Property Sector Update - Office market: Standing tall - Bahana Sekuritas

Recovery in Asian office market
The Asian office market recorded strong annual rental growth of 9% y-y in 2010, outstripping performances of markets in the US, Europe, Middle East and Africa (exhibit 6). Growing demand coupled with stalled construction activities post the crisis level in 2008-09 has led to office supply shortage, spurring higher rental rates. Going forward, we believe the office market in Jakarta like its Asian peers still has room to grow.

Jakarta: 2011 Office demand to continue growing, spreading …
Procon estimates cumulative demand to grow 5% to 3.9m sqm from 3.7m sqm in 2010, leading to higher occupancy rates of 89% from 87% in 2010. In line with the country’s rising GDP growth, many expansion plans from existing companies both local and MNCs in Indonesia in sectors like insurance, banks, oil and consumer goods will continue this year. Reportedly, AXA will become the major tenant in Agung Podomoro Land’s (APLN-NOT RATED-IDR345) new office tower in Satrio-Jakarta while DHL has plans to invest EUR20-30m to build an office tower and warehouse in East Jakarta as well as Allianz, which is ready to move to its new 28-story building in South Jakarta.

... to the Greater Jakarta area
Currently, the Greater Jakarta area like Serpong has emerged as another option for office relocations as well as business expansions due to its solid infrastructure access (toll road). Unilever, for example, has recently bought 3ha land in Serpong area to be developed as its new headquarters with the plan of moving there sometime in 2012. Growing population in the Greater Jakarta area also draws the openings of new branches/representative offices as well as new outlets by companies in sectors from banks to automotive and from telecommunication to the food industry.

CTRP, ASRI and BSDE to benefit most from office market growth
Growing office market will benefit Ciputra Property (CTRP-HOLD-IDR370-TP:IDR490) with its upcoming 64,000sqm office tower, which should be operational in 2H12 with estimated additional revenue of IDR60b towards 2012 revenue. Growing demand for the Greater Jakarta area will benefit Alam Sutera (ASRI-BUY-IDR240-TP:IDR400) and Bumi Serpong Damai (BSDE-BUY-IDR700-TP:IDR1,090) with their ample land bank for commercial and office parks. ASRI has started the construction of its first office tower and is in negotiation process with major tenants. Based on our calculation, this sale/lease office will conservatively provide additional one-time revenue of IDR50b in 2012. BSDE will also build a 15,000sqm office tower at the end of this year and continue developing its 25ha green office park and future 55ha area in the Serpong CBD.