Jakarta office rents to rise by 4-5% this year

The average CBD rents slipped by less than 1% in 2022.

In the short term, Colliers expects more upward pressure on asking rental rates in Jakarta’s office property market. 

“However, in today’s tenant market, landlords must remain accommodating and flexible when negotiating with current tenants or potential new tenants. Overall, their strategies will vary depending on the occupancy rates of the buildings,” Colliers adds.

Here’s more from Colliers:

Occupancy rate performance heavily influences a landlord's policy on rental rate. Currently, there is a large gap between asking and transacted rent because the absorption rate is still relatively low, leaving plenty of room for negotiation. Landlords, on the other hand, can offer policies that bind tenants for a longer period of time. Finally, all transactions can result in win-win situations for both parties. 

Due to a lack of office demand, developers have prioritized occupancy rather than increasing rental rates. Some developers have even reduced their asking base rent to attract more tenants. As a result, the average rental rate in the CBD was recorded at IDR239,209 in 2022, a decrease of less than 1% from 2021. Despite continuing to fall, rents performed much better in 2022 than they did in 2021, when they fell by around 7% compared to 2020. 

Some buildings gradually started to attract committed tenants, despite their limited numbers, and this will give landlords more confidence in reevaluating occupancy cost. However, it appears it is still too early for landlords to increase rental rates significantly in 2023. 

Nonetheless, we anticipate a 4% to 5% increase in average rent in 2023. This calculation includes some premium office buildings that will be completed in 2023. 

Outside of the CBD, the average rental rate was relatively stable at IDR175,000 in H2 2022. However, this average rent was still 10%-11% lower than before the pandemic (2019). Although it is still difficult to find tenants, landlords of some buildings with higher occupancy rates may begin to consider increasing rents. Overall, the average rent is expected to rise by 1%-1.5% in 2023, compared to 2022.

Meanwhile, the average service charge was relatively stable throughout 2022. In Q4 2022, the average service charge was IDR82,000 in the CBD and IDR62,000 outside the CBD. In contrast to rent, external factors such as an increase in operational costs, including labour, electricity, and fuel, will have an impact on the service charge. The reactions of building owners will vary greatly in response to this. Nevertheless, the average service charge is expected to grow 3% in 2023.