Property Business Down on Slow Economy

TEMPO.CO, Jakarta – Slowing economy has taken its toll on the property sector. Property consultancy firm Jones Lang Lasalle (JLL) noted that the absorption rate of condominiums in Jakarta dropped dramatically in the second quarter of 2015. In addition, there is a decline in the occupancy rate offices and retail markets.

JLL head of residential Luke Rowe said that the absorption rate of condominiums in Jakarta reached 1,400 units in the second quarter, down 69 percent from quarter one's 4,500 units.

Meanwhile, JLL head of retail James Austen said that the second quarter's retail occupancy rate fell by one percent to 91 percent.

In the office sector, JLL market chief Angela Wibawa said that office occupancy rate in the central business district (CBD) edged down but remains in the range of 92 percent. Meanwhile, outside the CBD, there is a one-percent decline to 87 percent.

Ferry Salanto, associate director of Research Colliers International Indonesia, said that lease transactions of elite office spaces in Jakarta CBD are now denominated in rupiah. Last year, about 30 percent of office buildings were still rented out in US dollar.

"With Bank Indonesia's regulation [to transact in rupiah], the percentage has dropped significantly," Ferry said.  

Ferry believes the policy has impacted the office subsector the most.

Developers are also faced with more risks posed by the mandatory rupiah use, since premium buildings often require imported materials that must be paid in US dollar. Projects with international standards also tend to pay contractors, architects and designers in US dollars.

"It would make them think twice before deciding to construct a new building," he said.

ADITYA BUDIMAN