Colliers Quarterly | Office | Jakarta | 7 April 2021

Huge Supply Projection Expected to Put

Further Pressure on Rent and Occupancy

2021–24
Summary & recommendations Q1 2021 Full Year 2021 Annual Average
The engagement of tenants at newly operating office
buildings will help demand in 2021, which is
The office market in Jakarta is still in
estimated to be higher than in 2020. Demand is
a position of rebalancing. Vacant
expected to continue to strengthen until 2024, 18,302 sq m 92,799 sq m 163,928 sq m
space is increasing and rents Demand
although still remaining below 200,000 per year.
continue to decline. Meanwhile, the
Some construction projects have been put on hold or
market still has to face large
delayed due to pandemic-related restrictions.
additional supply in the next two
However, the cumulative supply is expected to 37,628 sq m 387,331 sq m 229,758 sq m
years. Supply
increase by about 2% per year from 2021 to 2024.
In the future, integrated office Annual Average
buildings with excellent transport QOQ / YOY / Growth 2021–24
links, accessibility to residential End Q1 2021 End 2021 /End 2024
Economic growth has yet to return to pre-pandemic
catchment areas, affordable rents
levels, and is not expected to sooner than 2022. It is 2.48% 2.99% 0.57%
and retail amenities will be keenly
safe to assume that rents will start climbing at around
sought after.
Rent the same time. Therefore, rent growth in from 2021 IDR228,756 IDR227,556 IDR239,956
Landlords are expected to play an to 2024 is expected to be below 1% per year.
important role in the market Vacancy will increase 1.7% per year in the 2021-2022 0.47% 2.04% 0.35%
recovery; one that is more flexible in period. Nevertheless, after that additional supply will
responding to market needs, see pressure soften slightly, and the vacancy rate will
Vacancy 19.6% 21.2% 20.6%
especially considering that lease start to fall.
agreements are likely to become Limited new space for sale will encourage unit owners 2.89% 3.79% 1.47%
shorter due to continued uncertainty. to resell in the secondary market. However, that has
Selling price yet to have an impact on the average selling price that
IDR47.7mio IDR48.1mio IDR49.2mio
is estimated to increase moderately until 2024.
Source: Colliers International
Note: USD1 to IDR14,572 at the end of Q1 2021.
Colliers Quarterly Office | Jakarta | 7 April 2021
Large additional supply in consecutive year
Total additional supply in Jakarta is expected to reach about 380,000 sq m in 2021,
relatively in line with 2020 supply, and our pipeline projections for 2022. Based on
current progress, all construction of supply pipeline projects in 2021-2022 will be
completed on time.
In 1Q 2021, Menara Binakarsa (previously known as Graha Binakarsa) in Jalan
Rasuna Said was re-opened to bring the cumulative supply in the CBD to 6.89
million sq m. Despite slower progress in construction, some office projects are still
in line to meet completion dates in 2021. Total office supply in the CBD will reach 7
million sq m in 2021, an increase of around 3.5% YOY. Outside the CBD, the
opening of Menara Tendean (M Ten) brought total supply to 3.60 million sq m in
1Q 2021. Four other office buildings are expected to be completed in 2021, with
total supply increasing by around 4.5% YOY.
Cumulative supply
2 Source: Colliers International
Hybrid working model to maintain demand level
Uncertainty still looms on the horizon for many office-based business owners,
which means now is not the best time to expand or commit to new office leases. A
rise in vacant spaces continues – boosted by an increase in tenant-controlled stock,
as occupiers offload surplus space. However, the commitment of several tenants
has helped maintain average occupancy rates in 1Q 2021, at 80.7%, which is
relatively stable QOQ. Meanwhile, newly opened office buildings outside the CBD
have also showed an increase in occupancy rates. However, the slowdown in
business activities due to the pandemic has put more pressure on tenants,
encouraging several to leave, thus reducing the occupancy rate of the buildings
they occupied. The occupancy rate outside the CBD was registered at 79.7% in 1Q
2021, a fall of about 1% compared to 4Q 2020. Our forecasts for 2021 see average
occupancy rates declining by 2%, compared to 2020, both in and outside the CBD.
In any case, occupancy in the 2020-2021 period will register below figures seen
during the financial crisis in 2008-2009.
Oxford Economics has forecast an improvement in GDP growth in Indonesia GDP
in 2021. This is expected to encourage business activity and prompt a rebound in
office demand. However, the market will still be faced with a large supply in 2021-
2022. Other than that, the dip in occupancy has also been driven by an increased
focus on space utilization, with many occupiers adopting an unassigned hot-desks
system in place of traditional private cubes and offices. These trends have pushed
down the average area needed per employee. The pandemic-induced adoption of
large-scale remote working may well push occupancy down further.
Colliers Quarterly Office | Jakarta | 7 April 2021

Annual supply and occupancy rates Rental tariff still wait a momentum to improve
The office leasing market will continue to favour tenants in 2021. Landlords in
oversupplied markets are advised to prioritize securing good quality tenants over
obtaining higher rents. Landlords must also be more accommodative by offering
incentive packages, shorter terms and optionality in new leases. Conversely, the
mild down cycle makes it imperative for occupiers to capitalize on current weak
leasing sentiment to negotiate better terms before the window of opportunity
closes.

Jakarta office rent (/sq m/month)

Source: Colliers International

The hybrid work concept, combining remote working with office use, must be
developed by companies before it is adopted. Changes in office layout and
adoption of the shared desk concept must be well thought out to optimize the new
workspace. The pandemic may see companies seek greater efficiency and consider
adopting a hub-and-spoke office model, which would make it less important to
maintain large headquarters offices in CBD.

The adoption by companies in Indonesia of the hub-and-spoke office model will

likely arise as a topic of discussion. Providing satellite offices for employees (the
Source: Colliers International
spokes), in addition to the main office (the hub) is expected to offer employees
easier access to a professional workspace. Some benefits include providing options
for companies related to location, a better work-life balance by reducing commute
times and an increase in productivity. This scheme is expected to boost office
absorption particularly outside the CBD, for both traditional and flexible
workspaces.
3
Colliers Quarterly Office | Jakarta | 7 April 2021

In 2021, supply growth will remain high, and market sentiment has yet to fully Jakarta office selling price (/sq m)
recover. These factors, coupled with the WFH trend, are likely to lead to requests
for a reduction in office space. Weak demand and the continuing increase in vacant
spaces are factors that are conspiring to depress rents, impacts of which are the
negotiation of greater discounts and continuing pressure on office rents. In 1Q
2021, average CBD rent was registered at 255,185 Indonesian rupiah, a drop of
about 1% QOQ. Outside the CBD, average rent was recorded at 181,287
Indonesian rupiah, a 5% decline QOQ. The inevitable rent correction is likely to
manifest up to the end of 2021. In 4Q 2021, rents in the CBD and outside the CBD
rent are expected to decline further, by about 2% and 6% YOY, respectively.

Buyers find dilemma in sluggish strata-title

market
The strata-title office market is in a shaky period. Low sales per year in 2020
continued to put pressure on selling prices. Some owners are offering units at Source: Colliers International
lower than the current market price, especially in the secondary market.

Buyers are also facing a dilemma in terms of purchasing either for investment or to
sublease. Investors purchasing for sublease must be prepared to face tight
competition from unabsorbed spaces in the market. In addition, the rental rate
continues to fall, and it is possible owners will see returns far from the expected
yield. Other than that, buyers must still pay service charges, and calculate whether
the amount will be in line with the projected increase in selling price in the
following year.

In 1Q 2021, we recorded some new vacant spaces in office buildings in the CBD
selling at prices higher than the market, bringing the average to IDR57 million.
Outside the CBD, the average selling price was relatively stable QOQ, registered at
IDR36 million.

4
Colliers Quarterly Office | Jakarta | 7 April 2021

Appendix
New pipeline

Development
Name of Development Location Region Developer name SGA (sq m) Marketing scheme
progress

CBD

2021

Office One Rasuna Said South Jakarta Sentra Graha Sentosa 16,357 For Sale Under construction

T Tower (BJB Tower) Gatot Subroto South Jakarta BPD Jabar 24,000 For Lease & Sale Under construction

Windas Development &

Daswin Tower Rasuna Said South Jakarta 80,000 For Lease Under construction
Mitsubishi

Thamrin Nine Thamrin Central Jakarta Putra Gaya Wahana 97,500 For Lease Under construction

2022

Menara BRI Gatot Subroto South Jakarta Bank Rakyat Indonesia 60,000 For Lease Under construction

Jakarta Office Tower by MORI Sudirman Central Jakarta MORI Building 90,000 For Lease Under construction

continued

5
Colliers Quarterly Office | Jakarta | 7 April 2021

Development
Name of Development Location Region Developer name SGA (sq m) Marketing scheme
progress

continuation

China Sonangol Media

Indonesia Satu North Tower Thamrin Central Jakarta 62,000 For Lease & Sale Under construction
Investment
China Sonangol Media
Indonesia Satu South Tower Thamrin Central Jakarta 65,500 For Lease Under construction
Investment

St Regis Office Tower Rasuna Said South Jakarta Rajawali Group 40,000 For Lease Under construction

Outside CBD

2021

Sanggala Tower TB Simatupang South Jakarta Sapta Tunggal Mulia 9,900 For Lease & Sale Under construction

Pondok Indah Office Tower 5 Pondok Indah South Jakarta Metropolitan Kentjana 37,177 For Lease Under construction

The Sima TB Simatupang South Jakarta Grage Trimitra Usaha 59,169 For Lease & Sale Under construction

Wisma Barito Pacific 2 S. Parman West Jakarta Griya Idola 26,000 For Lease Under construction

continued

Source: Colliers International

6
Colliers Quarterly Office | Jakarta | 7 April 2021

Development
Name of Development Location Region Developer name SGA (sq m) Marketing scheme
progress

continuation

2022

One Belpark Office Fatmawati South Jakarta Harmas Jalesveva 17,800 For Lease Under construction

Owner Suite by Dharmawangsa Dharmawangsa South Jakarta Dharma Tatemono 24,000 For Sale Under construction

MTH 27 Office Suite MT Haryono South Jakarta Adhi Karya 25,000 For Sale Under construction

Lippo Tower Holland Village Cempaka Putih Central Jakarta Lippo Karawaci 27,000 For Sale Under construction

2023

South Gate Office Tower Tanjung Barat South Jakarta Sinarmas Land 30,000 For Lease Under construction

Menara Jakarta Office Tower Kemayoran Central Jakarta Agung Sedayu 90,000 For Lease & Sale Under construction

Source: Colliers International

7
Primary Authors: For further information, please contact:

Eko Arfianto Ferry Salanto

Senior Manager | Research | Jakarta Senior Associate Director | Research | Jakarta
62(21) 3043 6726 62(21) 3043 6730
Eko.Arfianto@colliers.com Ferry.Salanto@colliers.com

About Colliers International

Colliers (NASDAQ, TSX: CIGI) is a leading diversified professional services and investment management company. With operations in 67 countries, our more than 15,000 enterprising professionals work
collaboratively to provide expert advice to real estate occupiers, owners and investors. For more than 25 years, our experienced leadership with significant insider ownership has delivered compound
annual investment returns of almost 20% for shareholders. With annualized revenues of $3.0 billion ($3.3 billion including affiliates) and $40 billion of assets under management, we maximize the
potential of property and accelerate the success of our clients and our people. Learn more about how we accelerate success at corporate.colliers.com, Twitter or LinkedIn

Copyright © 2021 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.