Jakarta records lowest office space supply since 2015

Only 170,000 sqm of Grade A buildings were completed in 2020.

According to JLL, while the final quarter of the year is traditionally quiet due to the holiday season, there were a number of deals signed in 4Q20. Technology firms continued to be the driving force behind enquires in the office market and most of these deals involved upgrading into Grade A buildings.

Grade A net absorption was recorded at 7,400 sqm in 4Q20, adding to the total of around 120,000 sqm for the whole year. The average market vacancy rate remained high at almost 33%; hence, tenants have plenty of opportunities to upgrade or expand.

No new completions in 4Q20

No new Grade A completions in 2H20 caused Grade A occupancy to remain stable at 67%. Only 170,000 sqm of Grade A buildings were completed for the full-year 2020, the lowest annual supply since 2015.

The completion dates of some upcoming office buildings were adjusted based on development plans and current construction status. Several Grade A completions are expected next year; however, the pipeline is likely to thin out in subsequent years.

Rents continue falling

Grade A rents remained under slight pressure, with a decline of -0.4% q-o-q in 4Q20. This was broadly in line with our 2020 expectations. For the full-year 2020, Grade A rents recorded -1.7% growth.

Rents fell for the fourth-consecutive quarter in 4Q20. Despite improving demand, the sheer volume of supply has been such that the market vacancy rate ended the year slightly below 33%. Because of this, some landlords with lower occupancy levels are willing to sign deals below the market average.

Outlook: Rents to begin to stabilise

Rents are likely to drop slightly in 2021 before subsequent stability as market pressures remain due to the pandemic. Almost 220,000 sqm of new supply is scheduled for delivery in 2021; hence, we expect vacancy to rise.

The long-term outlook for office demand remains positive as the technology sector is 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.