Property issuers hold office projects

JAKARTA. Property issuers hold their business development at the segment of office property, amid the slow demands for the segment during the recent years.

According to Colliers International, along the third quarter of 2016, the office building occupancy has dropped to 85.4%. To date, some issuers decide to hold the new projects on office property.

Recently, PT Ciputra Development Tbk (CTRA) has delayed the project on the second tower of Ciputra World Jakarta I in Karet Kuningan, South Jakarta area, due to sluggish demand for office building.

However, according to Corporate Secretary of CTRA Teguh Santosa, the office property segment contributes only below of 5% of the company’s total revenues. Therefore the slow demand on the segment does not have significant impact to the company.

By the end of 2016, CTRA still focuses on residential projects. During the fourth quarter of 2016, CTRA targets to hit Rp 1 trillion of pre-sales from the five new projects.

Amid the sluggish demand, another issuer PT Intiland Development Tbk (DILD) prefers to adopt wait and see stance in developing the office property projects.

Director of Capital and Investment Management at DILD Archied Notopradono said that the company is focusing in selling South Quarter office property the area of TB Simatupang, South Jakarta. He added that currently the level of occupancy of South Quarter has hit 50%. By the end of the year, the level of occupancy is predicted to stand at around 50%.

Another DILD’s office property Intiland Tower has 90% of occupancy level.

Archied mentioned that office property contributes to 10% of DILD recurring revenue. Currenty, housing and highrise building segments contributed to 87.15% of DILD revenues.

Meanhwile, Marketing Director of PT Agung Podomoro Land Tbk (APLN) Indra Widjaja Antono admitted that to date APLN has not yet launched new office property project, on the grounds that some of land banks have no more potentials to develop as office property area.

APLN claimed that the company received high demands for office property. Therefore APLN has sold out its office properties. Office property segment itself comprises 30% of the total number of APLN property sales.

Amid the sluggish demand for office property, analyst at Recapital Securities Kiswoyo Adi Joe suggested property issuers to develop projects that may generate recurring revenues, such as the project at the segment of commercial center.

According to analyst at First Asia Capital David Nathanael Sutyanto, the sluggish office property market is driven by the oversupply, while the level of occupancy is low. Under this condition, the property issuers are suggested to diversify its business in order to survive. For an example, PT Lippo Karawaci Tbk (LPKR) has developed the segment of hospital. Another option, issuers may increase the number of land bank.

David also suggested issuers to wait for three years to start new office property projects. (Translator: Muhammad Farid)