Condominium, Rental Apartment and Industrial Marketbeat Reports Q2 2020

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Cushman & Wakefield MarketBeat reports analyze quarterly economic and commercial real estate activity including supply, demand and pricing trends at the market and submarket levels.

CONDOMINIUM Q2 2020 

“Prices of condominium units in the CBD still managed to register a modest increase during the quarter, largely due to upper segment sales initiated with end-user buyers pre-pandemic in January & February. Overall however, there was no price movement for Greater Jakarta Condominiums and the launching of new projects for pre-sales may only resume in fits and starts until there is some semblance of control on the spread of Covid-19 and economic stability or rebound,” said Lini Djafar, Executive Director.

SUPPLY: No New Project Launches During Quarter

Some 4,369 Condominium units in 9 projects were completed in the second quarter of 2020, bringing the YTD total completed supply to 7,735 units, compared to 17,504 YTD completions in the corresponding period last year (or -56% YoY). As the local government began to ease the mass social restrictive (“PSBB”) measures in Jakarta in mid-June as the transition phase to the “new normal”, several projects recommenced their construction activities or finishing works (despite limited workers) in order to meet their respective handover schedules. 

The total proposed (‘future’) Condominium supply remained unchanged at 184,167 units, with no additional new project launches during the quarter. Many developers continued to postpone their new project offerings, whilst others tested the market by offering pre-registration of interest for their upcoming projects.

DEMAND: Lower Unit Take-up

Net take-up of 3,318 units was recorded in the second quarter of 2020, 12.6% lower than in the previous quarter, and coming from sales initiated in January and February before the Covid-19 outbreak. Helped by less proposed future supply, the pre-sales rate improved slightly in the quarter from 61.1% to 61.3%. Developers also began to reopen their marketing offices and project sites (adopting appropriate health protocols) to prospective buyers and to boost sales, easier terms of payment with longer down payment installment were being offered.

Average vacancy within the Condominium sector was largely unchanged at 49.7%, with some expatriate occupiers who had returned to their home countries in the last quarter, gradually re-entering the country as companies started to recommence work from their offices. In contrast, student tenants have yet to reoccupy their condominium units, as universities and schools remain closed, which is expected to continue until early next year.

Basic health protocols, such as temperature checks, provision of hand sanitizer and the disinfecting of common areas were seen to be applied in most operational condominiums. In addition, some projects maintained access restrictions for visitors, as well as closing some on-site communal facilities and prohibiting unit fit-out works, to further reduce the risk of Covid-19 transmission.

PRICING: Only CBD Condominiums Saw Any Price Movement

Average prices for Greater Jakarta Condominiums still showed YoY growth of 2.9% by the end of the second quarter of 2020, but lower than the 3.4% YoY growth of the first quarter. Unit prices in the CBD area experienced a slight increase of 0.2% (QoQ) to reach Rp. 53,900,000 per sqm, whilst no price movement was recorded in either the Prime and the Secondary locations.

Rental Apartment Q2 2020 

“We expect serviced apartment rentals to remain sluggish for the rest of 2020 due to soft demand of rental accommodations from travel restrictions during the pandemic. Recovery in demand and rents in the serviced apartment segment hinges on the return of expatriates to the city and the resumption of business travel. Until then, serviced apartment operators would have to mitigate operating costs through various rental discounts and flexible rental terms,” said Lini Djafar, Executive Director.

SUPPLY: No New Supply During the Quarter

No new Serviced Apartment or Purpose-built Rental Apartment projects were completed during the review quarter. Several upcoming Serviced Apartments, such as Intercontinental Residence Pondok Indah, Somerset Kencana and Somerset Sudirman which had planned to become operational in Q3 and Q4 2020, are now expected to delay their start dates due to the ongoing Covid-19 situation. 

DEMAND: Demand Continued to Fall

The pandemic hit demand in the Serviced Apartment sub-sector hard during the review quarter, falling 17.7% QoQ and reducing overall occupancy of this sub-sector to 43.2%. Serviced Apartment operators struggled to secure new demand as some leasing enquiries from expatriates were postponed or canceled due to the implementation of travel restrictions to Indonesia, as well as other existing expatriate tenants being sent home as their companies put operations on hold during the pandemic. 

The lowest level of serviced apartment occupancy was recorded in April and May, but some limited new demand from short stay guests (for ‘staycation’ or business-related) began to appear in June, as local travel & work restrictions were eased. This short stay guest demand is expected to continue, which should lead to higher occupancy for this sub-sector in the coming quarters.

Similarly, Purpose-built Rental Apartments were also impacted by the non-renewal of lease contracts and postponement of new leasing deals. The Occupancy rate was recorded at 59.8% at the end of the review period (-4.3% compared to the last quarter). Some of the Purpose-built Rental Apartment projects were able to maintain higher occupancy, due to their longer-term contracts (of more than 1 year). As such, occupancy for this sub-sector is projected to remain relatively stable over the balance of the year.

PRICING: Rents Remain Under Pressure

The average rental rate of the Purpose-built Rental Apartment and Serviced Apartment sub-sectors remained mostly unchanged during the second quarter of 2020 (largely due to little transaction evidence), at Rp241,550 and Rp370,431 per square metre per month respectively.

But in the Condominium-for-lease sub-sector however, average rentals saw a 11.3% quarterly decrease (to Rp165,509 per sqm pm), coming for the high levels of available units competing for the limited demand, with individual owners prepared to accept much lower rental rates during the pandemic. This is expected to continue through to the end of the year, with rentals remaining under downwards pressure.

Industrial Q2 2020 

“E-commerce, logistics and data centers will be the key drivers in demand for industrial space. Covid-19 has in fact accelerated the pace of on-line commerce both by consumers and corporates and this will have positive spillover on demand going forward. We expect investor appetite to pick up the moment restrictions on movements are lifted,” said Wira Agus, Director, Industrial and Land Sales.

SUPPLY: No New Supply YTD 2020 

With the onset of the coronavirus pandemic in March, no new supply came to the market in the review quarter, such that cumulative supply in the Greater Jakarta area remained unchanged at 14,990 hectares. 

As the land bank in Greater Jakarta has become more limited, the future development of industrial estates is more likely to expand to the eastern corridor locations of Karawang, Purwakarta and further to Subang, in line with the development of supporting facilities occurring in those areas. With the continuing spread of Covid-19, the ongoing expansion in Subang has seen construction activities put hold however, which will likely see delayed completion until late 2020 at the earliest. 

DEMAND: Positive Demand Recorded but Lower than the Previous Quarter

34 hectares of demand in the Greater Jakarta area was recorded in the quarter, all within estates in the eastern corridor. Whilst the industrial sector is one which has been least impacted by Covid-19 (as evidenced by the positive take-up during the quarter), this net absorption was still down by 37.5% compared to the first three months of the year. 

As businesses & consumers adapted to the ‘new normal’ lifestyle and buying patterns under Covid-19, new inquiries were seen coming from those industry sectors related to consumer goods, e-commerce, logistics and data centers. A number of ongoing transactions however, particularly from international investors, were suspended or even cancelled in the near-term due to the local lockdowns and overseas travel restrictions being applied within most countries within the APAC region and this is likely to remain the same until after the easing or final suspension of the large-scale social restrictions (“PSBB”) in Jakarta and for inbound travel. 

PRICING: Estates Endeavour to Hold Land Prices at the Same Level 

The average price for industrial land decreased by -3.13% QoQ to Rp2,565,000 per sqm from the previous quarter, largely driven by the Rupiah exchange rate’s strengthening against the US Dollar in the quarter and developers endeavouring to hold land prices at similar levels, especially for overseas investors. 

Visit Cushman & Wakefield’s global website to download the report. 

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 53,000 employees in 400 offices and 60 countries. In 2019, the firm had revenue of $8.8 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services.