Jakarta office rents in a free fall since 2015

Blame it on burgeoning vacancy rates and a heavy supply schedule.

According to JLL, net demand for office space in Jakarta remained subdued in 1Q21. Notwithstanding, leasing enquiries started to pick up towards the end of the quarter as the government raised the office capacity maximum back to 50%, since mid-February.

The net absorption was positive at around 3,600 sqm in 1Q21; hence, overall Grade A vacancy rate held steady at 33%. Technology firms were quiet in the quarter and most transactions were of a smaller size.

Here’s more from JLL:

No new completions in 1Q21

No new Grade A buildings were completed in 1Q21. There is almost 220,000 sqm of Grade A office space expected to be completed for the full-year 2021; more new supply is expected to push the average market vacancy rate higher as the year progresses.

Occupancy levels remained stable at 67% in 1Q21, with three Grade A buildings expected to be completed in the remainder of 2021. The pipeline is likely to thin out in the subsequent years.

Rents continued to fall

Grade A rents continued to fall by -0.6% q-o-q in 1Q21, as landlords were willing to provide more competitive rents to entice tenants. Some landlords have offered incentives to encourage prospective tenants to relocate.

Rents have been falling since mid-2015 on the back of rising vacancy rates and a heavy supply schedule.

Outlook: Rents remain under pressure

Rents are likely to drop in 2021, as market pressures remain due to the pandemic. Our supply forecasts remain unchanged from the previous quarter. Almost 220,000 sqm of new supply is scheduled for delivery in 2021; hence, we expect the vacancy rate to rise.

The long-term outlook for office demand remains positive, as the technology and health sectors are likely to continue growing, and occupiers are likely to continue reimagining their office needs. We do not expect remote working to replace the office in the long term.

Note: Jakarta Office refers to Jakarta's CBD Grade A office market.