Above and beyond as offices reach new heights outside CBD

Jakarta is witnessing the spread of high-rise office towers outside central business district (CBD) areas, with prospective tenants opting for less expensive rentals away from traffic-clogged sections of the city.

The areas are also closer to the hubs of their business activities.

Although Jl. Sudirman, Jl. M.H. Thamrin and Kuningan will likely remain favorites among companies seeking a prestigious address, customers now have more choice with new business districts emerging outside traditional CBD areas.

The trend dates back to 2007, amid skyrocketing global crude oil prices. It led to an attendant increase in construction costs and the hike in the rental rates of CBD office space.

Several CBD tenants, including major oil and gas company ConocoPhilips, Marathon Oil, DuPont and Thiess Indonesia, moved to areas outside the CBD.

With increasing rental rates and notorious congestion in the CBD, developers are seizing the opportunity to boost their office space business.

L’Avenue, Alamanda Tower and The Manhattan Square are among office buildings set for non-CBD areas to meet the surging demand.

The 28-floor L’Avenue office tower will be built on Jl. Raya Pasar Minggu, South Jakarta, as a 39,000 sqm strata title building. Construction will be completed in September 2014.

Alamanda Tower, to be built by PT Karyadeka Graha Lestari on thriving Jl. TB Simatupang, will have total
office space of 37,000 sqm (rentable area) in its strata title building. The Manhattan Square developed by PT Sumber Mesin Raya, also located on Jl. Simatupang, will comprise three office towers with office space
totaling some 40,000 sqm. The office building will come on stream in the fourth quarter of 2013.

Many local companies with offices in shop-houses, known locally as “ruko”, have outgrown their workplaces due to the hiring of more employees – and are seeking space to grow.

“Naturally, they need bigger and adequate office space,” said PT Bintang Rajawali Perkasa’s general manager of sales and marketing, Gatot Sedyadi.

“Demand for office space also partly comes from domestic companies that look forward to opening a new branch office as part of their business expansion program.”

Heading south

South Jakarta is one of the fastest-growing areas outside the CBD. Demand for office space in the area encompassing Jl. TB Simatupang and Pondok Indah is part of an increasing trend, fueled by the presence of upscale facilities, such as international schools and hospitals, as well as commercial attractions of major malls and banks.

The construction of the Jakarta Outer Ring Road (JORR) toll road also provides tenants with convenient transportation options, connecting South Jakarta to residential areas such as Bintaro and Serpong, as well as the Debotabek (Depok, Bogor, Tangerang and Bekasi) industrial estates.

 “Jl. TB Simatupang is a new emerging CBD area in Jakarta. Many multinational companies have an office and some of them are moving here,” said P.K. Jalan, owner representative of PT Karyadeka Graha Lestari that will build office tower Alamanda.

He added that oil and gas and mining companies would be its main target as prospective tenants.

L’Avenue, Alamanda Tower and The Manhattan Square add to the burgeoning list of office towers located in growing business districts outside the CBD. For example, many local and multinational companies occupy offices at Ratu Prabu 2 on Jl. TB Simatupang; Menara 165, also on Jl. TB Simatupang; Graha Kanaan 2 on Jl. Raya Pasar Minggu and Arcadia Office Park along the Outer Ring Road (JORR).

In transit

According to Nirwono Joga, a specialist in architectural issues, the development of office buildings outside CBD areas will not have a significant impact on CBD areas in terms of office space demand.

He said this is partly because CBD areas will become one of the targets of the transit oriented development (TOD), or a mixed-use residential or commercial area designed to maximize access to public transport. It often incorporates features to encourage transit ridership.

When TOD is applied in CBD areas, with the Transjakarta bus corridor and mass railway transit (MRT) already in place, then demand for office space in CBD areas will remain high, he predicts.

The TOD concept, approved in 2011 , is expected to be implemented in 2016.

Development of office buildings should be an integral part of a mass transportation program, meaning that office buildings in Jakarta should be close to or parallel with the Transjakarta corridors and MRT stations.

“People will be encouraged to use mass transportation vehicles instead of personal cars and, in this way, traffic congestion can be reduced,” he said.

Meanwhile, Cushman & Wakefield’s associate director for research & advisory, Arief Rahardjo, said the development of office buildings outside CBD areas showed unique characteristics.

“The development of office buildings outside CBD areas has been pushed by the rising demand for an office building from buyers who want to use the space for their own, with the remainder offered for rent,” he said.

Tenants also consider the particular needs of their business in choosing which office space they will buy or rent for their business activities. For instance, most companies that have an office located on Jl. S. Parman and Slipi are engaged in trading, manufacturing, contractor activities, banking, IT & telecommunications, insurance and education, Arief said.

“This is because S. Parman and Slipi connect the Jakarta CBD to manufacturing areas, such as Daan Mogot, West Jakarta and Tangerang,” he added.

In contrast, most office buildings in the area close to Ir. Wiyoto Wiyono toll road that connects Cawang to Tanjung Priok, North Jakarta, are occupied by building owners whose businesses are focused on forwarding, transportation, manufacturing and other businesses that need proximity to the Tanjung Priok port, he said.

Office buildings located in both the CBD and non-CBD are projected to grow in tandem with Indonesia’s increasingly improving economy.

“Cumulatively, supply of office buildings located in non-CBD areas that will enter the market will total 785,000 m2 by the end of 2014. Part of the new supply is currently in the phase of construction, and the rest is in the planning phase,” Arief said.