The second quarter of 2011, marked the beginning of an upward trend in rental rates, demand and occupancy for the service and purposefully-built rental apartments sub-sectors. In the condominium-for-lease market, there is a slight drop in occupancy due to an increase in supply, however with a robust economic climate in Indonesia, demand and rental rates remained strong.
The quarter in review, witnessed a trend that most of the new demand are being generated from the local business travelers and government agencies, where a majority of enquiries are for the service and purposefully-built rental apartments.
Aggregately, foreigners still dominate this market making up 78% in total demand for both of these sectors.
At the end of the second quarter, we see an increase in the supply of the serviced apartments sector with the newly operated service apartments in Permata Hijau.
At the same time, the forecasted completion of the H-Tower (a mixed-use development) in Kuningan by the end of this year will also further increase the supply of service apartments. As for the purposefully-built rental apartments, there is no new completed project coming in this quarter.
Demand for the purposefully-built rental apartments have picked up since last quarter as seen by the increase in occupancy from 72.2% in the last quarter to 79.7% this quarter. The trend is also pertinent to the service apartment sector with the current occupancy rate of 75.3%, a 1% increase quarter-on-quarter or 4.6% increase year-on-year.
The increase in demand for the serviced apartments sub-sector mostly came from the new supply of Bellezza Suite with an average occupancy of 75%. Other queries for this sub-sector also arose from the banking and local government bodies, which needed space for their training purpose.
The purposefully-built rental apartments sector’s demand mostly originated from the newly arrived expatriates to Indonesia. These tenants include many Japanese, Koreans, some Chinese and Western workers. In both of these sub-sectors, foreigners still make up a majority of the demand with 86% for the purposefully built rental apartments and 73% for the serviced apartments.
In the condominium-for-lease sub sector, the occupancy rate experienced a decline due to a huge supply in the last two quarters, with a total of about 1,571 units that are still pending to hand-over, fit-out and market the units.
In terms of the supply for the purposefully-built rental apartments sector, there is no new development coming in this quarter thus total supply remained the same at 2,363 units. Within the serviced apartments subsector, we’ve included The Bellezza Suite in this quarter’s supply which makes up an additional 112 units to the total supply. This new service apartment is located in Permata Hijau and managed professionally by Maven Hospitality, a local management company.
Another new supply comes from Aston Marina which added 30 new units of serviced apartments to the market consequently bringing the total supply to 3,889 units for the second quarter of 2011. With the anticipation of the H-Tower being completed by year-end, this new mixed-used development will add an additional 153 units of supply for the serviced apartments sector. The new serviced apartments will be managed professionally by the Ascott group.
The completion of condominium projects during this quarter added about 507 units to the condominium-for-lease market, bringing the total cumulative supply of the market from 33,128 units in the previous quarter to a total of 33,635 units. The newly completed condominiums-for-lease projects were Royal Mediterania Garden (Lavender tower) in Jl Letjen S Parman and The Park Residence in Kelapa Gading area.
In this second quarter, rental rates for the three rental apartment sectors appeared to have increased on average by 3.0%, making it to Rp 154,899 per square meters (/sq.m.); in dollar terms the average /sq.m. rental rates is about USD18.02 (exchange rate used, 1USD: Rp8,570/USD).
The highest contributor to this increase came from the condominium-forlease sector with an increase of 4.8%, making its /sq.m. rental rate at USD 14.61. The increase in the rental rate is contributed by the sturdiness of Indonesia’s economic performance and the increase in occupancy for the majority of the Jakarta Rental Apartment.
The rental increase in the serviced and purposefully-built rental apartments is not as substantial in comparison to the condominium-forlease sector but the impact is still apparent. In the serviced apartments sector, the rental rate increased by 2.79% on average, making its dollar value at USD22.73/sq.m.
The purposefully-built rental apartments on the other hand, experienced an increase in the rental rate to USD16.71/sq.m. in comparison to the first quarter rental rate of USD 16.31/sq.m.
Looking at the current performance of Indonesia’s economic climate, the demand for serviced and purposefully-built rental apartments is expected to remain strong and continually growing. Many of the enquires will no longer come from our Western counterparts but also from the locals and the Asian expatriates, which aligns with the current robust economic conditions in Indonesia as seen by the increase of foreign inflows. Oil companies, the manufacturing, financial and banking sectors are some of the most prominent industries that are expanding into Indonesia. In the condominium-for-lease market, with the highly anticipated vast quantities of supply by year end, occupancy in this sector would stagnate and competition would be tougher.