CEO News

Optimism Still in Place for Property Sector

The recent bomb attack in Bali may have spread pessimism over the prospect of the national economy, but in the property sector, however, such negative concern was nowhere to be evidenced by the huge public demand for 1,724 units of assets offered by the Indonesian Bank Reconstruction Agency (IBRA) who is launching a Property Asset Selling program.

The overwhelming response is obvious by the number of people who deposited down payment worth of Rp10 millions ~ Rp100 millions in all of IBRA’s branches in 6 cities. By the closing day that fell on Wednesday, 23rd October 2002, the number of applicants has reached an astonishing figure of 4,994 – far surpassing the estimated figure of 3,500 to 3,800 by Mr Panangian, the IBRA property consultant.

“This reflects that the property business isn’t affected at all by the bomb accident in Bali,” said Panangian.

According to him, the growth of the property sector will be a great pull for all the other sectors of the economy. “So far, the heaviest hit is the tourism sector, but I am sure it will be only temporary. If hotels in Bali, which are the worst-hit can get over the negative effects by means of higher discounts, I am sure Bali will recover in no time.”

The vibrancy of the office sector is clear before the Bali tragedy. According to a research conducted by PT Procon Indah in the third quarter of year 2002, a building in Central Business District (CBD) changed hands to a local investor despite poor interest shown by investors in that office building. Other ongoing negotiations were also vigorous for office buildings in and out of the CBD area. In the third quarter of year 2002 alone, capital value has increased by as much as 1.3% to Rp 8.2 million per square meter!

The effects of the Bali tragedy on the office sector? Vibrant before the Bali tragedy, and a sector that has shown to be one to have the slowest recovery in any crisis?

According to another report by PT Procon Indah, the Bali tragedy has indirectly affected the office sector as the lessee is bound to the lease term that may have been agreed in the contract prior to the tragedy. On the brighter side however, the tragedy has also thrown caution to entrepreneurs with expansion plans or office relocation; with the number of new supply limited, occupancy rates in buildings are thus expected to increase on a small scale.

From such inference, it can be said that the effects of the recent Bali bomb attack has till now, been little felt. Dina Salem, a Senior Manager of CEO SUITE – the leading serviced office provider in CBD Jakarta agrees. According to her, the occupancy rate for their 80 office suites remains steady at 85%. The company rents offices, 90% of which are leased to foreign investors with rental value ranging from USD800 to USD3,500 per month.

“There isn’t a single foreign client in CEO SUITE who has terminated their lease agreement as yet. In fact, in October alone, we added 3 more international firms to our clientele list.” said Dina.

Investors who wanted to withdraw from Indonesia after the bomb tragedy has been presented with an offer to rent CEO SUITE’s offices in Kuala Lumpur and Singapore. “We offered them relocation alternatives in our other centers in Kuala Lumpur and Singapore, while in Jakarta they will be provided with our virtual office service. This way, if any of their business colleagues should contact Jakarta at CEO SUITE Jakarta, we will act on their behalf and divert all incoming calls and mails to wherever they want.” said Dina.

Quite a number of foreign investors now start their businesses in Indonesia via a Virtual Office in CEO SUITE. “There are now over 100 local and foreign businessmen”, Dina added.

What is the future for property business in Indonesia? One may be interested.

According to the Chairman of real estate companies Center of Indonesia, Yan Mogi, “Well, if the terror does not continue, the healing process in the property sector can carry on”.

In Yan Mogi’s opinion, property business still has its chance to recover in 2002 and 2003.

Like Yan Mogi, Panagian is also rather optimistic about the future of this business. It is generally predicted that year 2007 will be the crux point for a big boom in the property business in Indonesia.