When their business begins thriving, companies normally look for expansion, including their office.

Some companies have to decide whether they will continue renting office space they are using and then set up new office rooms, or buy additional office space to fulfill their needs.

As a matter of fact, renting or buying offices is determined by company policies. Multinational firms, whose offices in Jakarta and other cities in Indonesia are only branch offices, normally prefer renting office space. This is because office rent prices in Jakarta are relatively cheaper than in other Asian countries.

At the moment, prime office rental prices in Jakarta, comparable to the prime Grade A Office benchmark in Asia Pacific, average out at US$29.7 per square meter per month, including management fees and taxes.

These prices are far below those in Hong Kong, which can reach $259.5 per square meter per month, Tokyo ($208.6), Singapore ($165.3), and other cities like Ho Chi Minh City, Osaka, Seoul, Shanghai, Hanoi, Beijing and Kuala Lumpur.

Not surprisingly, foreign companies that intend to open new offices in Singapore, Hong Kong and Japan prefer buying offices rather than renting them. With their own office property they can make extraordinary capital gains.

Some foreign companies in these countries buy office buildings for themselves because existing office space for rent is not quite what they are looking for. Normally, they ask local developers to build the office buildings for them and after the development is completed, then they purchase the building.

However, conditions in Jakarta are different as rental prices for office space are among the cheapest in the region.

Total supply of office space in Jakarta rose 4 percent from end-December to 5.87 million square meters by end-June 2008. By end-2009 it is estimated there will be 6.61 million square meters if all the new office buildings are completed as originally scheduled.

Foreign companies investing here also prefer renting office space to buying, partly due to worries about political stability and security in Indonesia.

Moreover, at the moment property in Indonesia is not that liquid, as compared with stocks or other investment instruments.

Even foreigners who have bought office buildings or office space should be prepared to become property players. The question arises, however, as to whether buying office space or office buildings will be profitable for them.

And, is there flexibility for thriving companies that need larger offices? Can their current office space that they already purchased accommodate their needs? If not, then who will manage it if they move?

All these questions only show that buying office space is not as simple as many might have imagined. It should also be added that the amounts required to buy new office space are bigger than the amounts needed for renting it.

Most buyers of strata title offices are local companies that feel quite certain that their business will last long-term in Indonesia. Meanwhile, foreign companies do not have any reason to buy offices in Indonesia.

In the past, people bought office space for their own use and also for investment purposes because rent prices were then quite high. Many companies bought office space and office buildings but did not use all of it. They rented some of it out to other companies. And then they used a portion of their earnings to repay the loans they had borrowed to buy or build their offices.

But, in the current business climate, buying offices and then renting them out are no longer quite so easy. Moreover, nobody feels certain that the rent prices offered are more attractive than office building prices.

As technology and infrastructure in Jakarta are continuing to develop, in the coming years companies -- foreign and local -- will no longer have to decide whether their offices must be located in the CBD or in other areas.

In the past, all companies wanted to open their offices in the CBD. To date, however, this type of demand has shifted albeit gradually, partly due to the implementation of the three-in-one rule for the main roads near the CBD.

The worsening environmental pollution in the area is another factor.

With regard to prices, offices in non-CBD areas are cheaper. At the moment, however, with the completion of the Jakarta Outer Ring Road project, rent prices for office space in non-CBD locations will now be adjusted.

Within the next few years office space tariffs in non-CBD areas will not be much lower than in the CBD, unlike a few years ago, because those opening their offices in non-CBD locations will also have improved access to transportation.

Having offices in the Jakarta CBD will remain the main choice for companies that need exposure and closeness to their clients.

However, as the Jakarta Outer Ring Road (JORR) project nears completion, it is almost certain that the office market outside the CBD will become more active and it will even be more attractive that the office market in the Jakarta CBD.

The writer is chief business development officer at Procon Indah

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