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Research & Forecast Report

4Q 2013Jakarta | Office

Jakarta Property Market Report

Research & Forecast Report

3rd Quarter 2014

Accelerating success.

2 Research & Forecast Report | 3Q 2014 | Contents | Colliers International

Contents

Office Sector 3

Apartment Sector 13

Retail Sector 23

Industrial Estate Sector 32

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3 Research & Forecast Report | 3Q 2014 | Office | Colliers International

Office SectorThis quarter is a challenging period for the office market. The number of office space inquiries weakened and the downswing is highlighted by the declining occupancy rate in the CBD of 1% to 95.4% YoY. The average asking base rental rate for Grade A and Premium class US dollar denominated buildings also dropped modestly by 1.7% QoQ to USD42.84/sq m/month.

Apartment SectorDespite political tension in Indonesia, the apartment market maintained a stable performance. Apartment price increase slowed to 17% increase YoY, compared to 20% in the same period last year. The average price in the CBD is recorded at IDR41.8 million/sq m, in South Jakarta is IDR 31.2 million/sq m and is IDR20.3 million in the non-prime areas. The overall take-up rate climbed by 1.4% QoQ to 86.6% this quarter.

Retail SectorIn spite of limited retail space in DKI Jakarta, the average rental rate for available typical retail space rose only moderately by 1.2% QoQ or about 7% YoY. The rental rates for upper class shopping centers was registered at IDR856,482/sq m/month while the average rental rate for all classes of retail space was IDR510,562/sq m/month. Meanwhile, occupancy dropped quite a bit from 89.2% last quarter to 86.1%. This quarter saw more vacant space from the refurbishment of several old malls which are temporarily non-operational and the low occupancy of malls opened this quarter.

Industrial Estate SectorThe recent Indonesian presidential election and the relatively smooth transfer of power resulted in an increasing demand for industrial land in some industrial estates. Total industrial land being transacted this quarter was 124.64 hectares which brought total land sold 2014 YTD to 337.33 hectares - representing 76% of last year’s total sales. Four industrial estates in Bekasi, Serang and Tangerang have also introduced new prices as a result of increased inquiries about land and the limited availability of ready-to-use land. The overall land price in the greater Jakarta area has moved up mildly by 2.3% QoQ to USD176.32/sq m.

Highlight

Colliers International

is a leader in global real estate services, defined by our spirit of enterprise. Through a culture of service excellence and collaboration, we integrate the resources of real estate specialists worldwide to accelerate the success of our partners. We represent property investors, developers and occupiers in local and global markets. Our expertise spans all property sectors–office, industrial, retail, residential, rural & agribusiness, healthcare & retirement living, hotels & leisure.

By Ferry SalantoAssociate Director | [email protected]




4

OFFICE SECTORLeased Office

CBD Office Cumulative Supply

Source: Colliers International Indonesia - Research

Supply in the CBD

The CBD is anticipating a huge additional supply in the five years ahead looking at the construction progress of future office buildings. It appears that at least three office buildings will be completed as scheduled and bring 187,805 sq m of additional supply at the end of 2014.

As of 3Q 2014, the cumulative supply of office space in the CBD was 4.78 million sq m. Despite no new supply during the quarter, demolition of the Graha Surya Internusa office building for redevelopment has been started and this reduces the cumulative supply. Later, there will be a new office building of around 100,000 sq m on this site.

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2008

2009

2010

2011

2012

2013

2014

YTD

2014

F

2015

F

2016

F

2017

F

2018

F

sq m

Existing Supply Annual Supply

There will also be a redevelopment project in Jalan MH Thamrin. An existing shopping center will be demolished beginning in late 2014. With an approved high plot ratio for this site, a new landlord will develop a high-rise office building cum apartment towers with a planned completion in 2019.

The new plot ratio policy for certain business areas set out by the DKI Jakarta Government has urged developers to consider replacing old buildings with taller and more modern buildings to maximize the allowable building size. In the years ahead, the CBD will see several more high-rise office buildings.

Research & Forecast Report | 3Q 2014 | Office | Colliers International




5

Annual CBD Future Office Distribution Based on Sub Market


Thamrin Nine is projected to be the tallest office building in Jakarta in the future and will have an area of around 100,000 sq m on 70 floors, and will be taller than the tallest existing office buildings in Jakarta, i.e. Menara BCA (52 floors) and Wisma 46 (50 floors). Other high-rise office buildings are expected in Jakarta, namely Pertamina Tower and Signature Tower, which are currently in planning stages.

Although construction activity keeps progressing, several future office buildings have confirmed that they will reschedule their completions as of 3Q 2014. However, in addition, by the end of 2014, the construction work on future office buildings due for completion in 2015 - 2018 is still showing progress. Based on numbers, 29 of 37 future office buildings or 83.2% of the 2.36 million sq m additional supply expected from 2015 to 2018 are under construction.

Sudirman still leads as the major contributor of new office buildings in the CBD. The total future supply in the CBD until 2018 will be 2.51 million sq m, and 41.1% will be in Sudirman. Gatot Subroto and Mega Kuningan will also grow by contributing 21.1 and 13.1%, respectively, of the total future supply in 2015 - 2018.

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

Thamrin

Sudirman

Rasuna Said

Mega Kuningan

Gatot Subroto

Satrio

sq m2014F 2015F 2016F 2017F 2018F

Supply in the Outside CBD and

TB Simatupang

The amount of future office space will also increase in the outside CBD area. Ciputra Group will soon develop a superblock called Ciputra International on 7.4 hectares of land near the Outer Ring Road in West Jakarta. This group will also develop an office park in Kemayoran, Central Jakarta that will sit on 1.8 ha of their land bank and consist of two office towers connected by a retail arcade.

Besides Ciputra, Pondok Indah, Agung Podomoro Land (APL) and Lippo Group are among the big developers with office projects under construction in West Jakarta. Pondok Indah is developing Puri Financial Tower and APL is developing their latest office building project within the Podomoro City complex, SOHO Capital. Lippo is also developing an office building within the St. Moritz complex in Puri Indah. In addition to Puri, Lippo will also add to their portfolio by developing an office tower within Lippo Holland Village in Cempaka Putih, Central Jakarta. Additionally, an office building located within the Gallery West complex in Kebun Jeruk, West Jakarta will also be integrated with apartments and a hotel. All of the office buildings mentioned above are projected be completed in 2015 and 2016.

South Jakarta, especially TB Simatupang remains the most desirable area. Three new office towers by Intiland Group at a mixed-use development called South Quarter are projected to begin operations in 2015 in TB Simatupang. Then, after Tower 1 is in operation, Sumber Mesin Raya, the owner, will also launch The Manhattan Square Tower 2. This office building is projected to begin operations in 2017. The other projected office building in TB Simatupang is The Sima, located within a residential development called Izzara. With 60,000 sq m of floor space, this office building is scheduled to be completed in 2017. Another two office buildings, Cibis Tower and Arkadia Tower G, were also launched recently as additional new supply in TB Simatupang. These two office buildings will commence construction in late 2014. With the projects mentioned above, the total future supply in the outside CBD is expected to reach 1.27 million sq m from 2014 to 2018.

Based on construction progress, 58.1% of the total space projected to begin operations in 2015 - 2018 is now under construction.

As mentioned above, South and West Jakarta will contribute 51.8 and 26.6%, respectively, more than the other areas. TB Simatupang will contribute 48.1% of the total future supply in the outside CBD during 2014 - 2018. The 631,221 sq m of new supply in TB Simatupang by 2018 will represent 92.9% of the total future supply in South Jakarta.




6

Annual Outside CBD Future Office Distribution Based on Region


Outside CBD Office Cumulative Supply


0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2008

2009

2010

2011

2012

2013

2014

YTD

2014

F

2015

F

2016

F

2017

F

2018

F

sq m


In 3Q 2014, The Manhattan Square and Palma Tower, both of which are located in TB Simatupang in the outside CBD, were ready for tenant occupation. These office buildings brought 59,859 sq m of additional supply and brought the cumulative supply in the outside CBD to 2.39 million sq m.

With the additional office space, the cumulative supply in TB Simatupang was 536,806 sq m as of 3Q 2014. In the remaining quarter of 2014, the outside CBD will see another 131,826 sq m of office space, of which 70.4% will be in TB Simatupang.

0 150,000 300,000 450,000 600,000 750,000

Central Jakarta

South Jakarta

North Jakarta

East Jakarta

West Jakarta

sq m

2014F 2015F 2016F 2017F 2018F

Annual Future Office Distribution in TB Simatupang and Outside CBD exclude TB Simatupang


TB Simatupang Office Cumulative Supply


0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2008

2009

2010

2011

2012

2013

2014

YTD

2014

F

2015

F

2016

F

2017

F

2018

F

sq m


0 150,000 300,000 450,000 600,000 750,000

TB Simatupang

Outside CBD exclude TB Simatupang

sq m

2014F 2015F 2016F 2017F 2018F

Research & Forecast Report | 3Q 2014 | Office | Colliers International






Source: several sources

Some Construction Progress of Future Office Buildings in 2014 - 2018

Office Tower at District 8 Sequis Tower 2 Office Tower at St Moritz

Future Large Office Buildings of More Than 90,000 sq m

Sahid Sudirman Capital Palace Centennial Tower Treasury Tower

138,500 sq m 90,511 sq m 100,000 sq m 139,000 sq m52 storeys 46 storeys 48 storeys 55 storeys

2015 2016 2016 2017

Thamrin Nine Astra Tower PCPD Tower SSI Tower

97,500 sq m 100,000 sq m 96,000 sq m 100,000 sq m70 storeys 50 storeys 40 storeys 40 storeys

2017 2017 2017 2018





New Supply Pipeline

projected completion oFFice Building projectS name location Sga marketing Scheme StatuS development

cBd

2014 Sinarmas MSIG Sudirman 75,000 For Lease Under construction

2014 The Noble House Office Tower Mega Kuningan 45,000 For Lease Under construction

2014 Gran Rubina Tower 1 Rasuna Said 31,438 For Sale Under construction

2015 Ciputra World Jakarta 2 Satrio 70,000 For Lease & Sale Under construction

2015 International Financial Center 2 Sudirman 50,000 For Lease Under construction

2015 AIA Center (Menara Selaras) Sudirman 47,000 For Lease Under construction

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

2015 Sahid Sudirman Center Sudirman 138,500 For Lease & Sale 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

2015 Convergence Rasuna Said 36,367 For Lease & Sale Under construction

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

2016 Mangkuluhur Tower Gatot Subroto 53,000 For Lease & 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 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 (BJB Tower) Gatot Subroto 24,000 For Sale Under construction

2017 Prosperity Tower @ District 8 Sudirman 71,545 For Sale Under construction

2017 Gran Rubina Tower 2 Rasuna Said 32,000 For Sale Under construction

2017 World Capital Tower Mega Kuningan 72,000 For Sale In planning

2017 Sequis Life Tower 2 Sudirman 80,000 For Lease Under construction

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

2017 Gayanti City Gatot Subroto 25,000 For Lease In planning

2017 Thamrin Nine Thamrin 97,500 For Lease 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 Under construction

2017 Sudirman 7.8 (ex Nugra Santana) Sudirman 52,000 For Sale Under construction

2018 SSI Tower (Graha Surya Intenusa) Rasuna Said 100,000 For Lease Under construction

2018 Mangkuluhur Tower II Gatot Subroto 50,000 For Lease In planning

2018 Tower Two at The City Center Sudirman 39,204 For Lease Under construction

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

2018 Icon Tower Sudirman 72,500 For Lease Under construction

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

2018 Astra Tower Sudirman 100,000 For Lease In planning

2018 PCPD Tower Sudirman 96,000 For Lease Under construction

continued






projected completion oFFice Building projectS name location Sga marketing Scheme StatuS development

continuation

outSide cBd exclude tB Simatupang

2014 GP Plaza Slipi 12,204 For Sale Under construction

2014 Wisma 77 Tower 2 Slipi 24,200 For Lease Under construction

2014 Emerald Tower Kelapa Gading 2,644 For Lease Under construction

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

2015 The 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 MNC Tower II Kebon Sirih 20,000 For Lease Under construction

2015 Soho Capital Slipi 36,000 For Sale Under construction

2015 Altira Sunter 40,000 For Sale Under construction

2015 Maxima 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 In planning

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

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

2016 Soho Pancoran Pancoran 30,000 For Sale Under construction

2016 Jakarta Box Tower Kebon Sirih 36,000 For Lease Under construction

2016 Lippo Tower Holland Village Cempaka Putih 27,000 For Sale In planning

2016 One Tower Kemayoran 21,400 For Sale In planning

2016 BKP Office Tower Sunter 16,000 For Lease In planning

2016 Tamansari Parama Wahid Hasyim 10,800 For Sale In planning

2017 L'Venue Pasar Minggu 41,597 For Sale In planning

2017 Ciputra Business District Kemayoran Tower 1 Kemayoran 40,000 For Sale In planning

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

2018 Summarecon Tower Slipi 70,000 For Lease In planning

tB Simatupang

2014 Plaza Oleos 39,778 For Lease & Sale Under construction

2014 18 Office Park (Cityland Tower) 40,000 For Sale Under construction

2015 AD Premier 18,900 For Lease Under construction

2015 Metropolitan Tower 44,000 For Lease & Sale Under construction

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

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

2015 South Quarter Tower 3 40,778 For Lease Under construction

2016 Zuria 6,584 For Lease Under construction

2017 Beltway Office Park Tower 4 25,600 For Lease Under construction

2017 The Sima 60,000 For Lease Under construction

2017 The Manhattan Square Tower 2 39,375 For Lease & Sale In planning





Occupancy Rates in the CBD, Outside the CBD exclude TB Simatupang and TB Simatupang


Occupancy

80%

82%

84%

86%

88%

90%

92%

94%

96%

98%

100%

2008 2009 2010 2011 2012 2013 2014YTD

CBD Outside CBD exclude TB Simatupang TB Simatupang

The occupancy rate for office buildings in the CBD showed a downward trend throughout 2014 YTD. The occupancy rate was recorded at 96.5% in 2013. New additional supply in the previous quarter caused the occupancy rate to drop by nearly 1% QoQ. As of 3Q 2014, occupancy was 95.4%, again showing a decrease QoQ, albeit moderate.

Almost all sub-markets showed decreasing occupancy. After acquiring an office building in Gatot Subroto, the new landlord is planning to sell the whole building and will not extend the lease contracts of the existing tenants. In a similar case, due to the change in management, BRI 2, located in Sudirman, has a sizeable vacant space for owner-occupation (around mid-2015) and therefore decided not to extend the lease contracts of some tenants. The new management has made plans for major renovations of the M & E systems, like A/C and back-up generator.

Vacancy Rates in The CBD Based on Sub Markets


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2008 2009 2010 2011 2012 2013 2014YTD

Thamrin Sudirman Rasuna SaidMega Kuningan Gatot Subroto SatrioOverall

Aside from the office buildings above, at least 10 other office buildings continued to experience increasing vacant space of more than 2,000 sq m as of 3Q 2014. One office building in Jalan Sudirman has more than 20,000 sq m of vacant space. As of 3Q 2014, there are also large vacant spaces at an office building in Mega Kuningan that has been operating since 2013. However, this office building has secured two major tenants who will occupy around 10,000 sq m in 2015. These pre-committed tenants come from financial institution and coal mining companies.

Performance of Premium and Grade A office buildings also showed a decrease by 1.4% QoQ and recorded occupancy of 95.2% as of 3Q 2014. Previously, Premium and Grade A office buildings in the CBD maintained high occupancy rates of 97% throughout 2013 and up to 1Q 2014. A decline in occupancy for this grade of office building is generally because of high base rents. The occupancy of several office buildings of these grades was down QoQ.

Recording the same trend, outside the CBD area saw the occupancy rate go down by 1.7% QoQ to 93.9% as of 3Q 2014 due to the influx of newly operating office buildings. Central, West and South Jakarta still have large vacant spaces. With limited new additional supply in Central Jakarta, vacant spaces are only found in old office buildings. Conversely, West Jakarta is quite active in terms of providing additional new supply. Office buildings that began operations from 2010 to 2014 YTD contributed around 46% of the total stock in West Jakarta. Unfortunately, almost 80% of unoccupied space in West Jakarta is contributed by office buildings that began operations during those periods. The second biggest office building in Slipi, West Jakarta still has large vacant spaces on offer because the concept was changed from SOHO to a standard office building.

In South Jakarta, new office space also caused occupancy to go down 2.5% to 89.9% as of 3Q 2014. Office buildings located in Jalan Casablanca currently have large vacant spaces. In addition, decreasing performance in TB Simatupang also caused the occupancy to drop. Continual additional supply in each quarter of 2014 YTD has caused the occupancy rate in TB Simatupang to continuously drop. After slumping by 3.6% in the previous quarter, the occupancy rate in TB Simatupang went down drastically by 7.1% to 86.1% as of 3Q 2014.

Abundant supply in 2014 and 2015 will pose a big challenge for occupancy in the CBD and areas outside of it. As of 3Q 2014, the committed absorption for office buildings that are expected to be completed in 2014 and 2015 in the CBD reached 40 and 44%, respectively. The committed absorption outside the CBD has also reached 40% for office buildings in 2014 and 2015. Although TB Simatupang is experiencing decreasing occupancy, the committed absorption for office buildings in 2014 has reached 77%. Furthermore, as of 3Q 2014, TB Simatupang has attained 43% of committed absorption for office buildings in 2015.

Some tenants have committed to occupy large spaces and receive naming rights to replace the previous building name. At least two office buildings in Mega Kuningan will be renamed with the occupation of a new major tenant.





Pre-Committed Absorption of Annual Future Offices Supply in the CBD


0 150,000 300,000 450,000 600,000 750,000

2014F

2015F

2016F

2017F

2018F

sq mSpace Absorbed Space Unabsorbed

Pre-Committed Absorption of Annual Future Offices Supply in the Outside CBD exclude TB Simatupang


0 150,000 300,000 450,000 600,000 750,000

2014F

2015F

2016F

2017F

2018F


Pre-Committed Absorption of Annual Future Offices Supply in TB Simatupang


0 150,000 300,000 450,000 600,000 750,000

2014F

2015F

2016F

2017F


Asking Base RentAverage Asking Base Rent in the CBD


$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

IDR 0

IDR 59,000

IDR 118,000

IDR 177,000

IDR 236,000

IDR 295,000

IDR 354,000

IDR 413,000

IDR 472,00020

08

2009

2010

2011

2012

2013

2014

YTD

IDR US$

Although still on a rising trend, the QoQ growth of rental rates of office buildings charging in rupiah slowed in the CBD. Even in 2014 YTD, rent growth saw continuous weakening. As of 3Q 2014, the average asking base rental rate of office buildings charging in rupiah in the CBD was IDR253,513/sq m/month, exhibiting growth of less than 1% QoQ. This rent growth was far lower than that in previous quarters.





Average Asking Base Rent (Based on Available Space) in the CBD by Grade


Outside the CBD, the average rental rate of office buildings charging in rupiah was IDR166,748/sq m/month, whereas it was USD22.66/sq m/month for office buildings charging in US dollars as of 3Q 2014. These rental rates grew slowly QoQ. Based on area, we divided areas outside the CBD into TB Simatupang and areas outside the CBD, excluding TB Simatupang. As of 3Q 2014, the rental rate for office buildings outside the CBD (excluding TB Simatupang) was IDR155,402/sq m/month and USD18.23/sq m/month for those charging in US dollars.

Meanwhile, growth in the TB Simatupang rental rate was moderate as of 3Q 2014 for both currencies. Office buildings charging in rupiah are currently at IDR157,381/sq m/month and USD21.31/sq m/month for those charging in US dollars.

A slightly different trend was seen at office buildings charging in US dollars. The rent growth showed a similar weakening trend during the two early quarters in 2014. However, the overall rental rate still grew by 2% QoQ which brought them to USD37.03/sq m/month as of 3Q 2014 after some office buildings in the Mulia Group made an upward adjustment. Several office buildings charging in US dollars have lowered the rental rates as of 3Q 2014. Most of these office buildings are included in the Premium and Grade A category. As of 3Q 2014, the rental rates for Premium and Grade A office buildings dropped by 1.7% QoQ to USD42.84/sq m/month.

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

IDR 0

IDR 118,000

IDR 236,000

IDR 354,000

IDR 472,000

IDR 590,000

IDR 708,000

Premium Grade A Grade B Grade C

IDR US$

Average Asking Base Rent in the Outside CBD


IDR 0

IDR 50,000

IDR 100,000

IDR 150,000

IDR 200,000

IDR 250,000

2008

2009

2010

2011

2012

2013

2014

YTD

Outside CBD (combine) TB Simatupang (combine)

Service ChargeAverage Service Charge Cost


IDR 0

IDR 10,000

IDR 20,000

IDR 30,000

IDR 40,000

IDR 50,000

IDR 60,000

IDR 70,000

IDR 80,000

2008

2009

2010

2011

2012

2013

2014

YTD

CBD Outside CBD

After a rise in the electricity tariff, the fuel hike that is expected at the end of 2014 will likely raise service charges in 2015. As of 2014 YTD, the service charge of office buildings charging in US dollars and rupiah showed different trends. The service charge of office buildings charging in rupiah was IDR65,764/sq m/month as of 3Q 2014 reflecting growth of 8.3% QoQ; however, this still suggests that about 45% of office buildings have yet to adjust their service charges.

On the contrary, office buildings charging in US dollars demonstrated a declining trend QoQ. After experiencing relative stability in the previous quarters, service charges dropped by 8.2% to USD6.21/sq m/month as of 3Q 2014. Service charges at a complex office building in Sudirman have decreased QoQ.





In outside the CBD, the service charge was IDR46,152/sq m/month for office buildings charging in rupiah and showed positive growth of 4% in 2014 YTD. The service charge for office buildings charging in US dollars was down 3.7% in the same period and at USD5.24/sq m/month as of 3Q 2014.

The service charge for office buildings charging in rupiah in TB Simatupang was the highest at IDR55,577/sq m/month. Several office buildings charging in US dollars still maintained their service charge at USD3.00 - 5.00/sq m/month. Therefore, the service charge for buildings charging in US dollars was relatively flat at USD4.89/sq m/month as of 3Q 2014.

Strata-title OfficeAverage Strata-Title Office Price in Jakarta


The take-up level of offices for sale outside the CBD also showed positive performance. The take-up rate was above 90% of the 466,126 sq m of existing cumulative supply of offices for sale as of 3Q 2014. Outside the CBD, 566,351 sq m of additional space will be for sale until 2018. However, the market will respond optimistically because 40% of the projected supply has been absorbed as of 3Q 2014.

Office buildings for sale in TB Simatupang continue to show improving performance. As of 3Q 2014, the only remaining spaces are at office buildings that began operating in the previous quarter. Meanwhile, 72% of the total future supply of offices recorded for sale in TB Simatupang from 2014 to 2018 has been absorbed.

Based on available space, the asking price for strata-title offices in the CBD was IDR51.5 million psm, exhibiting growth of 22% YTD. Outside the CBD, excluding TB Simatupang, the asking price was IDR26.5 million/sq m, whereas in TB Simatupang, it was IDR31.1 million/sq m.

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

2008

2009

2010

2011

2012

2013

2014

YTD

CBD Outside CBD exclude TB Simatupang TB Simatupang

The sales of strata-title offices in the CBD will seemingly focus more on future supply due to very limited vacant space at existing buildings. As of 3Q 2014, with the take-up rate at 99%, only less than 5,000 sq m of space remains available for strata-title offices in the CBD.

For the rest of 2014 until 2018, it is expected that 1.13 million sq m of additional office supply will be up for sale in the CBD. Gran Rubina seems to be right on schedule in meeting its completion date of late 2014. On the demand side, absorption of strata-title offices is forecast to be strong. Office buildings that will begin operations in 2014 and 2015 have achieved high commitment levels at 92 and 82%, respectively. Overall, 40% of the total future supply up to 2018 has been absorbed.

Pre-Committed Absorption of Annual Supply of Strata-Title Office


0 250,000 500,000 750,000 1,000,000

2008

2009

2010

2011

2012

2013

2014YTD





14 Research & Forecast Report | 3Q 2014 | Apartment | Colliers International

Apartment SectorApartment for Strata-title

SupplySeveral projects currently under construction rescheduled their hand-over targets to the end of this year or early 2015. Technical issues, such as mechanical and electrical installation, and other finishing work were the most widely reported problems causing a delay in the hand-over process in this period. The long Idul Fitri holiday also hampered the finishing progress of new development. Overall, in 3Q 2014, the cumulative supply of strata-title apartments only increased by less than 2% QoQ and was registered at 139,239 units. The increase accounted for an additional 2,183 units that came from the completion of eight towers at six apartment projects, including Ambassade Residence, MyHome Apartment, The Pakubuwono Signature, Sherwood Residence (Tower Regent), Sky Terrace Lagoon, and The Green Pramuka (Tower Bougenville). Tower Regent is the final tower being handed over at the Sherwood Residence project, while Tower Bougenville is the fourth of a total of seven towers planned to be built at The Green Pramuka project. Ambassade Residence, MyHome Apartment, The Pakubuwono Signature and Sky Terrace Lagoon are brand-new projects comprising 1,083 units scattered in the CBD, South Jakarta and West Jakarta areas.

Until the third quarter of 2014, 33% of the total 20,899 projected units this year have been handed over, leaving about 14,000 units which will be available in the next quarter or next year. Currently, there are 21 projects left which are expected to be completed by 2014; 48% of them will likely meet their target of beginning operations this year, while the rest are predicted to commence in the first or second quarter of 2015. As a result, the total annual supply of 2015 will post a new record of approximately 28,950 units should all of these projects be completed.

Based on our database combined with a field survey, from a total of 51 projects that are expected to be completed in 2015 plus the additional projects from 2014, 66.7% of projects consisting of 19,213 apartment units will likely meet the target.






List of Completed Projecs During 3Q 2014development location region developer no. oF unitS

Ambassade Residence Tower A Jl. Denpasar Raya CBD PT. Duta Regency 234

MyHome Apartment Jl. Prof Dr Satrio CBD Ciputra 136

The Pakubuwono Signature Jl. Teuku Nyak Syarief South Jakarta PT. Mandiri Eka Abadi 188

Sherwood Residence (Tower Regent) Kelapa Gading North Jakarta Summarecon 100

Sky Terrace Lagoon (3 Towers) Jl. Tampak Siring blok KJE No. 30-32, Kalideres

West Jakarta PT. Fajar Surya Perkasa 525

The Grreen Pramuka (Tower Bougenville) Jl. Jenderal Ahmad Yani Central Jakarta PT. Duta Paramindo 1,000

The Hive @ Tamansari Jl. DI Panjaitan East Jakarta Wika Realty 422

The Green Pramuka (Tower Chrysant) Jl. Jenderal Ahmad Yani Central Jakarta PT Duta Paramindo 1,000

total 2,183

List of Newly Introduced Apartments Projects During 3Q 2014

newly introduced apartment location region expected completion time

eStimated price/Sq m*

aSking price/Sq m (excluding vat)

Lavie Kuningan CBD 2018 40 - 42 Mio 320

Grand Madison Park Tanjung Duren West Jakarta 2018 34 - 35 Mio 300

Sedayu City @ Kelapa Gading (14 Tower) Kelapa Gading North Jakarta 2018** 27 – 28 Mio 12,000


*Price exclude VAT 10%**First Phase

During this quarter, some developers have introduced their new projects to their loyal customers by using the NUP system. Recently, the NUP system has been commonly used for new apartment projects in Jakarta, especially for middle- and upper-class projects. This system involves a mutualism symbiotic relationship between the developer and the buyer. For developers, through the NUP system, the marketing team will get the “big picture” from the buyers, regarding the attractiveness

and the affordability of their new project, so they will have a formula to boost apartment sales. On the other hand, since there is a claim that the booking fee is 100% refundable, the buyer will not lose their money if the desired apartment unit does not meet their expectations. During this period, three new projects in West Jakarta, North Jakarta and CBD area had soft launches. These new projects will officially launch either in 4Q 2014 or early 2015.

Newly Introduced Apartments Projects During 3Q 2014

Lavie Grand Madison Park Sedayu City




16

List of Newly Launched Apartments Projects During 3Q 2014

newly launched apartment location region expected completion time

eStimated price/Sq m*

aSking price/Sq m (excluding vat)

Holland Village phase II Cempaka Putih 2016 20 - 22 Mio 230 320

Citra Lake Suites Kalideres 2018 17 - 19 Mio 496 300


*Price exclude VAT 10%

In addition, around 726 units at two projects were launched during the reviewed quarter. Holland Village Phase II and Citra Lake Suites are both located in non-prime areas, i.e. Central Jakarta (excluding the CBD) and West Jakarta, respectively. Holland Village (Phase II), developed by Lippo Karawaci, is the continuation of the Holland Village Phase I, which is expected to be completed in late 2016. Citra Lake Suites is a

brand new project and is a joint venture project between Ciputra and Mitsui Fudosan Residential. In contrast with Holland Village, which adopted a one-stop living concept, Citra Lake Suite is designed purely for residences with a greenery ambience. It consists of four mid-rise apartment towers, located within the Citra Garden City housing complex.

New Supply Pipeline (2014 - 2017)apartment name location region no. oF unitS

2014

Woodland Park (Matoa tower) (1Q) Kalibata South Jakarta 221

Pakubuwono Terrace (Tower North) (1Q) Kebayoran Lama South Jakarta 750

Sherwood Residence (Wellington) (1Q) Kelapa Gading North Jakarta 100

Kemang Village (The Infinity) (1Q) Antasari South Jakarta 175

Ambassade Residence Tower A Puri Denpasar CBD 234

Raffles Residences Satrio CBD 64

MyHome Apartment at Ciputra World Satrio CBD 136

Setiabudi Sky Garden (tower 1) Rasuna Said CBD 426

Verde Apartment (Tower East) Rasuna Said CBD 114

Pasar Baru Mansion (2 towers) Pasar Baru Central Jakarta 520

Elpis Residence Gunung Sahari Central Jakarta 791

Capitol Park Apartment Salemba Central Jakarta 1,700

The Mansion at Dukuh Golf Residence (Aurora Tower) Kemayoran Central Jakarta 522

The Mansion at Dukuh Golf Residence (BellaVista Tower) Kemayoran Central Jakarta 612

The Green Pramuka (Tower Chrysant) Pramuka Central Jakarta 1,000

The Green Pramuka (Tower Bougenville) Pramuka Central Jakarta 1,000

Sentra Timur Residence II (2 Towers) Pasar Rebo East Jakarta 810

Titanium Square Pulo Gebang East Jakarta 725

The Hive @ Tamansari Cawang East Jakarta 422

Sherwood Residence (Regent) Kelapa Gading North Jakarta 100

Pluit Seaview (Tower Maldives) Pluit North Jakarta 940

Gading Greenhill Pegangsaan Dua North Jakarta 700

Northern Ancol Residence Ancol North Jakarta 800

La Venue - South Tower Pasar Minggu South Jakarta 341

Kemang Village (The Intercon) Antasari South Jakarta 400

The East at Essense Complex Dharmawangsa Dharmawangsa South Jakarta 244

The Aspen at Admiralty Fatmawati South Jakarta 860

Pakubuwono Terrace (Tower South) Kebayoran Lama South Jakarta 720

The Pakubuwono Signature Pakubuwono South Jakarta 188

Senopati Penthouse Senopati South Jakarta 63

LA City Apartment (Tower A) Lenteng Agung South Jakarta 980

continued





apartment name location region no. oF unitS

continuation

La Maison Barito Barito South Jakarta 80

Botanica Apartment (3 Towers) Simprug South Jakarta 626

The Bellevue at Pondok Indah Pondok Indah South Jakarta 40

Green Central Tower Cerberra Gajah Mada West Jakarta 420

The Windsor (Tower I) Puri Indah West Jakarta 176

The Windsor (Tower II) Puri Indah West Jakarta 164

Sky Terrace Lagoon Kalideres West Jakarta 525

Metro Park Residence Kebon Jeruk West Jakarta 1,200

Green Palm Residence @ Puri Kosambi West Jakarta 1,000

2015

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

The Residence (CWJ 2) Satrio CBD 119

The Orchad Satrio (CWJ 2) Satrio CBD 349

Setiabudi Sky Garden (tower 2) Setiabudi CBD 160

T - Plaza Residence (Tower B) Pejompongan Central Jakarta 500

Menteng Park Cikini Central Jakarta 756

The Grreen Pramuka (Tower Orchid) Pramuka Central Jakarta 1,000

The Grreen Pramuka (Tower Penelope) Pramuka Central Jakarta 1,000

The Green Pramuka (Tower Scarlet) Pramuka Central Jakarta 1,000

The H Residence Kemayoran (Amethyst) Kemayoran Central Jakarta 800

Green Signature Apartment MT. Haryono East Jakarta 800

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

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

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

Bassura City (Tower Cattleya) Basuki Rahmat East Jakarta 600

Bassura City (Tower Alamanda) Basuki Rahmat East Jakarta 600

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

Tifolia Apartment Perintis Kemerdekaan East Jakarta 500

Pluit Seaview (Tower Belize) Pluit North Jakarta 300

Callia Apartment Perintis Kemerdekaan East Jakarta 560

The Oakwood Sky Garden (2 Towers) Pluit North Jakarta 700

Pluit Seaview (Tower Ibiza) Pluit North Jakarta 500

Pluit Seaview (Tower Bahama) Pluit North Jakarta 650

Green Bay Pluit (Sea View) Pluit North Jakarta 2,072

Kemang Village - The Bloomington Antasari South Jakarta 150

The Royal Olive Residence Tower I Buncit Raya South Jakarta 225

Woodland Park (Cendana Tower) Kalibata South Jakarta 218

Senopati Suites 2 Senopati South Jakarta 81

1 Park Avenue Gandaria South Jakarta 279

Nine Residence Warung Buncit South Jakarta 246

Providence Park Permata Hijau South Jakarta 114

Kencana Residence Pondok Indah South Jakarta 173

District 8 (Tower Eternity) Senopati South Jakarta 400

District 8 (Tower Infinity) Senopati South Jakarta 280

Izzara Apartment (2 Tower @ 225 unit) TB. Simatupang South Jakarta 450

Lexington Rersidence (Tower 1) Pondok Pinang South Jakarta 270

Lexington Rersidence (Tower 2) Pondok Pinang South Jakarta 270

continued






continuation

The Aspen Peak at Admiralty Fatmawati South Jakarta 644

Belmont Residence (Tower Montblanc) Meruya Ilir West Jakarta 350

Gianetti Apartment Kemanggisan West Jakarta 500

St. Moritz (New Presidential Tower) Puri Indah West Jakarta 150

Satu8 Residence Kedoya West Jakarta 174

The Nest Apartment Meruya Utara West Jakarta 1,100

Point 8 (Air Crew Tower) Daan Mogot West Jakarta 546

Gallery West Kebon Jeruk West Jakarta 280

19 Avenue Apartment Daan Mogot West Jakarta 338

2016

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

The H Residence MT Haryono East Jakarta 383

Sudirman Suites Sudirman CBD 380

Senopati Suites 3 Senopati South Jakarta 54

Signature Park Grande MT Haryono East Jakarta 1,100

Grand Pakubuwono Terrace Kebayoran Lama South Jakarta 435

Sentosa Residence Cempaka Putih Central Jakarta 687

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

Grand Pancoran Pancoran South Jakarta 120

Sudirman Hill Residence Karet Central Jakarta 255

Apartment Pejaten Park Residence Warung Buncit South Jakarta 380

Belmont Residence (TowerAthena) Meruya West Jakarta 165

Four Winds Permata Hijau South Jakarta 122

Capitol Suites Prapatan Raya Central Jakarta 327

Puri Mansion Apartment (Tower A) Puri Kembangan West Jakarta 900

Madison Park Tanjung Duren West Jakarta 1,200

Gayanti City (2 Towers) Gatot Subroto CBD 318

Verde Two (Tower 1) Rasuna Said CBD 152

Verde Two (Tower 2) Rasuna Said CBD 152

Bellevue Place Tebet South Jakarta 128

Kebayoran Icon Kebayoran Lama South Jakarta 256

Veranda Pesanggrahan West Jakarta 174

2017

Regatta London Tower Pantai Mutiara North Jakarta 276

Central 88 (2 Towers) Kemayoran Central Jakarta 612

Holland Village Cempaka Putih Central Jakarta 400

Domaine Sudirman CBD 186

Skyline Residence (2 Towers) DI Panjaitan East Jakarta 481

Kemang Penthouse Kemang South Jakarta 262

The Foresque Pasar Minggu South Jakarta 600

Springhill Golf Suites Kemayoran Central Jakarta 450

Sentra Timur Residence (Tosca Tower) Pulogebang East Jakarta 133

Taman Anggrek Residence Tanjung Duren West Jakarta 3,000

Puri Orchad (3 Tower) Kembangan West Jakarta 3,000

The Langham Residences Senopati South Jakarta 57

continued




19


continuation

Anandamaya Residences (3 towers) Sudirman CBD 500

Maqna Residence Meruya West Jakarta 380

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

One Otium Residence Antasari South Jakarta 160

Wang Residence Kedoya West Jakarta 250

The Batik @ Pejaten Pejaten South Jakarta 200


DemandSales activity in the Jakarta apartment market during 3Q 2014 increased modestly. The overall take-up rate of the Jakarta apartment market was 86.6%, an increase of only 1.4% QoQ. Based on the findings in the field, after the Idul Fitri holiday and the presidential election, sales activities have gradually trended upward. Less newly launched / introduced projects, compared to the previous quarter, has affected the increase of the overall take-up rate. Based on a field survey and findings from the marketing of several apartment projects, the sales activity has been slightly hampered, on the back of uncertainty prior to the presidential election. However, sales activity has bounced back in a positive trend since the new president elect was announced.

In addition to the high demand for inner city living and a gradual shift in the trend of living from landed houses to high-rise apartment buildings, people buy apartments for investment reasons. Both end-users and investors treat apartment units as an asset. From the end-user’s perspective, the apartment can be an asset that hedges against inflation. For investors, owning an apartment can provide recurring income from rent and keep cash flow stable if the owners buy the apartment with a mortgage.

Take-up Rate Trend Between Existing and Future Projects


50%

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80%

90%

100%

2007

2008

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2011

2012

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2014

YTD

Existing Future

Until September 2014, the take-up rate of existing apartments in Jakarta reached 95%, relatively stable from the previous quarter and an increase of only 2% YoY. On the other hand, the take-up rate of under-construction projects was 73.2%, rising by 2.7% from the previous quarter.

Based on the market segment, the pre-sales rate of middle upper class projects achieved the highest take-up rate of 84%, followed by upper class at 78%. The high pre-sales absorption rate of middle upper and upper class was related to the high demand in those areas, such as Pondok Indah, Simprug, Senopati, Permata Hijau, Kemayoran, Kedoya and in the CBD area. The large number of apartment units from low and middle lower class apartment projects will likely increase market competition and impact the overall sales rate, evidenced by lower take-up rates of 71 and 72%, respectively. However, there are only two luxury apartment projects under construction, Raffles Residences and The Langham Residences, which posted an average sales rate of 71%.

Average Take-up Rate Performance by Class on Future Projects


50%

60%

70%

80%

90%

100%

Low Middle-Low Middle-Upper Upper Lux





Developers, especially of middle class projects, will therefore need to offer compelling product advantages, such as the proximate access to public transport and other public facilities, and be competitive in promoting their projects in order to boost sales. Traditional catalysts, such as more flexible payments, giving discounts and direct prizes, and longer instalments, continue to lead in accelerating sales. Flexible payments include the buyer being able to purchase the apartment by paying a fixed amount during a certain period, e.g. 12 months and at the end of the instalment period, the buyer can immediate settle by cash or with a mortgage. If the buyer chooses a hard-cash payment, the developer usually gives a big discount, e.g. 10 - 15%. Electronic media advertising is proving to be an effective way to gain more sales as it reaches more people than other media.

The CBD area continued to have the highest take-up rate during this quarter, particularly because there are no new developments being introduced during the quarter. The non-prime area achieved the highest take-up rate growth compared to the previous quarter, mainly generated from the good performance of apartment projects in West Jakarta. On the other hand, with its good accessibility and the fact that it is generally perceived as the second most prominent location for both investment and for a second or third home, the South Jakarta area continues to record positive growth both QoQ and YoY.


Average Take-up Rate Performance in Different Locations

area 3q 2013 2q 2014 3q 2014change

qoq yoy

CBD 95.6% 94.8% 95.3% 0.4% -0.3%

South Jakarta 88.2% 89.7% 91.2% 1.5% 3.0%

Non-Prime Area 84.1% 82.0% 83.6% 1.5% -0.5%

Asking PriceThe average asking price of Jakarta’s apartments witnessed a smoothly increasing trend this quarter. The upward adjustment in price is largely driven by good sales performance of the under-construction projects. The non-demand reasons, like continuing construction progress, also triggered the price hike as well as limited availability of vacant land in sterling locations in Jakarta. Overall, the average asking price of apartments in Jakarta increased by 5.8% QoQ and 17.2% YoY, to IDR26.8 million/sq m for the whole area and all classes of apartment. In our records, there are about 41 apartment projects that introduced new prices during the quarter, with the increases ranging from 5 to 15% QoQ. Despite modest demand growth, some developers are still confident in increasing the asking price due to investment reasons. From the buyer side, investing in property, such as apartments, is the best way to maintain the value of their money. Buying property is particularly appealing in Jakarta because the limited financial sector offers few other investment options. Furthermore, in a developing country like Indonesia, people buy property as a way of saving for the future because they cannot rely on pensions and other social benefits.

Average Asking Price of Strata-title Apartment Based on Area


As depicted in the graph, the average asking price for apartments in South Jakarta recorded the highest QoQ growth followed by the CBD and non-prime areas. The high increase in the South Jakarta area was mainly triggered by under-construction projects that are approaching their completion dates, such as Bellevue at Pondok Indah, Woodland Park, and La Venue Apartment. Most of the increase in the non-prime area was triggered by good sales performance of middle-class apartment projects located in the middle to upscale areas, such as Tanjung Duren, Kedoya, Puri Indah, and Cawang areas.

IDR 0

IDR 10,000,000

IDR 20,000,000

IDR 30,000,000

IDR 40,000,000

IDR 50,000,000

2010 2011 2012 2013 2014YTD

CBD South Jakarta Non-prime Area


Average Asking Price in Different Locations (in IDR)

area 3q 2013 2q 2014 3q 2014change

qoq yoyCBD 35,498,251 39,702,373 41,759,611 5% 18%

South Jakarta 24,329,220 28,724,626 31,241,685 9% 28%

Non-Prime Area 17,912,497 19,609,236 20,320,645 4% 13%





Apartment For Lease

SupplyFor the last two consecutive quarters, Jakarta has not seen any new serviced or non-serviced apartment supply. Thus, as of the end of September 2014, the cumulative supply of apartments for lease stood at 8,334 units, consisting of 57.2% serviced and 42.8% non-serviced apartments.

The apartment market in Jakarta is expecting for 185 fully-furnished new dwellings in the next quarter from the serviced apartment project, The Ascott Kuningan, that is part of the large integrated development, Ciputra World Jakarta I, offering one- to three-bedroom units. Supposed to open in 2014, TBS Linera Serviced Apartments was postponed due to regulation issues and will likely hold the opening in the second quarter of 2015.


List of Future Apartment For Lease Projects

name oF development year oF operation location area no. oF unitS

TBS Linera Apartment Service 2015 Jl. Intan No. 25 Cilandak Barat South Jakarta 110

Fraser Place at Setiabudi Sky Garden 2015 Jl. Karbela Selatan CBD 150

Fraser Suites at Ciputra World Jakarta 2 2016 Jl. Prof. Dr. Satrio CBD 200

Oakwood at District 8 Senopati 2016 Jl. Senopati South Jakarta 180


Detail of Unit Available at the Ascott Kuningantype Size (Sq m) #unitS

1BrDeluxe 50 16

Executive 64 17

Premier 66 - 74 68

2BrExecutive 109 - 114 32

Premier 103 - 116 34

3BrPremier 145 - 150 18

There are four serviced apartment projects in the pipeline until 2016, including projects that will be operated by two international brands, Frasers Hospitality and Oakwood. Fraser Place at Setiabudi Sky Garden is part of three towers in the Setiabudi area.

Jakarta, with limited land, offers a high plot ratio in strategic business and residential locations, which enables developers to build more floor space on a piece of land. Future serviced apartments are mainly part of integrated mixed-used developments. Locations like the CBD and South Jakarta remain the preferred location for serviced apartments. For several years, these two areas have been irreplaceable for many expatriate communities due to the proximity to the business district and international schools.





Average Rental RatesOverall, no rental increases occurred during the quarter. As we previously predicted in the 2Q 2014 report, despite the hike in electricity tariffs in July 2014, most apartments did not immediately increase the rental rates, and will only apply a yearly cyclical rent increase instead. During 3Q 2014, the average rental rate of apartments for lease stood at USD21.80/sq m/month. This figure represents the average for all of Jakarta with the CBD posting the highest average rental rates at USD27.60/sq m/month, followed by South Jakarta at USD15.34 and Non-prime areas at USD19.45/sq m/month.

The direct competition from individually owned apartments does not immediately impact the drop in occupancy rates. One of the reasons for this is the long-term partnership between companies with the serviced apartment operators to provide houses for their client’s representatives in Jakarta. Despite a massive amount of future strata-titled apartment supply, the occupancy rate of apartments for lease is projected to hold steady at between 70 and 80%. Such a steady condition is likely to hold back rental rate growth. Rent growth is anticipated to be less aggressive going ahead as compared to the previous years.

Occupancy RatesThe average occupancy rate of apartments for lease in 3Q 2014 stabilised at 76.2%, reflecting a minor change of less than 1% compared to the previous quarter. Unlike short-term accommodation that is generally seasonal, long-term accommodation, like serviced apartments, is less affected by the Islamic holiday season and presidential elections. In general, a large number of occupiers of apartments for lease are long-stay tenants. A slight decrease in the overall QoQ occupancy performance is a result of the intermediate period of occupation between old and new corporate tenants and also because of the expiration of contract work permits.

The CBD area recorded a modest increase of 0.3% compared to the previous quarter to 82.3%. The increase occurred mainly due to short-term leases for serviced apartments, which constituted a maximum of 30% of the total occupied units. Meanwhile, South Jakarta and Non-prime areas experienced a downward trend compared to the previous quarter, by 1.7 and 0.1%, respectively.


The QoQ Occupancy Performancearea 1q 2014 2q 2014 qoq change

CBD 82.02% 82.28% 0.26%

South Jakarta 79.30% 77.62% -1.68%

Non-Prime area 70.54% 70.41% -0.13%

The overall occupancy rate of apartments for lease has remained steady since 2011 despite the lack of new apartments for lease. Tough competition from new strata-titled apartments, especially in the South Jakarta area, has likely hampered the occupancy rates of both serviced and non-serviced apartments. Potential tenants, which mostly come from overseas corporations, are generally finding serviced apartments to occupy during their time working in Jakarta. However, since new strata-titled (individually owned) apartments continue to offer an option to lease, there is a wide variety and selection of apartments at competitive prices with flexible payments. This is likely to put pressure on the overall occupancy rate for leased apartments.

Occupancy Rate of Serviced and Non-Serviced Apartment


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2007

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Non-Serviced Serviced





OutlookPositive outlook in the Jakarta apartment market, particularly strata-titled apartments, is expected to continue. Despite current market conditions softening due to a slowdown in the economy and the presidential election which hampered buying activities from both investors and end-users, the take-up rate of Jakarta apartments during this quarter increased modestly. After gradually softening for three consecutive quarters, the market has started to show positive momentum, evidenced by a slight increase in the average take-up rate, particularly in under-construction projects.

The growing middle class, which more than doubled in size from 2006 to 2011 (source: Euromonitor International), as well as traffic jams in Jakarta, will further push demand for apartments, especially from young families or executives who work in Jakarta. As mentioned above, there are currently about 46,688 apartment units to be completed in the market between now and 2016.

However, the plan to slowly reduce fuel subsidies in Indonesia is currently an issue in the news because there is a strong link between the increase in fuel prices and economic growth, including inflation rate. Overall, the increasing fuel price likely means that the cost of anything relying on transport will be affected, including raw materials for building.

From 2010 to 2014 YTD, the average asking rental rate for apartments in the CBD grew by 8% per annum, while for apartments in South Jakarta (including Non-prime areas), it only grew by 4% per annum. In fact, the upward trend of rental rates was mostly affected by periodic increases in serviced apartment rents, typically by 10 - 12% per year. Meanwhile, non-serviced apartments generally reviewed the new rental rate in every two or three years with a lower percentage of increase than serviced apartments.

With tight competition from the new, individually owned apartments, as well as limitations on expatriate arrivals since the government implemented the new decree from the Ministry of Manpower and Transmigration, the rental rate growth is expected to be less aggressive compared to the previous years.

Average Rental Rates of Apartment For Lease (Serviced and Non-Serviced)


USD 0

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USD 3020

09

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CBD South Jakarta (including Non-prime Area)




24

Supply

Jakarta

Cumulative Retail Supply in Jakarta (For Lease and For Sale)


Research & Forecast Report | 3Q 2014 | Retail | Colliers International

After ten years of operations, Plaza eX, which was located in a very strategic location in the downtown, was closed. This lifestyle mall will be knocked down after being taken over by an overseas developer, China Sonangol, who will rebuild the area as an integrated commercial compound comprising offices, serviced apartments and small-scale supporting retail facilities. With the termination of operations at Plaza eX, the retail stock in Jakarta subsides by 15,461 sq m of leasable area. Apart from space reduction, the Jakarta retail market saw additional new retail space from the soft launch of Lippo Mall Puri, a retail mall located within the St. Moritz mixed-use development project in West Jakarta. Currently, the Lippo Mall Puri is only operating with some major tenants and will be fully operational some time in early 2015.

The minor retail supply reduction this quarter was offset by the commencement of operations of Lippo Mall Puri, which provides a new, huge additional supply of 129,200 sq m, resulting in a cumulative 4.43 million sq m of retail space as of 3Q 2014. In addition, with 129,200 sq m of total lettable area, Lippo Mall Puri is the fifth mall that has an area of 100,000 sq m or more in Jakarta.

0

500,000

1,000,000

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2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

2008

2009

2010

2011

2012

2013

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YTD

2014

F

2015

F

2016

F

2017

F

2018

F

for Lease for Sale

RETAIL SECTOR




25 Research & Forecast Report | 3Q 2014 | Retail | Colliers International

Future Retail Space (2015 - 2018) by Region in Jakarta


Lippo Mall Puri is the latest retail center completed in 2014. Despite the absence of new retail space until the end of 2014, construction work on shopping centers in Jakarta continues to progress. At least three shopping centers are projected to begin operating in 2015 - 2016, namely, Pantai Indah Kapuk, Neo SOHO at Podomoro City and the shopping center at Pancoran, which are exhibiting significant construction progress. Pantai Indah Kapuk and the shopping center at Pancoran will meet their completion dates and add new supply in 2015. Neo SOHO, an extension project within Podomoro City, is projected to enter the market a year later.

The Existing and Future Retail Space in Jakarta by Region


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Central Jakarta

South Jakarta

North Jakarta

East Jakarta

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Existing Future

Apart from these three shopping centers, construction work is only seen at the New Harco Glodok development in West Jakarta. The majority of other future shopping center projects are still in the planning stages, and based on information from developers, some shopping mall construction will be delayed further, mainly due to changes in their design concepts.

A few shopping centers benefit from the development synergy of being in the same compound with a residential area, which brings population to support the retail area. Projects included in the abovementioned concept are mall @ green pramuka, mall @ jatinegara and Holland Village Mall.

Some existing shopping centers are continuously improving their physical appearance to face the tight competition among retail centers in Jakarta. Senayan Trade Center (STC) is revamping its top floor to provide a hotel as a supporting facility. Currently, the developer of STC is reconstructing its vertical accessibility by adding an escalator and an elevator. With the operating hotel, the developer is expecting to raise the overall performance of the whole development. Likewise, Cilandak Mall, located in South Jakarta, is planning refurbishment work on the façade as well as non-physical upgrades like re-arrange tenancy mix. The abovementioned malls have been in operation for around 10 years.

In all of the Jakarta area, North Jakarta has the most retail space (23.2%) of the 4.09 million sq m existing cumulative supply in Jakarta in 2013. In the future retail supply composition, West Jakarta shows significant growth of additional supply during 2015 - 2018. Of the 538,000 sq m total projected additional supply in 2015 - 2018, West Jakarta will contribute 307,200 sq m or 57.1% of that additional future space. In addition to Lippo Mall Puri, which has begun operating, and the current construction of New Harco Glodok and Neo SOHO Mall, Mal Puri Indah 2 is in the planning stage.

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2015F 2016F 2017F 2018F





Construction Progress of Some Shopping Centers in Jakarta, as of 3Q 2014

SOHO Pancoran Mall, South Jakarta Pantai Indah Kapuk Mall, North Jakarta Podomoro City, West Jakartta

Greater Jakarta Area (BoDeTaBek - Bogor, Depok, Tangerang, Bekasi)After the absence of new retail space in the previous quarter, the BoDeTaBek area saw the completion of a new shopping center called Cinere Bellevue Mall. This shopping center brought a 23,491 sq m leasable area and increased the cumulative retail supply in the BoDeTaBek area to 3.61 million sq m as of 3Q 2014. There are two shopping centers in operation in the BoDeTaBek area as of 3Q 2014. In the remainder of the year, one under-construction retail development, Grand Dadap City Mall, is expected to be completed.

Cumulative Retail Supply in Greater Jakarta (BoDeTaBek)


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2,000,000

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2014

F

2015

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2016

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2017

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2018

F

for Lease for Sale

The Grand Dadap City mall project is located close to the international airport in Tangerang. There will be two stages of development for this shopping center. The first phase is targeted for completion and operations in 2014 and the next phase is scheduled for a year later. The lack of retail center supply in the surrounding area (in a radius of around 10 km) will make this shopping center a pioneer.

Japan-based shopping mall developer, AEON Mall, rescheduled the completion time of the Serpong project from 2014 to 2015, despite its on-going construction activity. Being quite aggressive in developing its shopping centers in Indonesia, AEON Mall has confirmed the construction of the next shopping center in Sentul, Bogor. Apart from expanding overseas developers, local developers have also demonstrated active market penetration by utilising their land banks. Metropolitan Land has launched its new mall in Cileungsi, Bogor, called Metropolitan Mall Cileungsi. The recent ground-breaking marked the commencement of construction of this shopping center.

The advantage of being surrounded by potential residential areas has triggered new retail development. Kota Harapan Indah in Bekasi also plans to provide facilities to accommodate the recreational and shopping needs of people living in and around the area.






Annual Retail Space Supply Comparison Between Jakarta and BoDeTaBek


Annual Retail Supply in BoDeTaBek Based on Region


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

Bogor

Depok

Tangerang

Bekasi

Existing Future

The abundance of potential population in the retail catchment area is one of the stimulating factors for developers to develop retail centers. Other determinants that spur developers to build shopping malls are the expectation of a prosperous economic outlook and infrastructure work (including new toll road, dry ports, train lines, etc.). The opening of JORR W2, which connects the northern, western and southern parts of Jakarta, will have a big impact on access, especially to Bintaro, Serpong and the surrounding areas.

In the south, Bogor is projected to see significant growth in retail space, as reflected by the future development list. Depok is aiming to shift development to other areas including districts such as Sawangan. Currently, shopping centers in Depok are mostly located in the city center along Jalan Margonda. Developing a section of toll road in Cimanggis – Serpong and Depok – Antasari will mean better growth for this region.

Future Retail Supply (2H 2014 - 2018) in BoDeTaBek Based on Region


0

100,000

200,000

300,000

400,000

500,000

600,00020

08

2009

2010

2011

2012

2013

2014

F

2015

F

2016

F

2017

F

2018

F

Jakarta BoDeTaBek

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

Bogor

Depok

Tangerang

Bekasi

2014F 2015F 2016F 2017F 2018F

New Supply Pipeline in JakartaShopping centerS location region nla (Sq m) StatuS

2015

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

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

2016

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

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

Pulo Gadung Trade Center extension Pulo Gadung East Jakarta 10,000 In Planning

AEON Mall Cakung East Jakarta 90,000 In Planning

continued




28


Research & Forecast Report | 3Q 2014 | Retail | Colliers International

New Supply Pipeline in BoDeTaBekShopping centerS location region nla (Sq m) StatuS

2014

AEON Mall Serpong Tangerang 75,000 Under Construction

Grand Dadap Mall Dadap Tangerang 20,000 Under Construction

2015

AEON Mall Deltamas Bekasi 90,000 In Planning

Plaza Indonesia Jababeka Bekasi 20,000 In Planning

2016

Bekasi Trade Center 2 Bulak Kapal Bekasi 56,000 In Planning

Living World Jababeka Bekasi 18,000 In Planning

Metropolitan Mall Cileungsi Bogor 25,000 In Planning

Vivo Sentul Lifestyle Cibinong Bogor 30,000 In Planning

Vivo Sentul Trademall Cibinong Bogor 13,000 In Planning

2017

AEON Mall Cibinong Bogor 20,000 In Planning

Hollywood Central Cikarang Bekasi 25,000 In Planning

Embarcadero Bintaro Tangerang 40,000 In Planning

Grand Dhika City Mall Bekasi Bekasi 24,000 In Planning

Sawangan Mall Sawangan Depok In Planning

2017

Kota Harapan Indah Bekasi Bekasi In Planning

Lippo Grand Mall Karawaci Tangerang In Planning

AEON Mall Sentul Bogor In Planning

Shopping centerS location region nla (Sq m) StatuS

continuation

2017

Mal Puri Indah 2 Puri Indah West Jakarta 75,000 In Planning

Grand Cipulir Cipulir South Jakarta 40,000 In Planning

Jatinegara City Jatinegara East Jakarta 50,000 In Planning

New Harco Plaza Glodok West Jakarta 60,000 In Planning

Mall @ Green Pramuka City Cempaka Putih Central Jakarta 30,000 In Planning

2018

Mall at The City Center Mas Mansyur Central Jakarta 65,000 In Planning






Occupancy Occupancy Performance of Shopping Centers in Different Regions of Jakarta


A large, new retail space by operating Lippo Mall Puri contributed to bring the occupancy rate of shopping centers in Jakarta dropped quite sharply by 3.1% QoQ to 86.1% as of 3Q 2014. Despite high pre-committed occupancy, only a few tenants are operating thus far in Lippo Mall Puri. Vacant retail spaces in Jakarta are largely found on lower and/or upper floors, primarily at old shopping centers that are scattered around Central and West Jakarta. At these malls, most of the occupied spaces are only near escalators, elevators and/or the main entrance.

Additional unoccupied spaces are also generated from the renovation work at most shopping centers in Central and West Jakarta and therefore the retail market in these areas saw continuously weakening performance during January - September 2014. The occupancy rate in Central Jakarta alone (excluding the CBD area) was 73.1% as of 3Q 2014 and dropped by 10.5% QoQ.

West Jakarta saw the most significant dwindling in occupancy. The low occupancy experienced by run-down shopping centers coupled with the large, incoming supply (from Lippo Puri Mall) in the quarter has had a big impact on occupancy, which fell 15.1% QoQ to 77.4% as of 3Q 2014. Thus far, Lippo Mall Puri have secured Parkson, Matahari and Hypermart which have been operational. These tenants are expected to attract more visitors and pull in increasing crowds. The Parkson store in Lippo Mall Puri is their first store in Indonesia.

Cilandak Mall, located in South Jakarta, plans to re-compose the layout and tenancy mix which resulted in the closure of under-performed stores and accordingly increased the vacancy level. Nevertheless, the overall occupancy performance in South Jakarta (excluding the CBD) registered a mild increase of 90.7% as of 3Q 2014. The CBD occupancy level is currently at 92.3%.

North and East Jakarta also recorded sanguine occupancy during 2014. Despite moderately rising QoQ, occupancy at shopping centers in those areas climbed around 2% on average in 2014 YTD. Some malls showed increased performance in the midst of tight competition in the Pluit and Kelapa Gading areas. In East Jakarta, at least three shopping centers fuelled the overall occupancy performance in the region during 2014. Occupancy levels in both the North and East Jakarta areas gradually moved upward to 85.2 and 86.7%, respectively as of 3Q 2014.

60%

65%

70%

75%

80%

85%

90%

95%

100%

2008 2009 2010 2011 2012 2013 2014YTD

CBD Central Jakarta South Jakarta

North Jakarta East Jakarta West Jakarta

The Occupancy Level Comparison Between Retail for Lease and for Sale


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012 2013 2014 YTD

for Lease for Sale

The upper class shopping centers maintaining an occupancy rate of 88.3% as of 3Q 2014 despite dropping significantly by 4.6% in QoQ. The vacancy level of upper class shopping centers that began operations before 2012 remains at only 3.8% while a higher vacancy rate was shown by shopping centers that were in operation in 2012 - 2013, i.e. 7.7%. In some cases, the middle and low grade shopping centers seem to experience gloomy performances QoQ. Occupancy was recorded at 85.4%, reflecting a change of 1.2% QoQ.

Jakarta





Occupancy Level of Retail Center in Jakarta


There was a quite large additional supply in Bogor in early 2014, which caused the occupancy rate to plummet by 7.7% to 81.7% as of 1Q 2014. Thereafter, with no new additional supply, the occupancy rate in Bogor was relatively stable at 82.4% as of 3Q 2014.

After almost eight years since Margo City began operations, Cinere Bellevue provided new additional retail space in Depok with a total lettable area of more than 20,000 sq m. After remaining relatively steady at 88 - 90%, the occupancy rate of shopping centers in Depok fell 6.3% to 83.8% because the physical commitment at Cinere Bellevue is still low. Nevertheless, this newly operating mall has achieved high pre-commitment occupancy. With no new additional supply in at least the next two years, occupancy is projected to rebound.

Bekasi and Tangerang are the most active areas to contribute new shopping centers, at least within the last two years. However, the average occupancy rate for shopping centers in Bekasi and Tangerang remained at 80 and 83%, respectively, throughout 2014.

Although only a few additional retail spaces will be completed next quarter, seemingly the occupancy level will continue to face a big challenge up to the end of 2014 in the BoDeTaBek area. Furthermore, additional large retail supply in 2015 - 2017 will create tighter retail competition in the BoDeTaBek area.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012 2013 2014 YTD

Upper Class All Classes

Again, refurbishing and incoming large additional supply caused occupancy rates for shopping centers in Jakarta to go down QoQ. However, this does not reflect a slowdown in demand. Some future shopping centers in Jakarta have secured high pre-commitment level from several tenants. It is expected that the stores will open soon and bring the occupancy up. Landlords need to refurbish their premises and to refresh their concept in order to attract more new tenants.

As the fourth largest country in the world based on population, Indonesia continues to be an attraction for foreign retailers as a business expansion target. Several retail brands have been eyeing this big market and some have confirmed the opening of their first stores in Indonesia next year. In the middle to low segment, local retailer, Ramayana Lestari Sentosa, is set to join with Holland-based supermarket chain, SPAR International BV, to develop the company’s supermarket business. SPAR International is the world’s largest food retail chain with more than 12,000 stores worldwide. Ramayana will set up 30 supermarkets under the Spar name in the next three years with five of them expected to be operating before the end of 2014.

Next year is expected to continue as a landlord’s market given the limited retail space supply in 2015. In this situation, it is likely that the retail market in Jakarta will raise the occupancy rate. The pre-commitment level for shopping centers that are projected to open in 2015 is around 70% as of 3Q 2014. The retail market is waiting to see that all the pre-committed tenants immediately open stores at the new malls.

BoDeTaBekA declining trend of occupancy occurred at shopping centers in BoDeTaBek, at 81.8% as of 3Q 2014 or down 1.1% QoQ. In fact, new shopping centers that were in operation in 2013 - 2014 have reached an 85% commitment level as of 3Q 2014. However, some stores are currently fitting out and not officially open.

Occupancy Level of Retail Center in BoDeTaBek


50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

2008 2009 2010 2011 2012 2013 2014 YTD

Bogor Depok Tangerang Bekasi Average





Base Rental Rates Geographically, asking base rental rates for shopping centers located in the outside CBD area are higher than the average market. Some malls which have been operating since 2010 - 2014 in good locations and were developed by reputable developers, started offering base rents considerably higher than others.

Average asking base rent for shopping centers in Jakarta was IDR510,562/sq m/month as of 3Q 2014. Despite growing 7.3% in 2014 YTD, growth of 1.2% QoQ was slower than in previous quarters.

The graph below shows that asking base rents for shopping centers in Jakarta experienced a significant bounce in 2012 - 2014, by 9.8% on average. However this growth has put pressure on occupancy, which continued to fall mildly, especially in 2013 - 2014 YTD.

In order to attract new tenants, the growth of asking base rents at most shopping centers in Jakarta was slow. As of 3Q 2014, almost 60% of the shopping centers for lease in Jakarta still offered a range of base rents similar to the last one to two years.

Only 23.2% of the shopping malls in Jakarta adjusted their base rents between 5 and 52% based on available space YoY. Most of them feel confident in increasing their base rents due to positive performance and limited vacant space. In some cases, refurbishment work, as well as repositioning the new market for the malls, have better positioned the malls to introduce higher asking rents. Additionally, newly operating shopping centers with asking base rents above the market average also push up the rental rates further.

Occupancy Rates vs Base Rental Rates of Retail Centers in Jakarta


0%10%20%30%40%50%60%70%80%90%100%

IDR 0

IDR 100,000

IDR 200,000

IDR 300,000

IDR 400,000

IDR 500,000

IDR 600,000

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

YTD

Base Rent (IDR) Occupancy (%)

As the main business area of Jakarta, the CBD is mainly populated by upper class shopping centers that maintain a wide gap in the rental rates compared to the non-prime area (outside CBD). As of 3Q 2014, the average asking base rent (for typical floor) in the CBD was IDR780,300 psm / month, while outside the CBD it was IDR400,612/sq m/month.

Average Asking Base Rental Rates in the CBD and Non CBD Areas


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

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

YTD

CBD Outside CBD Average

The average base rent for upper-class shopping centers is currently IDR856,482/sq m/month. Due to very limited available space, at least two shopping centers of this grade have adjusted their base rents by around 20 - 30%.

In addition, the average base rent for upper-class malls is also 1.5 times higher than middle-class malls in Jakarta, which was IDR360,744/sq m/month.

Shopping centers in BoDeTaBek also showed growth, although moderate, in QoQ. As of 3Q 2014, base rent in BoDeTaBek was IDR308,259/sq m/month with growth of 11.2% in 2014 YTD.

Tangerang and Bekasi are still major contributors to the overall base rent in Bodetabek. In 2014 YTD, these two regions recorded increases of 13.5 and 12.7%, respectively, and had base rents of IDR377,642 and 285,801/sq m/month. Bogor also recorded a significantly increasing base rent. New shopping centers with slightly higher than average base rents have caused shopping center rents in Bogor to reach IDR272,396/sq m/month as of 3Q 2014. This average rent grew 12.1% during 2014 YTD. The base rent for shopping centers in Depok was IDR256,472/sq m/month, growing 9.6% in a similar period, 2014 YTD.





Service Charge

Average Service Charges Cost of Different Class of Shopping Centers in Jakarta


After being driven by an increasing electricity tariff last year, a fuel hike seemingly will have an impact on the adjustment in service charges next year. About 40 shopping centers have adjusted their service charges from 10 - 40% to bring the overall service charge to IDR100,384/sq m/month, growing 12.9% YoY.

Service charges for upper-class malls showed the highest growth with 11% in the last two years. In 2014 YTD alone, service charges at upper-class malls grew by 20% to IDR133,911/sq m/month.

Service charges for the middle and middle-low class shopping centers grew by 6.8 and 14.3% in 2014 YTD to IDR89,286 and 63,335/sq m/month, respectively. This growth reflected that the gap between those classes of shopping center has gradually been reduced. This also illustrated that middle - low class malls are organising.

Much higher growth, 23.6%, was demonstrated in BoDeTaBek, YoY, with average service charges at IDR78,296/sq m/month. The highest growth was seen in 1Q 2014 in the whole of BoDeTaBek this year. An increasing basic electricity tariff in 2013 caused both existing and newly operating shopping centers to adjust their service charges. Thereafter, growth of service charges was relatively flat in the next two quarters.

As of 3Q 2014, it has not yet been confirmed if any shopping centers will adjust their service charges at the end of the year. Most of them are waiting for the right time while evaluating their performance during 2014.

IDR 0

IDR 20,000

IDR 40,000

IDR 60,000

IDR 80,000

IDR 100,000

IDR 120,000

IDR 140,000

IDR 160,000

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

YTD

Upper Class Middle Middle Low All Class

Average Service Charges Cost of Shopping Centers in BoDeTaBek Based on Region


IDR 0

IDR 20,000

IDR 40,000

IDR 60,000

IDR 80,000

IDR 100,000

2008

2009

2010

2011

2012

2013

2014

YTD

Bogor Depok Tangerang

Bekasi Average




33

Industrial Estate SectorSupplyThe availability of ready-to-use land remained the major issue for active industrial estates, particularly in Bekasi and Karawang regions. Sluggish land absorption has been triggered by the lack of industrial land stock that is mostly seen in both regions. Several operating industrial estates have been reporting slow sales mainly because of meager land stocks.

A similar issue also occurred in other regions. The Bogor region only has a limited amount of land stock, however, inquiries for industrial land in the region have been relatively sparse. As a result, this issue has not been an immediate problem for the region. In Tangerang, requests for industrial land are generally quite a few and thus far can still be managed by the most active industrial market in the region. Many industrial developers in the Tangerang area have finished selling land and some others are only focusing on providing land for their own company. Recently, the market has witnessed the growth of industrial compounds, like warehouse centers, but they are not categorised as industrial estates.

With only two major active industrial estates operating in the Serang region, land availability was somewhat of an issue amid continued requests for new land. One industrial estate may limit the sales volume due to the availability of land while the other estate still has a big parcel of land to sell. With the improvement in the transport infrastructure, Serang is increasingly becoming a popular industrial location.

The overall remaining land stock in Bekasi is mainly undeveloped land while some is still in the planning stage. It takes some time to develop this as ready-to-use land. Almost all industrial estates with expansion plans reported that new land would only be available during 2015.

In terms of future supply, Karawang holds potential land stock of more than 2,250 ha. This immense land bank mainly comes from the mega-project known as Trans Hexa Karawang, a consortium comprising seven companies in several big groups, which include Gajah Tunggal Group, Salim Group, Artha Graha Group, etc. In total, potential industrial land provided by the consortium is 1,967 ha. The Trans Heksa Karawang location can be accessed via the Jakarta-Cikampek toll road, exit at km 46, Karawang Barat Toll Gate 2. The Trans Heksa Karawang main road connects several industrial estates in the area. The construction of road infrastructure is progressing. Gajah Tunggal Group is the pioneer that started developing and selling industrial land and thus provided around 400 ha (gross) of new industrial land to the market. This industrial estate is now called GT Technopark @ Karawang.

Research & Forecast Report | 3Q 2014 | Industrial Estate | Colliers International




34 Research & Forecast Report | 3Q 2014 | Industrial Estate | Colliers International

Construction Progress in Some Industrial Estate

PT Toyota Motor Manufacturing in KJIE Trans Hexa


DemandFor the first time in the industrial market history, the Karawang region did not register sales this quarter. All active industrial estates reported zero sales during the quarter. The reason behind the poor performance was limited ready-to-use land for sale. One industrial estate confirmed that they keep receiving requests for industrial land, nevertheless, land remains limited. At least four active industrial estates are in the same condition where most of the future land is still under development. For the last three consecutive quarters of this year, all of the operating industrial estates only sold 9 ha of land.

Industrial Land Stock Status in Some Active and Future Industrial Estates

Note: temporary figures (subject to be revised)


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Bogor Bekasi Tangerang Karawang Serang

Hec

tare

s

Total Saleable Land Remaining Land Potential Land To Be Developed

Annual Industrial Land Absorption


0

200

400

600

800

1,000

1,200

1,400

2006

2007

2008

2009

2010

2011

2012

2013

2014

YTD

Hec

tare

s

Jakarta Bogor Bekasi Tangerang Karawang Serang





Total industrial land absorption decreased moderately compared to the previous quarter, accounting for only 70% compared to figures seen in 2Q 2014. However, the number of transactions occurring this quarter were higher than were concluded in 1Q 2014. A substantial 54 ha of land were transacted in Delta Silicon, which was the highest transaction volume in one industrial estate for this quarter. The 54 ha being transacted was sold to a local developer company to develop logistics and warehouses for sale on 26 ha of land. Another 10 ha was sold to an expanding company producing plastic and the remaining 18 ha was sold to joint operation developers for warehouses. Another transaction that fuelled the sales performance this quarter was by Bekasi Fajar, totalling around 16 ha. These sales were concluded by warehouse and automotive-related companies. Other smaller land transactions were recorded by Greenland International Industrial Center (GIIC) and Jababeka. GIIC mainly released around 4 ha comprising three land lots to metal work, chemical warehouse and auto parts companies. A total of about 2.5 ha of land in Jababeka were sold for packaging, warehousing and general manufacturing / commercial purposes. All in all, the Bekasi region recorded a total of 76.5 ha of land transacted, the highest quarterly sales so far in 2014 YTD.

There is no substantial single transaction like in the previous quarter; nevertheless, this quarter’s sales proved that the Serang region continued to record consistent sales performance. Driven by two active industrial estates, the total industrial land transactions amounted to 22.25 ha this quarter. Unlike the transactions in the previous quarter when Charoen Pokphand Indonesia helped fuel the most sales, 3Q 2014 saw eight transactions with a total of 22.25 ha. KIEC welcomed two new investors specializing in steel fabrication totalling 2.5 ha and single expansion activity of food industry that took 1.2 ha of land. Land transactions in Modern Cikande were dominated by the expansion of food processing companies of more than 12 ha. A building materials company acquired 3.2 ha of land for expansion while almost 3 ha of land was released to a new pet food company from Thailand.

Tangerang witnessed Millennium as the most active industrial estate in the region. Approximately 25 ha of land were sold to heavy equipment companies from Japan.

All in all, the overall land transactions during the quarter accounted for 124.64 ha or 30% lower than in 2Q 2014. Nonetheless, there are eight industrial estates that registered transactions this quarter compared to six industrial estates last quarter. During 2014 YTD, the total of industrial land being transacted was 337.33 ha or 76% of the total transactions for the whole of 2013. Should the land availability be no issue, total transactions for the full year 2014 should surpass total sales from last year.

Land Absorption During 3Q 2014


Some sales activities during the quarter were pre-commitment transactions, although the hand-over process will be largely completed in 2015. Amid the land scarcity, tenants (mainly existing tenants) are competing to get new land for their expansion plans by paying in advance before the land is completely developed as ready-to-use industrial plots. Land plots are reserved before they are ready (after cut and fill work, placing roads and other infrastructure), paid at the current market price and handed over to buyers after the land is ready for development. This practice has been conducted for several years in order to secure land for future business expansion and to peg prices at the current value. The under-construction GT Technopark @ Karawang has allocated around 20 ha for their own use and about 12 ha were sold to a Japanese company. Existing industrial estates with undeveloped land banks have also sold land before it is ready to be occupied.

On the leasing front, only Kota Bukit Indah (Besland Pertiwi) in Karawang and CCIE in Bogor are active estates. During the quarter, one leasing transaction registered less than 0.88 ha of land for the fabrication of oil drilling equipment and automotive products. There was no significant change in the number of industrial buildings (SFBs or warehouses) or land being leased in Kota Bukit Indah (Besland Pertiwi) as the number of newly committed tenants is almost equal to the outgoing tenants.

0 5 10 15 20 25 30

CCIE

Jababeka

Krakatau Industrial Estate Cilegon

Bekasi Fajar

Modern Cikande

Millenium

Delta Silicon

hectares

Price and Rental Tariff None of the industrial estates located in Karawang have set new prices. The slow sales resulting from insufficient land stocks has pushed industrial developers to maintain their current prices.

Price adjustments during the quarter were only introduced by three industrial estates in Bekasi, one in Serang and one in Tangerang.





Two main industrial estates in Bekasi quoting in US dollars adjusted the asking price by 5 to 10%. Another estate in the region quoting prices in local currency introduced a new price that is 14% higher than in the last quarter. All in all, industrial land prices in Bekasi climbed 3.6% over the last quarter, an average of USD218.07/sq m. Prices in Bekasi have steadily risen in line with the diminishing readily available land stock in this region.

One industrial estate in Tangerang has changed the average land price in the region by 7.2% QoQ after introducing a new price of IDR1.8 million/sq m or an increase of 20%. Being the only operating industrial estate with active selling was their reason for introducing a new price. Likewise, one industrial estate in Serang confidently applied a gradual increase in anticipation of the better access and consistent sales recorded every quarter. In the last month of the quarter, this estate offered a price 7% higher than the last quarter, at IDR1.5 million/sq m. The average industrial land price in Serang has climbed modestly by 2% QoQ.

Rental rates have been stable for some time. In Bogor, rental rates for buildings (only) hovered at IDR37,500/sq m/month while that for industrial land ranges from IDR4,500 to 5,000/sq m/month. Apart from rent, the industrial operator charges an additional service charge of IDR800/sq m/month. The leasing scheme in Karawang is only applicable in two industrial estates, i.e. Kota Bukit Indah (operated by Besland Pertiwi) and Kawasan Industri Kujang Cikampek (state-owned company). Rental rates for industrial buildings range from USD3.50 to 4.00/sq m/month. The land for lease is offered at around USD1.25/sq m/month.

Greater Jakarta Industrial Land Prices


IDR 0

IDR 50

IDR 100

IDR 150

IDR 200

IDR 250

2006

2007

2008

2009

2010

2011

2012

2013

2014

YTD

Bogor Bekasi Tangerang

Karawang Serang

Types of Activities Industries During January - September 2014



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 USD 120.0 USD 237.9 USD 179.0 USD 0.06 USD 0.06 USD 0.06

Bekasi USD 212.4 USD 254.9 USD 218.1 USD 0.06 USD 0.08 USD 0.07

Tangerang USD 153.0 USD 170.0 USD 161.5 USD 0.03 USD 0.08 USD 0.06

Karawang USD 170.0 USD 200.0 USD 185.0 USD 0.05 USD 0.10 USD 0.06

Serang USD 127.5 USD 148.7 USD 138.1 USD 0.03 USD 0.05 USD 0.04

*1USD = Rp 11,768

Automotive20.6%

Food & Beverage37.6%

Plastics4.0%

Steel-related1.4%

Oil & Gas Related0.4%

Manufacturing0.1%

Logistics/Warehousing

21.9%Packaging

1.3% Metal1.3%

Heavy Equipment

7.4%

Machinery0.3%Building Material1.0%

Others2.6%

Service ChargeNothing changed for service charges, but one industrial estate in Bogor introduced an increase of IDR50/sq m/month. After increasing the service charge in early 2014, most developers are now maintaining the current rates.





OutlookThe overall sales at least until 2014 YTD were much fuelled by one significant transaction occurred last quarter. There is a sign of recovery this quarter at least it started happening in certain industrial estates that reported good sales for the quarter and better prospect in the remainder of the year. Total sales during 2014 are previously expected to be lower than total sales volume in 2013. Up until 3Q 2014, total year-to-date sales already represented 76% of total sales in 2013. For the remaining three months in the year, it is expected to catch up to last year’s performance. The brisk economy, the hope for political stability and continued enquiries for industrial land are factors to underpin sales performance. Nevertheless, the main problem lies in the shortage of land.

The industrial market along 2014 is focusing on overcoming the backlog of supply since several industrial estates are rushing for construction with the expectation to deliver next year. Nonetheless, most of the upcoming industrial land scheduled for next year is already reserved by pre-commitment sales, and only a few will be available for sale. Thus, we still expect new industrial land to be difficult to find next year.

The post election situation is not immediately translated into making quick business decision although some industrial estates have reported good sales after the election. In some case, foreign investors with business experience in Indonesia take immediate investment action. For new business entity, leasing industrial property is perceived to be the safest option until they are confident with the market condition. Lastly, the market is expecting a better government and solid cabinet team to anticipate growth next year.

$0.00

$0.01

$0.02

$0.03

$0.04

$0.05

$0.06

$0.07

$0.08

$0.0920

06

2007

2008

2009

2010

2011

2012

2013

2014

YTD

US

$/sq

m/m

onth

Bogor Bekasi Tangerang Karawang Serang

Greater Jakarta Industrial Maintenance Cost





38 Research & Forecast Report | 3Q 2014 | Colliers International




Copyright © 2013 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 15,800 professionals operating out of more than 485 offices in 63 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.

colliers.com

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

Colliers International IndonesiaWorld Trade Centre 10th & 14th floorJalan Jenderal Sudirman Kav. 29 - 31Jakarta 12920Indonesia

TEL 62 21 521 1400

Accelerating success.

485 offices in 63 countries on 6 continentsUnited States: 146 Canada: 44 Latin America: 25 Asia: 38 ANZ: 148 EMEA: 84

$2.1billion in annual revenue

1.46billion square feet under management

15,800professionals and staff




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