Jakarta's Grade A office leasing activity to pick up from Q3: JLL

But net absorption is likely to be down YoY.

As the COVID-19 situation escalated in March, JLL notes many offices temporarily closed and switched to work-from-home type arrangements. Restrictions began to be lifted in June with offices permitted to re-open at maximum 50% capacity. Due to long commute times and fear of infection many offices were functioning at significantly less than 50% at end-2Q20.

During 2Q20, occupiers were more focused on the continuity of business rather than expanding their footprint and some put new leasing deals on hold. Renewal negotiations continued, however, as did some deals that were already in progress prior to the pandemic.

Here's more from JLL:

RDTX Place was completed in 2Q20. This 90,000 sqm Grade A office building is located on Jalan Satrio; one of the main thoroughfares in the CBD. Developed by local Indonesian group Chitaland Perkasa, this project is directly adjacent to the Ciputra World One mixed use complex.

Around 170,000 sqm have now been completed in the year-to-date and almost 2 million sqm has come online since the current supply wave began in 2015. This has caused the average market vacancy rate to rise from 5% at end-2014 to 35% at end-2Q20.

Rents fall marginally

We continue to believe that the impact from the pandemic will effect short-term demand rather than rental rates. Rents have now been falling for around five years on the back of record supply volumes. While still pressured, rents are already affordable and the rate of decline has started to slow.

In the face of office closures and severe disruption to business, some tenants have asked landlords for rent relief. There is no unified response from landlords and these negotiations are being dealt with on a case-by-case basis.

Outlook: More activity expected in the ‘new normal’ environment

We expect leasing activity to pick up from 3Q20 although net absorption is likely to be down y-o-y and our forecasts have been revised downwards accordingly. No more supply is expected in the remainder of the year, although we are expecting completions in each subsequent year up to 2023.

Rents have fallen by a touch under 1% in the year-to-date and 31% since the peak in mid-2015. We expect a similar scenario in 2H20 with -2% growth y-o-y to be expected – this outlook is unaffected by the pandemic and is instead driven by high vacancy rates and record supply.

Note: Jakarta Office refers to Jakarta's CBD Grade A office market.