Jakarta remains focus of local property market

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Despite rapid economic growth in second-tier cities in Indonesia during the last several years, Jakarta remains the darling of developers in the local property market, a recent study by real estate consultancy Jones Lang LaSalle says.

LaSalle chairman Lucy Rumantir said on Tuesday that even second-tier cities in Kalimantan and Sulawesi have become more important property markets, although they had yet to become favored by property developers due to limited demand.

Unlike the situation in business centers such as the capital; Surabaya, East Java; and Bandung, West Java; the condominium market in second-tier cities was still uninviting, Lucy said, since “home prices in the downtowns of those cities are relatively affordable compared to Jakarta.”

“People there choose to purchase landed houses instead of renting apartments, thus making developers reluctant to build apartments,” Lucy told The Jakarta Post.

The Jakarta condominium market currently has a total stock of 77,000 units, which is slated to grow by 27,000 units by the end of 2014. More than 65 percent of the new condominiums have already been sold off-plan, according to the report.

The condominium market has yet to develop in cities outside Java, such as in Balikpapan and Samarinda in East Kalimantan, even though those cities, for example, were dominated by industries in the oil and gas, mining and agriculture sectors, Lucy said.

Nevertheless, according to LaSalle’s report, Balikpapan and Samarinda had the potential to accommodate a strong leasing market in the future, thanks to their large expatriate populations.

Other cities categorized as developing markets by the report include Medan, North Sumatra, and Palembang, South Sumatra.

Jakarta still tops the nation’s office market, as shown in the report, which was launched on Tuesday.

The capital’s Sudirman Central Business District (SCBD), comprises around 4.2 million square meters of office space with about a 90 percent occupancy rate.

In 2012, SCBD absorption would reach around 400,000 square meters, according to report, while rents in the district would grow by around 20 to 25 percent annually over the next two years due to limited space and surging
demand.

In its report, LaSalle also noted the revival of the retail market in Jakarta, which the firm attributed to the continued growth of Southeast Asia’s largest economy, the rise of the nation’s middle class and the ever-growing number of malls in the capital.

The study said that a pre-commitment from South Korean Lotte Department Store to open a store in Ciputra World Jakarta, an upscale multiuse development currently under construction, was an example of foreign firms willing to pursue business opportunities in Indonesia.

 Lotte has already leased the entire 78,000-square-meter area. (asa)