Jakarta has nearly 3 million sqm of unabsorbed office space in 2023

Almost 70% of these are located in the CBD

In Jakarta, about 2.90 million sq m of office space remained unabsorbed in 2023, and Colliers says 67.6% of this are office buildings in the CBD. This situation presents an opportunity for tenants, especially those nearing the end of their leases, to engage in negotiations with landlords. 

“The availability of newly completed buildings is likely to entice tenants to consider relocation. Moreover, with the business climate showing signs of improvement, some tenants are contemplating expansion and are seeking larger office spaces,” the analyst said.

Here’s more from Colliers:

Buildings with low committed occupancy levels are particularly attractive options for tenants in need of space, should landlords be unable to provide the required accommodations. As a result, tenants find themselves in a stronger bargaining position during transactions. Conversely, the completion of new office buildings will attract more tenants, boosting overall occupancy rates. 

Despite the existence of significant vacant space, office demand was stronger in 2023 compared to 2022. This improvement can be attributed to the closure of certain deals that have been under negotiation for some time. The extended duration in finalising deals in 2023 has largely been due to the need to obtain approval from head offices, especially those located outside Indonesia. Additionally, tenants are taking the time to assess the ongoing strengthening of the business climate before committing to agreements.

In addition to transactions within existing buildings, relocations to different buildings were also documented throughout 2023. Relocations are typically prompted by disparities between tenant requirements and the available space in their current building. In certain instances, when space on the same floor is limited, landlords may propose alternative floors to accommodate the need for more space. 

However, from the tenant’s perspective, opting for new vacant space in the same building may incur additional costs. In response, some tenants are exploring the possibility of moving to another office building to circumvent these expenses. Notably, the current Green Building Certification has emerged as a motivating factor for relocations, especially among multinational companies. 

Companies actively searching for space belong to diverse sectors, including electronics, logistics, shipping, freight forwarding, import and export, oil and law firms, and a common trend among these businesses is a preference for expansion into new spaces rather than remaining in their current buildings.

In the CBD, average occupancy was registered at 73.5% in 2023. Pressure from introducing a significant amount of additional office space saw the current average occupancy fall by about 1% compared to 2022. Similarly, in areas outside the CBD, the operation of new office buildings posed a challenge to occupancy rates. To address this, several building owners collaborated with co-working space operators. Consequently, the average occupancy in areas outside the CBD was recorded at 72.5% in 2023, a slight improvement compared to 2022. 

Differing additional supply levels prompt distinct occupancy forecasts for 2024. In areas outside the CBD, substantial supply with a relatively low level of committed occupancy is likely to result in a fall in the average occupancy rate in 2024. Conversely, in the CBD, where no new office buildings have been completed and committed tenants are ready to operate, an increase in the average occupancy rate is anticipated. 

The presidential election could potentially influence and bring about changes in the business climate, leading to a "wait and see" approach. Some deals may be concluded in early 2024, stemming from an active negotiation process initiated in 2023. It is expected that more transactions will be closed after the election or when the policy direction of the next government becomes known.