hayam Wuruk Central Jakarta 120 2017

POP! Hotel Wahid Hasyim N/A Wahid Hasyim Central Jakarta 150 1Q 2019

POP! Hotel Gajah Mada N/A Gajah Mada Central Jakarta 90 1Q 2020

Hotel DemandThe ruling government announced a plan to reform 89 regulations, aiming to boost national economic growth. All business sectors have been in tight budget policy including the oil and mining industry, which experienced this situation long before the weakening economy took place.

In general, the hotel market in Jakarta is struggling from tighter competition and the slowing demand as a result of corporation’s efficiency measures. The government spending on MICE activity, which has been the major propellant for hotel revenue, is not yet back to normal.

The third quarter 2015 was the period of Islamic fasting month, Ramadhan. During this month which was ahead to another big festive, Eid Mubarak are identic to the slow business. Based on data from Statistic Bureau Indonesia, the number of passengers coming to Indonesia through Soekarno-Hatta International airport by along 2015 YTD was recorded at 1,237,352 passengers, declined significantly by 5.20% compared to the same period last year.




35

Number of Passengers Through Soekarno – Hatta, Ngurah Rai and Juanda Airports

Source: Statistics Bureau Office (BPS)

PerformanceThe mandatory use of rupiah as stipulated in the Central Bank’s regulations has affected the hotel industry in general. Some hotels operated by international hotel chains have to convert room prices into local currency. Room tariffs published on the website may be quoted in US dollars because a universal currency, i.e. the US dollar, is still needed for international guests. Most hotels have posted hotel room tariffs in rupiah for any free independent traveller who comes directly to the hotel.

OccupancyApproaching the fasting month of Ramadhan and Eid Festival, hotel occupancy during 3Q 2015 slowed. In this period, overall hotel occupancy in Jakarta area dropped slightly by 1.2% to 57.2%, while occupancy in the CBD alone slumped 2.5% to 58.6%. Hotel occupancy in the outside CBD area in the same period was stable at 56.2%.

Looking at the monthly occupancy data provided by STR Global, during June - July 2015, the occupancy of all classes of hotels in Jakarta dropped by 2.5% on average. Occupancy improved in August, approximately two weeks after the Eid Fitr holiday.

Looking at the occupancy performance by area, both the CBD area and outside CBD area saw a declining growth QoQ. Meanwhile, the QoQ occupancy for luxury class hotels in Jakarta plunged almost 4.0%, to 57.1% which was the biggest drop in the CBD area. The second biggest drop was at upscale class hotels by 2.5% bringing the occupancy to 62.1%. As for upper upscale class, upper midscale and midscale class hotels, the occupancy slightly declined by 1.6 and 1.7% to 62.1 and 58.4%.

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,00020

08

2009

2010

2011

2012

2013

2014

2015

YTD

Soekarno - Hatta Ngurah Rai Juanda

The same conditions occurred in the outside CBD area where the occupancy for upper upscale class hotels fell by 2.9%, while the upscale class hotels in this area slightly increased by less than 1% compared to 2Q 2015.

Average Occupancy Rate Jakarta

Source: STR Global

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 1Q 2015 2Q 2015 3Q 2015

Jakarta CBD Outside CBD

Average Occupancy Rate CBD Jakarta

Source: STR Global

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 1Q 2015 2Q 2015 3Q 2015

Luxury Upper Upscale Upscale Upper Midscale & Midscale+

Research & Forecast Report | 3Q 2015 | Hotel | Colliers International





Average Daily RateThe trend of weakening occupancy was in line with the performance of hotel revenue as reflected in the Average Daily Rate (ADR). The overall ADR of hotels in Jakarta experienced a very significant decline of 10.2% QoQ. The ADR for CBD and outside CBD hotels experienced the same downward trend with QoQ change of 7.5 and 7.1%, respectively.

Luxury class hotels in the CBD saw the biggest drop of 2.4% in the ADR this quarter to USD191.90. For upper midscale class and midscale class+ hotel, ADR fell by almost 2% in 3Q 2015, which put the ADR at USD66.60. The ADR for upper-class hotels was USD 76.50, down 1.4% compared to 2Q. Upper upscale class hotels in the CBD Jakarta experienced the least decline of only 0.18% that kept the ADR relatively stable at USD121.57.

In the outside CBD Jakarta, the upscale class hotels experienced a moderate change of 0.69% bringing the ADR to USD58.64, lower than 2Q 2015. Meanwhile, the upper upscale class hotels in outside CBD showed a similar drop of only 0.68% in 3Q 2015 which stabilised the ADR at USD79.24.

The continued hotel development that is taking place in Jakarta has affected the overall hotel industry, particularly the overall occupancy rate and ADR. In most cases, in anticipation of such tight competition among hotels, especially low-cost hotels and newly operating hotels, they maintain occupancy levels by giving more discounts which may affect the whole ADR performance. In particular, during the Islamic festivities when business activity softens, quite a few hotel operators provided discount packages and competitive rates. This may be a good explanation of the ADR decline in Jakarta. Aside from that, the weakening of the rupiah, has also contributed to the overall slump in the ADR.

Average Occupancy Rate Outside CBD Jakarta

Source: STR Global

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 1Q 2015 2Q 2015 3Q 2015

Upper Upscale Upscale

Average Daily Rate Jakarta

Source: STR Global

Average Daily Rate CBD Jakarta

Source: STR Global

USD 0.00

USD 20.00

USD 40.00

USD 60.00

USD 80.00

USD 100.00

USD 120.00

USD 140.00

2013 2014 1Q 2015 2Q 2015 3Q 2015

Jakarta CBD Outside CBD

USD 0.00

USD 40.00

USD 80.00

USD 120.00

USD 160.00

USD 200.00

2013 2014 1Q 2015 2Q 2015 3Q 2015

Luxury Upper Upscale Upscale Upper Midscale & Midscale+





Average Daily Rate Outside CBD Jakarta

Source: STR Global

USD 0.00

USD 10.00

USD 20.00

USD 30.00

USD 40.00

USD 50.00

USD 60.00

USD 70.00

USD 80.00

USD 90.00

2013 2014 1Q 2015 2Q 2015 3Q 2015

Upper Upscale Upscale




38 Research & Forecast Report | 3Q 2015 | Industrial Estate | Colliers International

Industrial Estate SectorIndustrial Land SupplyLand stock might not be the major issue during the hard times. Supply of land might not be immediately available but large industrial estates are generally ready to prepare for tenant expansion.

Two major industrial estates in Karawang have indicated that they are about to expand their capacity by providing a total of 260 ha of land. However, there is no definite target for completion at either industrial estate, and this will probably be delivered in stages according to the market interest.

In the Bogor region, the amount of land stock availability is an issue. However, inquiries for industrial land in the region have been relatively rare and have not been the immediate problem for the region. Requests for industrial land in Tangerang generally comes in a moderate amount and thus far can still be managed by one industrial estate, like Millennium Industrial Estate. Quite a few industrial landlords in the Tangerang area have finished selling land while some others are only focused on providing land for their own group of companies. In recent times, the market has witnessed the growth of industrial compounds like warehouse centres that are not categorised as industrial estates. One of these is Griya Idola Industrial Park developed by Barito Pacific Group and is located in Cikupa, Tangerang. This 50 ha integrated compound offers a range of industrial plots and standard factory buildings, complemented by other supporting facilities.

Two major active industrial estates operating in the Serang region, in the short term, do not see land availability as a major issue following the expectation of slow requests for new land. In the long term, Serang has great potential as the main industrial location, particularly with the improvement in the transport infrastructure.

There are some industrial estates with undeveloped land in Bekasi while some are still in planning. Of the off-plan expansion, there is unlikely to be a definite time scheduled for completion.

The region with the most potential land to be developed is Karawang that has land stock of more than 2,250 ha. Such a huge land bank is mainly be offered by the several projects of a consortium called Trans Hexa Karawang. This consortium includes seven big groups of companies like Gajah Tunggal Group, Salim Group, Artha Graha Group and Agung Podomoro. In total, the potential industrial land provided by the consortium is 1,967 ha (net area). The location is accessible via the Jakarta-Cikampek toll road at km 46, Karawang Barat Toll Gate 2. In the field, the construction of road infrastructure is almost finished. GT Techpark @ Karawang developed by Gajah Tunggal Group is likely to be ready for operation soon and provides a total of 400 ha.


Industrial Land Stock Status in Some Active and Future Industrial Estates

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Bogor Bekasi Tangerang Karawang Serang

Hec

tare

s

Existing Stock Remaining Land Potential Land to be Developed





Land Absorption During 3Q 2015


Demand: Sales and Leasing ActivitiesThe top sales performer for this quarter was Greenland Industrial Estate at Kota Deltamas, Cikarang, Bekasi with total land transactions of 60.82 ha. Around 60 ha was absorbed by an automotive company while a small plot of around 8,200 sq m was taken by the food industry. In this present market situation, such a transaction is huge and limited in number. Thus far, Greenland has been the most active industrial estate in selling sizeable amounts of land given their relatively large land bank compared to other established industrial estates in the Bekasi region. With such a substantial sale concluded by Greenland, other transactions registered at several industrial estates in the Bekasi region became negligible. For example, Jababeka only reported 1 ha of land being sold to a logistics-related industry, much lower than what they achieved last quarter. Similarly, Delta Silicon, which is part of the Lippo Group only registered 5,600 sq m in sales to two automotive companies this quarter. Other than these, several established industrial estates in the Bekasi region mentioned a slowdown in industrial land inquiries this quarter.

For several periods, Modern Cikande has maintained the tradition of selling a sizeable amount of industrial land. The largest parcel of land being sold this quarter took place in Modern Cikande to a metal-product related company of around 20 ha. This transaction was concluded by a new company from China expanding to this estate. Other smaller transactions were also new companies buying land in this estate including a workshop company from Singapore and a local agricultural product company. In total, Modern Cikande sold around 20.95 ha of land this quarter, much less than last quarter but it adequately bolters their position as the most active industrial estate in selling land. Another active industrial peer for Modern Cikande in Serang area is KIEC - Krakatau Industrial Estate Cilegon, which used to record consistent sales in every quarter but this time reported zero sales. Approaching the last quarter of 2015, the estate is confident in recording a transaction with a local company.

Nothing extraordinary happened in the Karawang region. From eight industrial estates in Karawang (five active estates and three newly introduced industrial estates), only two estates, i.e. Suryacipta and KIIC, reported sales this quarter. A new Korean packaging company acquired 3.3 ha of land in Suryacipta, which was higher than last quarter’s sales. Another transaction of around 3 ha with a new automotive industry from Japan occurred in KIIC.

Kota Bukit Indah is the only industrial estate for lease that reported two leasing transactions to a logistics company and an apparel company. One estate in Karawang and another in Bogor have yet to report leasing transactions during the quarter.

Albeit lower than in the previous quarter, the total amount of industrial land being transacted during 3Q 2015 was slightly higher than in the first quarter. With a total 3Q 2015 sales of 89.86 ha, the overall take-up until 2015YTD represents 73% of what was achieved in 2004.

Modern Cikande remains the top sales performer until 2015YTD and this will likely remain the same until the end of the year.

Due to the substantial absorption by the food industry in Modern Cikande last quarter, the overall sales of this type of industrial sector remain the largest at least until 2015YTD. Food related industries took around 106.87 ha this year so far. During the quarter, sales of Greenland at Kota Deltamas to an automotive company is the biggest, however the total industrial land sales to automotive companies is still lower than those to the food-related industry. Transactions made by automotive-related companies represent 81.56 ha during 2015 YTD. Other active sectors this year include consumer goods, and logistics and warehouse companies.

Annual Industrial Land Absorption


0

200

400

600

800

1,000

1,200

1,400

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

YTD

Hec

tare

s

Jakarta Bogor Bekasi Tangerang Karawang Serang

0 10 20 30 40 50 60 70

Kota Bukit Indah

Delta Silicon

Jababeka

KIIC

Suryacipta

Modern Cikande

Greenland International Industrial Centre

hectares





Price and Rental Rate In the circulation letter number 17/11/DKSP that further explains the content of Bank Indonesia (Central Bank) regulation number 17/3/PBI/2015 on the mandatory use of rupiah for any transaction in Indonesia, it clearly states on Page 6, Article II about “mandatory to quote prices and services in rupiah only”, Paragraph A states that not only is quoting in US dollars prohibited but also quoting foreign and local currencies at the same time is not allowed.

About eight industrial estates have been quoting land prices in US dollars, representing about 50% of the active industrial estates that sell land. These industrial estates are only located in the Bekasi and Karawang regions. Unlike other sectors, like office that has almost fully implemented the regulation, industrial landlords are mainly half-hearted about complying with this and continue to quote prices in US dollars. The group of landlords quoting US dollar prices are mainly joint-venture corporations between local groups of companies and foreign developers that aim at income in US dollars. Large industrial estates with US dollar prices generally claim to receive payment in rupiah for any land transactions or any service charge payment using the prevailing BI’s median rate as the basis. One industrial estate is even maintaining the price in US dollars but with a fixed rate set out above the current average exchange rate, i.e. IDR15,000/US dollar.

In general, most industrial estates are still comfortable charging in US dollars, mainly because of generating US dollar income and minimising currency risk without having to worry about the sanctions as stipulated in the regulation.

Apart from the currency issue that characterises the property market in general, prices of industrial land remained unchanged this quarter. The industrial market has reached its plateau and this will likely continue in the remainder of this year, particularly amid the sluggish absorption of industrial land. However, because quite a few industrial estates are charging US dollar prices, the general cost in rupiah has been actually moving upward along with the continued weakening of the rupiah.

In Serang, industrial land prices have long been quoted in rupiah. The average industrial land price taken from the two most active estates is IDR1,750,000/sq m or using the exchange rate of IDR14,500 is equivalent to USD121/sq m.

In Bogor, the rental rate for buildings (only) was IDR40,000/sq m/month while the rental rate for industrial land ranges from IDR5,000/sq m/month. Apart from rental cost, the industrial operator charges an additional service charge of IDR850/sq m/month. The leasing scheme in Karawang is only applicable at two industrial estates, i.e. Kota Bukit Indah (operated by Besland Pertiwi) and Kawasan Industri Kujang Cikampek (state-owned company). The rental rate for industrial buildings ranges from IDR50,000 to 65,000/sq m/month. The land for lease is offered at around IDR13,500/sq m/ month.

Greater Jakarta Industrial Land Prices


USD 0

USD 50

USD 100

USD 150

USD 200

USD 250

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

YTD



*1USD = Rp 13,868

Industrial Land Prices and Maintenance Costs*region land price (per SQ m) maintenance coStS

(per SQ m per month)

loweSt higheSt average loweSt higheSt average

Bogor USD120.0 USD201.9 USD161.0 USD0.06 USD0.06 USD0.06

Bekasi USD195.0 USD252.4 USD220.2 USD0.06 USD0.08 USD0.07

Tangerang USD137.0 USD144.2 USD140.6 USD0.03 USD0.08 USD0.06

Karawang USD170.0 USD200.0 USD185.0 USD0.05 USD0.10 USD0.06

Serang USD122.6 USD137.0 USD129.8 USD0.03 USD0.05 USD0.04

Types of Active Industries During 3Q 2015


Automotive25.32%

Food & Beverage33.17%

ConsumerGoods7.14%

Plastics0.31%

Steel-related0.43%

Electronics0.62%

Chemicals2.96%

Logistics/Warehousing

7.08%

Packaging1.02% Metal

6.21%

Heavy Equipment

5.19%Machinery2.77%

Clothing0.05%

Building Material5.75%

Medical0.32%

Others1.65%





Service Charges/Maintenance CostsThe operational costs remained unchanged. None of the industrial estates set a new rate, particularly when it was in US dollars. Since mid-2013, the rupiah has been undervalued by as much as 50%. Every industrial estate that quotes in US dollars for the maintenance cost argues that the payment is made using rupiah. Nevertheless, because the US dollar is used as a reference for the service charge, the maintenance cost in rupiah becomes more expensive. According to our records, almost all industrial estates in Bekasi charge the maintenance fee in US dollars while quite a few estates in Karawang are still quoting service charges in US dollars.

OutlookFor companies that generate income in rupiah, the cost of acquiring land is becoming more expensive particularly because of the continued weakening rupiah against the US dollar. As mentioned above, most industrial developers are still reluctant to change from charging prices and maintenance tariffs in US dollars. All in all, the deteriorating value of the rupiah against the greenback has also impacted tenants in particular when they need to spend both on operational costs and capital expenditure. Some tenants are even delaying the construction of their factories due to currency issues that make imported machinery and other specific construction materials extortionate.

In general, despite a substantial sales volume, the industrial market is in the position of not making investment decisions in the short term. If the economic situation gets tougher, the industrial market is facing headwinds that will possibly continue into next year. Several industrial estates have set lower sales targets this year, indicating that things will not get better at least until the end of 2015.

To keep pace with the total sales record of last year, the industrial sector still needs to sell more than 100 ha in the remaining three months in 2015, a very challenging target considering the current slow situation. Furthermore, some of the most active industrial estates have signalled that good times will not materialise at least in the short term.

Greater Jakarta Industrial Maintenance Cost


$0.00

$0.02

$0.04

$0.06

$0.08

$0.10

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

YTD

US

D/s

q m

/mon

th





Copyright © 2015 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

About Colliers International

Colliers International is a global leader in commercial real estate services, with over 16,300 professionals operating out of more than 502 offices in 67 countries. A subsidiary of FirstService Corporation, Colliers International delivers a full range of services to real estate users, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and insightful research. The latest annual survey by the Lipsey Company ranked Colliers International as the second-most recognized commercial real estate firm in the world.

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Primary Authors:Ferry SalantoAssociate Director | Jakarta62 21 521 1400 ext [email protected]

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Jakarta Property Market Report - Colliers International