JAKARTA PROPERTY MARKET REPORT

Transcription

1 Colliers Quarterly Q October 2017 JAKARTA PROPERTY MARKET REPORT Accelerating success.

2 Highlights Office Sector A mild rise in leasing activities. Intense enquiries for office spaces primarily coming from ITbased companies (including online businesses), shipping, consumer goods and banking highlighted this quarter s office market. Nevertheless, the pressure on rental costs for landlords still continues in the tenant market. Tenants acquiring large footprints are taking advantage of low rents, whilst a vast number of new ventures, including start-up companies, are emerging. Apartment Sector Jakarta s apartment market is anticipated to remain lacklustre for the rest of 2017 on the back of persistently weak market sentiment and continued influx of new apartment projects. Several newly launched projects demonstrated a brisk pre-sales performance; this nonetheless generally occurred for a short-term period only, and thus it is too early to consider this as a sign of market recovery. Another prevailing trend that may affect current and future inventory growth is the rise of overseas developers and investors, particularly from major Asian countries. These business entities usually partner up with local players in developing apartment projects. Some of these developers are quite aggressive and quick to execute new projects, usually targeting the middle-lower segment. Retail Sector The current occupancy figure of Jakarta s retail market was recorded as the lowest, at least for the last 10 years. Besides the entry of large, newly operating shopping centres bringing more vacant spaces, the shutdown of two big department stores by the end of September 2017 has also rubbed salt to the wound. The retail market itself is entering a very challenging period, as consumers spending power declines and some prominent stores and mall outlets shut down. Thanks to the prevailing shopping centre moratorium in Jakarta, the supply side was controlled during the current slowdown. Industrial Estate Sector This quarter, transaction volume reduced in number, registering only hectares from in the previous quarter. Landlords opted to keep prices unchanged in this particularly slow market. Hotel Sector Hotel occupancy performance in the third quarter of the year was the best for the last three years for the same period. Thus far, the number of additional hotel rooms was quite limited at least until Q3 2017, but would probably inflate at the end of the year, albeit still lower than last year s figure. The ADR has stabilised and is still in the same line with the previous trend, only that it has not exceeded the figures over the last three years. Colliers Quarterly Q3 2017

3 Office Sector Ferry Salanto Senior Associate Director Research A mild rise in leasing activities. Intense enquiries for office spaces primarily coming from IT-based companies (including online businesses), shipping, consumer goods and banking highlighted this quarter s office market. Nevertheless, the pressure on rental costs for landlords still continues in the tenant market. Tenants acquiring large footprints are taking advantage of low rents, whilst a vast number of new ventures, including start-up companies, are emerging. Forecast at a glance Demand Tenants are flooded with abundant office spaces as a result of the continuing influx of new office buildings. This provides opportunities for tenants to occupy a new building, since the rent is competitive when compared to older buildings. Furthermore, for efficiency reasons and due to budget constraints, more tenants are becoming very keen to moving into second-hand but fittedout spaces left by previous tenants. Such situation will likely to continue in Supply Jakarta expects to see around 600,000 sq m of future supply at the remainder of 2017, 75% of which is located in the CBD area. The projected additional supply will bring total office spaces in the CBD to 6 million sq m by the end of Furthermore, we estimate around 1.5 million sq m of additional office spaces to enter the Jakarta market in , of which 60% is contributed by office buildings in the CBD. Vacancy Rate Despite the expectation of strengthening demand, a large future supply will add more pressure to occupancy performance. We forecast vacancy to be higher than 20% in the CBD in Conversely, average vacancy rate outside the CBD is predicted to be slightly lower, given a relatively small future supply in Rent The current large supply, particularly in 2017, will hit rental tariff. We estimate a drop of 10% YOY in the CBD by the end of 2017, and less than 5% outside the CBD. Price Around 40% of the total office spaces for sale in remain unsold. Accordingly, price stood at an average of IDR56.6 million/sq m in the CBD and IDR36.4 million/sq m in other nonprime areas. Prices are projected to increase mildly by 2% next year, given a substantial number of spaces available. CBD Office Spaces Offered For Lease Supply Office Cumulative Supply sq m 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 Existing Supply Additional Supply YTD Supply Future Supply 2017F 2018F 2019F 2020F

4 In Q3 2017, Telkom Landmark Tower 2 officially became a newly operating office building in the CBD. Together with five office buildings that previously began operation in H1 2017, Telkom Landmark Tower 2 brought the cumulative supply in the CBD area to 5.78 million sq m. Afterwards, we estimate around 450,000 sq m of future office supply to come in the market in the remainder of 2017, contributed by six office buildings. These 12 office buildings will drive the projected cumulative supply to reach 6 million sq m by the end of 2017, up 13% YOY. The total office supply in the CBD is expected to reach 7 million sq m within the next three years. Office Cumulative Supply Based on Area Satrio Gatot Subroto Mega Kuningan Rasuna Said Sudirman Thamrin 0 500,000 1,000,000 Cumulative Supply 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 sq m Future Supply 2017F F Apart from the SSI (Surya Semesta Internusa) project, there will be at least two future office projects in Jalan Rasuna Said. Besides the hotel and apartment towers within the St Regis complex, Rajawali Group will also build an office building, BCA Gold Plus, which shall be designed following international standards. The other project is a 64-floor office tower that is located at the corner of Jalan Rasuna Said and Casablanca, a joint operation by a local company (Gesit Indonesia) and foreign developer (Mitsubishi). In Gatot Subroto, as the first tower is about to meet completion, the Mangkuluhur Tower 2 within Mangkuluhur City seems to be ready to begin construction. This will also become the other high-rise office building, with estimated height reaching 80 floors. The owner of the Mangkuluhur City project will also begin constructing another mixedused project called Gayanti City, located in Jalan Jenderal Gatot Subroto. Besides the above-mentioned office projects, we also monitor some potential contributors for future office supplies in the CBD, such as Tower Two at The City Center and Icon Tower (both in Sudirman) as well as Tower 2 at Ciputra World Jakarta 1 (located in Jalan Prof. Dr. Satrio). Intiland is also developing their mixed-use project at Waduk Melati, Central Jakarta. It is planned as an office tower to be constructed during the second phase within a mixed-use project sitting on a 3.2-hectare land. Office Annual Supply Based on Marketing Scheme 500, ,000 Apart from office buildings already currently under construction, several future office building projects seem to commence construction. In Sudirman, Mori Building has announced to start constructing a 59-floor office tower. The Jakarta Office Tower Project (tentative name for this project) will become Mori Building s first undertaking in Southeast Asia. Meanwhile, Wisma Sudirman shut down its operations in early 2017 (currently being demolished) and will be replaced with newer buildings within a mixed-use complex. Still in the same corridor, another office project called Sudirman 7.8 will start building the first tower within Nugra Santana office complex. This complex will comprise of three towers. The existing building will soon be demolished and be replaced by the third tower. sq m 400, , , , , , ,000 50, F 2020F For Lease For Sale 4 Colliers Quarterly Q3 2017

5 New Supply Pipeline Office Building Project Location SGA (sq m) Marketing Scheme Development Status 2017 Menara Palma 2 Rasuna Said 50,000 For Lease Under Construction The Tower Gatot Subroto 56,492 For Sale Under Construction PCPD Tower Sudirman 90,500 For Lease Under Construction Prosperity Tower (District 8 complex) Sudirman 71,545 For Sale Under Construction Treasury Tower (District 8 complex) Sudirman 139,000 For Sale Under Construction Revenue Tower (District 8 complex) SCBD, Sudirman 40,000 For Lease Under Construction 2018 Mangkuluhur Tower Gatot Subroto 53,000 For Lease & Sale Under Construction Lippo Thamrin Office Tower Thamrin 16,500 For Sale Under Construction Sequis Tower Sudirman 78,000 For Lease Under Construction Sudirman 7.8 (Tower 1) Sudirman 52,000 For Sale Under Construction Astra Tower Sudirman 80,000 For Lease Under Construction World Capital Tower Mega Kuningan 72,000 For Lease & Sale Under Construction World Trade Center 3 Sudirman 70,000 For Lease Under Construction Sopo Del Tower B Mega Kuningan 24,300 For Sale Under Construction 2019 T Tower Gatot Subroto 24,000 For Lease & Sale Under Construction Thamrin Nine Thamrin 97,500 For Lease Under Construction Millenium Centennial Tower Sudirman 93,588 For Lease Under Construction 2020 Indonesia Satu North Tower Thamrin 43,000 For Lease Under Construction Indonesia Satu South Tower Thamrin 88,500 For Lease Under Construction Chitaland Satrio 90,000 For Lease Under Construction Social Security Tower Rasuna Said 23,500 For Lease Under Construction Graha Binakarsa (redevelopment) Rasuna Said 20,000 For Lease In Planning Occupancy Six newly operating office buildings in the CBD significantly and definitely put more pressure to occupancy performance. Despite declining 2% in YTD, occupancy has been relatively flat in 2017 and has registered a moderate increase of 83.3% QOQ. However, the large upcoming supply at the remainder of 2017 coupled with relatively unstable absorption will possibly bring occupancy down to below 80% by the end of 2017, which is a decline of 4-5% YOY. Although occupancy is projected to go down, the number of office space enquiries is expected to increase due to both relocation and expansion. We anticipate some big potential transactions to come on stream from some industries, including banking, leasing, shipping, consumer goods, IT, telecommunication and start-up companies. A new telecommunication company intends to penetrate the Indonesian market and will require a substantial amount of office spaces, particularly in the CBD area. We also monitor some tenants that will temporarily relocate (swing spaces) whilst waiting for their existing offices that are currently being renovated. This is happening to two big state-owned companies that are seeking large office spaces in the CBD. In some cases, relocation activities are sometimes followed by space expansion, which helps maintain occupancy performance in the future. 5 Colliers Quarterly Q3 2017

6 Annual Supply and Occupancy Rates sq m 500, , , , , , , , ,000 50, F Annual Supply Occupancy 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% The growth of economic activities in Jakarta has triggered a vast amount of new ventures, mostly involving start-up companies in the technology sector. As the working population rises, cost of rent continues to soar, as companies endeavour to succeed in a volatile business environment. The uncertainty in the market caused conventional office spaces, which require long-term contracts, less favourable. This condition initiates the emergence of co-working businesses that also provide private office spaces. New start-up or any company trying to cut costs perceived the concept to be efficient and as a cost-effective workspace model. Spreading across all regions in Jakarta, the fastest growth of co-working spaces are eventually in the CBD area, especially for operators with resilient working capital. They would normally take areas of up to 1,000 sq m or beyond. Although local players still dominate the co-working space market, foreign players, mainly from Asia countries, have already started penetrating the market. The abundant office spaces in the market offer many possibilities for tenants, who can choose from amongst many options, and thus providing opportunities for them to occupy a new building even when rent is competitive when compared with older buildings. Other than that, for the sake of efficiency and due to budget constraint, more tenants are currently very keen to move to second-hand but fitted-out spaces left by previous tenants. They may spend less and might only need minor renovation works in an efficient way. Pre-Committed Absorption at Office Buildings for Lease in F Occupancy Rates Based on Building Grade 100% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% 2017F 0 70, , , , ,000 sq m Space Absorbed Space Unabsorbed Premium Grade A Grade B Grade C 6 Colliers Quarterly Q3 2017

7 Averages Occupancy Based on Area 100% 95% 90% 85% 80% 75% 70% 65% 60% Thamrin Sudirman Asking Rents Rasuna Said Mega Kuningan Gatot Subroto Satrio Average Asking Rents (in IDR/sq m/month) Based on Grade Q YTD Change Premium 445, , % Grade A 315, , % Grade B 244, , % Grade C 205, , % Average Asking Rents IDR400,000 IDR350,000 IDR300,000 IDR250,000 IDR200,000 IDR150,000 IDR100,000 IDR50,000 IDR0 In proportion to the deteriorating occupancy rates, the average base rental rate has eroded in the CBD at least over the last year. The average base rental dropped 9% in YTD. Despite still in a downward trend since Q3, the average base rental strengthened in Q Only a few office buildings adjusted their base rental lower to boost their occupancy rates at a healthier level. Thanks to the other office buildings that maintained their base rental rate relatively stable QOQ, this quarter figure stood at IDR284,368/sq m/month. The already steady rent might rise in anticipation of the upcoming large future supply coming on stream in the near term of Two of six future office buildings projected to operate in the remainder of 2017 are categorised as premium office buildings that commonly offer higher rents, and this will change the overall rental calculation particularly when those buildings have large vacant spaces. In YTD, some office buildings within a prestigious complex in Sudirman adjusted their base rents lower, ranging from 10% up to 30%. This is particularly in correlation with the rental performance of Grade A office buildings in the CBD. Meanwhile, tight competition in this tenant market situation still give pressure to lower grade office buildings. In the same case, only newly operating office buildings that offer rents above market prices could change the overall rental calculation, which resulted to the overall rental growth for Grade B office buildings in YTD. Average Asking Rents (in IDR/sq m/month) Based on Area Q YTD Change Thamrin 330, , % Sudirman 317, , % Rasuna Said 267, , % Mega Kuningan 248, , % Gatot Subroto 351, , % Satrio 285, , % Service Charges Service charges were recorded relatively flat YOY in the CBD. A slight increase in 2017 YTD to IDR79,731/sq m/month was only contributed by new office buildings that started operating in Other than that, the new strata-title office buildings with service charges below market prices (because these buildings generally apply separate electric metres) will make sure that the average service charges will be relatively stable up to the end of F 7 Colliers Quarterly Q3 2017

8 The Range of Service Charges Based on Building Grades IDR150,000 Average Asking Prices Based on Available Spaces IDR60,000,000 IDR120,000 IDR50,000,000 IDR40,000,000 IDR90,000 IDR30,000,000 IDR60,000 IDR20,000,000 IDR30,000 IDR10,000,000 IDR0 IDR0 Premium Grade A Grade B Grade C 2017F The Range of Service Charges Based on Marketing Schemes IDR150,000 Despite registering limited sales transactions, landlords are still reluctant to sell at lower prices. Landlords prefer to offer the unsold spaces for lease, whilst expecting the market for strata-title office to improve. IDR120,000 Pre-Committed Take-Up Rate of Strata Title Office Building Spaces for Sale in IDR90,000 IDR60,000 Space Unabsorbed IDR30,000 IDR0 Office for Lease Strata-title Office Space Absorbed Strata-Title Office The absence of significant sales transaction in strata-title offices continued in Q3 2017, as around 40% of the total office spaces for sale in remain unsold. The average prices stayed at IDR56.6 million/sq m as of Q In line with a moderate take-up rate projection, the average asking prices are expected to be relatively stable up to the end of 2017, which means reflecting a 2% increase YOY , , , ,000 sq m 2017F 2018F 8 Colliers Quarterly Q3 2017

9 Outside the CBD Office Spaces Offered For Lease Supply Office Cumulative Supply sq m 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , F 2018F 2019F 2020F Existing Supply Additional Supply YTD Supply Future Supply Office Cumulative Supply Based on Area Furthermore, we estimate a total of around 630,000 sq m of future office supply in Based on area, around 40% of the total future supply outside the CBD is located in South Jakarta. In addition, West and Central Jakarta will also become main contributors for future office spaces up to As the largest office space contributor outside the CBD, around 70% of the large future supply in South Jakarta is supplied by TB Simatupang. TB Simatupang itself experienced a booming supply by registering around 500,000 sq m of total additional office spaces in -. Including Pondok Indah and its surrounding areas, the current cumulative supply in TB Simatupang was recorded around 950,000 sq m. Nevertheless, the projected number of office spaces in at TB Simatupang is quite limited compared to the previous years. Zuria Tower is expected to meet completion by the end of 2017 and then The Sima within Izzara complex in The lack of infrastructure, particularly major roads and roads connecting southern and northern TB Simatupang, becomes a primary threat to the growth of office supplies in TB Simatupang. The construction progress of Desari (Depok-Antasari) Toll Road, which will connect South Jakarta and Depok, is expected to bring positive impact for future development at TB Simatupang, despite indirectly to the office sector. Potentially, the residential sector will be developed first. Nevertheless, we project with the growing number of employees moving to Southern Jakarta that companies will likely relocate to this area. TB Simatupang West Jakarta East Jakarta North Jakarta South Jakarta Office Annual Supply Based on Marketing Scheme 300, , ,000 Central Jakarta sq m 150, , , ,000 1,200, ,000 sq m 50,000 Cumulative Supply Future Supply 2017F F F 2018F 2019F 2020F Consecutively in Q2 and Q3, the absence of new office spaces caused the cumulative supply outside the CBD to remain at 3.03 million sq m. Based on how construction is progressing, large future supply is expected to come in at the remainder of Eight office buildings will result to 3.19 million sq m of cumulative supply by the end of 2017, showing a growth by 6.6% YOY. For Lease For Sale 9 Colliers Quarterly Q3 2017

10 New Supply Pipeline in Outside CBD excluding TB Simatupang Office Building Project Location SGA (sq m) Marketing Scheme Development Status 2017 Gallery West Kebun Jeruk 29,000 For Sale Under Construction Tamansari Parama Wahid Hasyim 10,800 For Sale Under Construction One Belpark Office Pondok Labu 17,800 For Lease Under Construction St Moritz Office Tower Puri Indah 19,500 For Sale Under Construction BKP Office Tower Sunter 16,000 For Lease Under Construction Hermina Office Building Kemayoran 20,000 For Sale Under Construction Puri Matahari Tower Puri Kembangan 28,925 For Lease Under Construction 2018 Arcade Business Center Pantai Indah Kapuk 22,000 For Lease Under Construction Soho Pancoran Pancoran 30,000 For Sale Under Construction One Tower Kemayoran 21,400 For Sale Under Construction Ciputra International Puri 1 Phase 1 Puri 15,000 For Lease Under Construction Ciputra International Puri 2 Phase 1 Puri 20,000 For Lease Under Construction 2019 MNC Tower II Kebon Sirih 60,000 For Lease Under Construction Jakarta Box Tower Kebon Sirih 36,000 For Lease Under Construction The Kota Kasablanka Kasablanka 80,000 For Lease Under Construction Ciputra International Puri 3 Phase 1 Puri 30,000 For Lease Under Construction Ciputra International Puri Phase 2 Puri 15,000 For Lease In Planning Ciputra International Puri 1 Phase 3 Puri 15,000 For Lease In Planning Ciputra Internatinal Puri 2 Phase 3 Puri 15,000 For Lease In Planning New Supply Pipeline in TB Simatupang Office Building Project SGA (sq m) Marketing Scheme Development Status 2017 Zuria 6,584 For Lease Under Construction 2018 The Sima 60,000 For Lease Under Construction 2019 Arkadia Tower G 30,000 For Lease In Planning Beltway Office Park Tower 4 30,839 For Lease In Planning 2020 The Manhattan Square Tower 2 39,375 For Lease & Sale In Planning 10 Colliers Quarterly Q3 2017

11 The Occupancy Occupancy Rates 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Outside CBD excluding TB Simatupang TB Simatupang Conversely, with the absence of office supplies in Q2 and Q3 2017, the average occupancy rates for office buildings outside the CBD improved marginally. As of Q3 2017, occupancy rate was recorded at 83.5%, a slight increase in YTD. This figure would drop in near term given a large projected future supply, albeit still above 80%. Pre-Committed Absorption at Office Buildings for Lease in Compared to other areas that are relatively stagnant, occupancy rates of office buildings in South Jakarta slightly grew in Despite showing positive performance, the average occupancy rate in South Jakarta was still the lowest compared to other regions outside the CBD. Occupancy rates in South Jakarta were mainly complemented by the performance of office buildings located in TB Simatupang. Despite being still below 80%, the average occupancy rates of office buildings at TB Simatupang increased significantly by 7.2% in YTD to 76.4%. Whilst office demand is expected to be small, the limited future supply of office buildings will help the forecasted occupancy rates in TB Simatupang improve, albeit moderately. Asking Rents Average Asking Rents (in IDR/sq m/month) Based on Region Q YTD Change Central Jakarta 153, , % South Jakarta 235, , % North Jakarta 226, , % East Jakarta 125, , % West Jakarta 192, , % Average Asking Rents IDR300,000 IDR250,000 IDR200, F IDR150,000 IDR100,000 IDR50,000 IDR0 2017F Outside CBD excluding TB Simatupang TB Simatupang 0 20,000 40,000 60,000 80, ,000 Space Absorbed Space Unabsorbed sq m 11 Colliers Quarterly Q3 2017

12 Despite limited supply, the average rent for office buildings outside the CBD dropped in The average base rental was at IDR217,715/sq m/month in Q3 2017, showing a decreasing growth of 2.7% in YTD. Based on area, the highest average rent outside the CBD was still recorded in South Jakarta (the home of modern and big buildings outside the CBD area), whilst East Jakarta was the lowest as of Q High average rents in South Jakarta were still driven by high-quality buildings located along Jalan TB Simatupang. The average base rental at TB Simatupang increased by 2% QoQ at IDR242,943/sq m/month in Q The Range of Service Charges Based on Marketing Schemes IDR150,000 IDR120,000 IDR90,000 IDR60,000 Average Rents (in IDR/sq m/month) Based on Building Grades IDR30,000 Q YTD Change Grade A 269, , % Grade B 225, , % Grade C 150, , % IDR0 Office for Lease Strata-title Office Service Charges The Range of Service Charges Based on Area IDR150,000 IDR120,000 IDR90,000 IDR60,000 Strata-Title Office Average Asking Prices Based on Available Spaces IDR40,000,000 IDR35,000,000 IDR30,000,000 IDR25,000,000 IDR20,000,000 IDR15,000,000 IDR10,000,000 IDR5,000,000 IDR0 IDR30,000 IDR0 Outside CBD Excluding TB Simatupang TB Simatupang Outside CBD Outside CBD excluding TB Simatupang TB Simatupang Overall service charges were recorded at IDR60,830/sq m/ month outside the CBD as of Q Despite showing a 5.6% growth from to 2017 YTD, service charges are also expected to be relatively flat outside the CBD in Q The average office space prices outside the CBD (excluding TB Simatupang) were registered at IDR37.7 million/sq m as of Q Two strata-title office buildings in Kelapa Gading (North Jakarta) confidently adjusted their price higher at around 17% in YTD, and this contributed to edge the average prices up by almost 3%. Currently, these two strata-title office buildings only have limited available spaces and previously offered asking prices lower than the average market price. 12 Colliers Quarterly Q3 2017

13 Conversely, one strata-title office building that began operation in in TB Simatupang adjusted its asking prices by around 7% lower than last quarter in order to push sales upward. We also recorded declining prices in office units at the secondary market. Owners of these units are still expecting a proper capital gain even by lowering their price by 7% up to 13% than in the previous offer. This situation drove the current average asking prices at TB Simatupang to drop 3.2% QOQ to IDR33.6 million/sq m. Pre-Committed Take-Up Rate of Strata Title Office Building Spaces for Sale Concluding Thoughts The office market intends to come close to a confident level and expects office demand to rise. Office space enquiries are expected to come from relocations and expansions. Nonetheless, supply flow is still too strong to be offset by even a seemingly resilient demand, at least until the quantity of supply influx stabilises. Having said that, landlords still need to be patient to see a rebound in the rental tariff, at least in the short term. Space Unabsorbed Space Absorbed 0 30,000 60,000 90, , ,000 sq m 2017F 2018F 13 Colliers Quarterly Q3 2017

14 Apartment Sector Ferry Salanto Senior Associate Director Research Jakarta s apartment market is anticipated to remain lacklustre for the rest of 2017 on the back of persistently weak market sentiment and continued influx of new apartment projects. Several newly launched projects demonstrated a brisk pre-sales performance; this nonetheless generally occurred for a short-term period only, and thus it is too early to consider this as a sign of market recovery. Another prevailing trend that may affect current and future inventory growth is the rise of overseas developers and investors, particularly from major Asian countries. These business entities usually partner up with local players in developing apartment projects. Some of these developers are quite aggressive and quick to execute new projects, usually targeting the middle-lower segment. Forecast at a glance Demand The average take-up rate in 2017 is anticipated to stabilise at 86-87% and start to pick up in 2018 to 88-90%, assuming the political condition is stable and the GDP will accelerate to a healthier level beyond 5.3%. Supply We expect a total annual supply of 15,292 Jakarta apartment units in 2017, which is 28% lower than our projection earlier in the year. Later in 2018, there will be around 34,043 units that are scheduled for completion during the year and another 9,509 units to enter the market in Vacancy Rate Vacancy rate for apartments for lease dipped from 29.8% to 28.3% this quarter. In 2018, we anticipate an increasing number of expatriates working on project-based infrastructure works and other projects related to the Asian Games 2018, which will help reduce vacancy by at least 25%. Rent With substantial amount of serviced apartment projects in the pipeline, vacancy rate would potentially rise over the next few years. In this competitive rental market, some landlords and local operators have to adjust their rental rates lower in order to entice potential tenants. Rent is projected to modestly increase by 3 to 5% in Price Apartment price is anticipated to grow by % by the end of 2017 and will rise to 6-8% in 2018 on the back of better economic projection, which in turn will improve sales performance. APARTMENT FOR STRATA- TITLE Supply The quarter-on-quarter change in the cumulative supply of strata-title apartment was only up by 1% for a total of 181,112 units. The increase accounted for an additional 1,804 units that came from the completion of four brand new projects and extension towers, including Kebayoran Icon, Puri Orchard (Orange Grove Tower), Maqna Residence, Apartemen Lucky Tower Residence and St. Moritz (New Presidential Tower). The above-mentioned four new projects are located in West Jakarta and thus changed the overall apartment unit distribution in Jakarta with 22% of total stocks in West Jakarta, followed by North Jakarta and South Jakarta, each with 20%. Until the third quarter of 2017, 23.4% of the total 21,167 projected units this year have been handed over, leaving about 16,218 units that will commence in the remainder of 2017 or even delayed until early Some developers are still in their grace period (ranging from four to six months), allowing them to hold the handover time until the first semester of The sluggish sales performance in some of the projects may lead to financial issues, which could suspend construction and thus delay delivery.

15 Completed Apartment Projects in Q Name of apartment project location region developer units Kebayoran Icon Jl. Ciledug Raya South Jakarta Tamara Land 256 Puri Orchad (Orange Grove tower) Jl Raya Adicipta West Jakarta PT Adicipta Graha Kencana (Serenity Group) 960 Maqna Residence Jl. Meruya Ilir No. 88 West Jakarta PT. Graha Meruya 312 Pancoran China Town (Lucky Tower) Jl. Pancoran No.42 A, Glodok West Jakarta PT. Supra Megah Utama 117 St. Moritz (New Presidential Tower) Jl. Puri Indah West Jakarta Lippo Karawaci 159 Newly Introduced Projects in Q Name of development LOCATION region Expected completion time estimated price (IDR/sq m)* total Units Aerium (South Tower) Jl. Pulau Melintang, Kembangan Utara West Jakarta million 366 The Padmayana Jl. Sinabung Senayan South Jakarta million 145 The Newton 2 Jl. Karet Sawah CBD million Promenade (2 tower) Jl. Kebon Melati CBD million 496 *) Price based on hard cash excludes VAT 10% In addition to the projects being handed over, four upcoming apartment projects were launched during the quarter with a total potential stock of 1,631 units, growing almost five times compared to last quarter. After the latest future project that was launched about six months ago, the CBD will see two brand new projects, whilst West and South Jakarta continue to add new apartment projects in the last three years. The continuing development in the West and South Jakarta is chiefly propelled by the transportation infrastructure and accessibility to commercial areas. One brand new project, namely Aerium, was developed by a joint venture between Sinar Mas Land and two Japanese companies, Itochu and Shimizu. This project is located in the upscale housing complex, Taman Permata Buana, in West Jakarta. This middle-upper class project provides only two- to three-bedroom apartment types, suggesting that Aerium aims to provide accommodation for families. In South Jakarta, a single residential tower, namely The Padmayana, is adopting a heritage resort concept and offers limited number of units at only 145, ranging from one- to three-bedroom types. The Padmayana would become the first upscale project of PT. Adhi Persada Realty, a stateowned enterprise developer that consistently builds middle to low class apartment projects. In the CBD, Ciputra introduced The Newton 2 after their first project recorded a brisk sale, fully absorbed in just six months. Unlike the previous projects, The Newton project offers smaller units, from studio to two-bedroom types, ranging from 24 to 61 sq m, in order to make the product relatively affordable. On the other front, Intiland with GIC, a sovereign wealth fund of the government of Singapore, have joined hands for shared ownership and development of 57 Promenade, an integrated mixed-use development located near Grand Indonesia shopping mall. The first phase will comprise two apartment towers, Sky and City, which are for the upper segment market. Number of Newly Launched Apartment Unit and Project (Q1 Q3 2017) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Q1 Q2 3Q 4Q Q1 #units Q2 Q3 #projects Q4 Q Q Q Colliers Quarterly Q3 2017

16 Moreover, from those four newly launched projects, Aerium and 57 Promenade have recorded 30% and 57% take-up rates respectively during their launching date. Having delayed about two years since their first soft launching, the take-up rate of Aerium has increased gradually to 30% on the back of their consistent construction progress. On the other hand, the high take-up rate of 57 Promenade stems in part from its location within the prestigious address in the heart of Jakarta s business district and the proximity to the future MRT station that is coming on stream in Overall, the noteworthy highlight from recent months is the interest of foreign companies to invest in Jakarta and Greater Jakarta areas. Enquiries continue to come, especially from groups of Japanese and Chinese investors. The latter are relatively new to the market, and are mainly focusing on acquiring land and engaging in residential development, either landed house and apartment, primarily on the eastern and north-western parts of Jakarta. The Japanese companies are mainly looking for middle to upper class market opportunities in a mature and established area. New Pipeline 2017 Apartment name location region developer #units Status Green Signature Apartment Jl. MT. Haryono East Jakarta KSO Fortuna Indonesia 2,000 On operation (Pikko) T - Plaza Residence (Tower A & C) Jl. Penjernihan I Kav.1 Central Jakarta PT. Prima Kencana 614 Under-construction Pejompongan St. Moritz (New Presidential Tower) Jl. Puri Indah West Jakarta Lippo Karawaci 159 On operation Elpis Residence Gunung Sahari Central Jakarta Sioeng Group 790 On operation Senopati Suites 3 Jl. Senopati South Jakarta Mahkota Asiana Graha 54 On operation District 8 (Tower Eternity) Jl. Senopati South Jakarta Agung Sedayu 400 On operation District 8 (Tower Infinity) Jl. Senopati South Jakarta Agung Sedayu 280 On operation Izzara Apartment (South and North TB. Simatupang South Jakarta Grage Group 542 Under-construction Tower) Menteng Park Jl. Cikini Raya No.79 Central Jakarta Agung Sedayu Group 756 Under-construction Lexington Rersidence Pondok Pinang South Jakarta Cowwel Development 275 Under-construction Casa Domaine Jl. Jend. Sudirman Kav 1 CBD Lyman Group 186 Under-construction Kebayoran Icon Jl. Ciledug Raya South Jakarta Tamara Land 256 On operation Puri Mansion Apartment (Tower Amethyst) Jl. Lingkar Luar Barat, Puri Kembangan West Jakarta Agung Sedayu Group 900 Under-construction La Terrasse Jl. Deplu Raya No.12 South Jakarta Cowell Development 111 Under-construction Puri Orchad (Orange Grove tower) Jl Raya Adicipta West Jakarta PT Adicipta Graha Kencana 960 On operation (Serenity Group) Puri Orchad (Cedar Heights tower) Jl Raya Adicipta West Jakarta PT Adicipta Graha Kencana 1,050 Under-construction (Serenity Group) The Langham Residences Senopati South Jakarta Agung Sedayu Group 57 Under-construction Maqna Residence Jl. Meruya Ilir No. 88 West Jakarta PT. Graha Meruya 312 On operation Veranda Jl. Pesanggrahan Raya, West Jakarta PT. Mutirara Puri Indah 174 On operation Kembangan Wang Residence Jl. Panjang No 18 West Jakarta PT. Citicon Propertindo 250 Under-construction The Hamilton Jl. KHM Syafi'I Hadzami South Jakarta Intiland 112 On operation Apartemen Lucky Tower Residence Jl. Pancoran No.42 A, West Jakarta PT. Supra Megah Utama 117 On operation Glodok The H Residence Kemayoran (Amethyst) Jl. Rajawali Selatan Central Jakarta Hutama Karya Realtindo 800 Under-construction Paradise Mansion (2 tower) Jl. Paradise Boulevard West Jakarta Palm Group 1,000 On operation Selatan Bassura City (Tower Jasmine) 2 tower Jl. Basuki Rahmat East Jakarta Synthesis Development 2,000 Under-construction Bassura City (Tower Heliconia) Jl. Basuki Rahmat East Jakarta Synthesis Development 700 Under-construction The Green Pramuka (Tower Nerine) Jl. Jenderal Ahmad Yani Central Jakarta PT Duta Paramindo 1,000 On operation continued 16 Colliers Quarterly Q3 2017

17 Apartment name location region developer #units Status continuation 2018 St Moritz (The New Ambassador Suite Tower) Jl. Puri Indah Kembangan West Jakarta Lippo Karawaci 200 Under-construction Regatta London Tower Jl. Pantai Mutiara North Jakarta Intiland 186 Under-construction Sudirman Suites Jl. Sudirman CBD Pikko Group 380 Under-construction LA City Apartment (Tower A) Jl. Raya Lenteng Agung, South Jakarta Pancanaka Samaktha 980 Under-construction Jagakarsa Nine Residence Warung Buncit South Jakarta Lippo Karawaci 246 Under-construction Pluit Seaview (Tower Belize) Pluit North Jakarta Binakarya Propertindo 300 Under-construction Group Gianetti Apartment Jl. Kebon Jeruk Raya, West Jakarta Bangun Investa Graha 500 Under-construction Kemanggisan Pluit Seaview (Tower Ibiza) Pluit North Jakarta Binakarya Propertindo 500 Under-construction Group Pakubuwono Terrace Grand Tower Kebayoran Lama South Jakarta PT. Selaras Mitra Sejati 435 Under-construction Gallery West Jl. Panjang No 5 West Jakarta AKR 280 Under-construction Gold Coast Apartment (Atlantic Tower) Pantai Indah Kapuk North Jakarta Agung Sedayu 568 Under-construction The Aspen Peak at Admiralty (Tower C) Jl. Fatmawati South Jakarta PT. Harmas Jalasveva 322 Under-construction Bellevue Place MT Haryono, Tebet South Jakarta Gapura Prima 240 Under-construction The Suites Satrio Jl. Prof. Dr. Satrio CBD Ciputra 200 Under-construction Sudirman Hill Residence Jl. Karet Pasar Baru Central Jakarta PT. Muliaguna Propertindo 299 Under-construction Barat Development One Casablanca Residence Jl. Pal Batu South Jakarta Forza Land 215 Under-construction Capitol Suites Jl. Prapatan Raya Central Jakarta The Capitol Group 327 Under-construction Gayanti City (2 Towers) Jl. Gatot Subroto CBD PT Buana Pasifik International 598 Under-construction The Foresque Pasar Minggu, Ragunan South Jakarta PT Griya Karunia Sejahtera 660 Under-construction (Binakarya Proper- tindo Group) Puri Orchad (Magnolia Spring tower) Jl Raya Adicipta West Jakarta PT Adicipta Graha Kencana 544 Under-construction (Serenity Group) Verde Two (Tower West) Jl. Rasuna Said CBD Farpoint Realty 152 Under-construction Antasari Heights (One Otium Residence) Jl. Pangeran Antasari No.8 South Jakarta PT Radinka Quatro Land 360 Under-construction Anandamaya Residences (3 towers) Jl. Jend Sudirman CBD Hongkong Land 500 Under-construction Vittoria Residence (3 tower) Jl. Daan Mogot West Jakarta PT. Duta Indah Kencana 1,100 Under-construction Taman Anggrek Residence (6 towers) Tanjung Duren West Jakarta Agung Sedayu 3,000 Under-construction Royal Suites Kemayoran Central Jakarta Springhill Golf Group 450 Under-construction Ciputra International Puri Indah (Tower Jl. Lingkar Luar Barat West Jakarta Ciputra 412 Under-construction Amsterdam) Regatta Apartment (Tower New York) Pantai Mutiara North Jakarta Intiland 186 Under-construction Grand Madison Park Tanjung Duren West Jakarta Agung Podomoro Group 300 Under-construction Lavie Jl. Denpasar Raya CBD Wilsor Group 302 Under-construction Citra Lake Suites (Tower Rosewood) Jl. Raya Kresek West Jakarta Ciputra Group 104 Under-construction Citra Lake Suites (Tower Greenwood) Jl. Raya Kresek West Jakarta Ciputra Group 126 Under-construction Citra Lake Suites (Tower Oakwood) Jl. Raya Kresek West Jakarta Ciputra Group 117 Under-construction Citra Lake Suites (Tower Sherwood) Jl. Raya Kresek West Jakarta Ciputra Group 122 Under-construction The Aspen Peak at Admiralty (Tower D) Jl. Fatmawati South Jakarta PT. Harmas Jalasveva 322 Under-construction Casa Grande Residence 2 (Tower Jl. Casablanca South Jakarta Pakuwon Group 350 Under-construction Angelo) Casa Grande Residence 2 (Tower Bella) Jl. Casablanca South Jakarta Pakuwon Group 350 Under-construction continued 17 Colliers Quarterly Q3 2017

18 Apartment name location region developer #units Status continuation The Kensington Royal Suites (4 Tower) Kelapa Gading North Jakarta Summarecon 790 Under-construction Casa Grande Residence 2 (Tower Jl. Casablanca South Jakarta Pakuwon Group 350 Under-construction Chianti) Pondok Indah Residences (3 Towers) Pondok Indah South Jakarta Metro Pondok Indah 880 Under-construction Selatan 8 (Tower Prabu) Jl. Raya Ulujami South Jakarta Karya Cipta Group 344 Under-construction Pakubuwono Spring (2 towers) Jl. Teuku Nyak Arief No.9 South Jakarta PT. Simprug Mahkota 545 Under-construction Indah (Agung Podomoro Group) Ciputra International Puri Indah (Tower Jl. Lingkar Luar Barat West Jakarta Ciputra 335 Under-construction Barcelona) Puri Mansion Apartment (Tower Crystal) Jl. Lingkar Luar Barat, West Jakarta Agung Sedayu Group 700 Under-construction Puri Kembangan West Vista (2 towers) Jl. Lingkar Luar Barat West Jakarta PT. Harapan Global Niaga 2,840 Under-construction No.8, Duri Kosambi Branz Simatupang (2 tower) TB. Simatupang South Jakarta Tokyuland 381 Under-construction Synthesis Residence Kemang (3 towersment Jl. Ampera Raya No.17 South Jakarta PT. Synthesis Develop- 1,100 Under-construction Gold Coast Apartment (Bahama Tower) Pantai Indah Kapuk North Jakarta Agung Sedayu 600 Under-construction Gold Coast Apartment (Carribean Pantai Indah Kapuk North Jakarta Agung Sedayu 600 Under-construction Tower) Gold Coast Apartment (Honolulu Tower) Pantai Indah Kapuk North Jakarta Agung Sedayu 600 Under-construction Le' Parc Jl. Thamrin CBD PT. Putragaya Wahana 100 Under-construction Regent Residences (tower 1) Semanggi CBD PT. Kencana Graha 100 Under-construction Global The Elements Epicentrum (2 Towers) Rasuna Said CBD Sinar Mas Land 372 Under-construction 2019 Pluit Seaview (Tower Bahama) Pluit North Jakarta Binakarya Propertindo Group Arandra Residence (was Sentosa Residence) Jl. Cempaka Putih Raya No Under-construction Central Jakarta Gamaland 687 Under-construction La Foret Vivante Jl. Limo, Permata Hijau South Jakarta PT. Mahkota Properti Indo 253 In Planning Permata Holland Village (Phase II) Cempaka Putih Central Jakarta Lippo Karawaci 230 Under-construction Sedayu City (Tower Melbourne) Jl. Pegangsaan Dua North Jakarta Agung Sedayu 912 Under-construction Raya Sedayu City (Tower Darwin) Jl. Pegangsaan Dua North Jakarta Agung Sedayu 936 Under-construction Raya 45 Antasari (2 Tower) Antasari South Jakarta Cowell Development 1,924 Under-construction Arzuria Apartment Jl. Tendean South Jakarta Tolaram Group 210 Under-construction The Sahid Asena Apartment and Garden Ciracas East Jakarta Sahid Group 476 Under-construction (was Sahid Garden Residence) Jaya Ancol Seafront - Oceana Tower Pademangan, Ancol East Jakarta Jaya Ancol 524 In Planning Sentra Timur Residence (Tower Safir) Pulo Gebang East Jakarta Bakriland Development 605 Under-construction Orient Residence Jl. Yos Sudarso, No 76 North Jakarta PT Tri Raton Mega 225 Under-construction 19 Avenue Apartment (Tower B) Daan Mogot West Jakarta Margahayu Land 416 Under-construction South Hill Jl. Denpasar Raya CBD Tan Kian 611 Under-construction Green Sedayu Apartment (Tower Pasadena) Fatmawati City Center - Corona Park Suite Tower Citra Living Apartment (Somerset Tower) Jl. Kamal Raya, Cengkareng West Jakarta Agung Sedayu 644 Under-construction Fatmawati South Jakarta Agung Sedayu 620 In Planning Jl. Citra 7, Kalideres West Jakarta Citra Mitra Graha KSO 312 Under-construction continued 18 Colliers Quarterly Q3 2017

19 Apartment name location region developer #units Status continuation Citra Living Apartment (Orchad Tower) Jl. Citra 7, Kalideres West Jakarta Citra Mitra Graha KSO 312 Under-construction Menara Jakarta (Tower Equinox) Kemayoran Central Jakarta Agung Sedayu 396 Under-construction Menara Jakarta (Tower Azure) Kemayoran Central Jakarta Agung Sedayu 860 Under-construction The Linq Kemayoran (2 towers) Kemayoran Central Jakarta KG Global 1,020 Under-construction Ratu Prabu 3 Residences TB. Simatupang South Jakarta PT Ratu Prabu Tiga 61 In Planning Menteng 37 Jl. Menteng 37 Central Jakarta Pikko Group & Wijaya 99 Under-construction Wisesa (JV) Samara Suites (was The Residence Jl. Gatot Subroto South Jakarta Synthesis Development 300 Under-construction Gatot Subroto) The Residences at The St. Regis Jl. H.R Rasuna Said CBD Rajawali Property Group 164 Under-construction Jakarta Lavish Kemang Residence Jl. Kemang Raya No.3, South Jakarta PT Kemang Karya Utama 474 Under-construction Bangka Permata Hijau Suites Jl. Raya Kebayoran South Jakarta PT Palmerindo Properti 649 Under-construction Lama Daan Mogot City (3 towers) Daan Mogot West Jakarta PT China Harbour Jakarta 700 Under-construction Real Estate Development TBS Tower Apartment TB Simatupang South Jakarta PT Mahkota Asia Graha 162 In Planning Kasamara Residence Jl. Kesehatan Raya South Jakarta PT MGM Propertindo 151 In Planning Demand In general, the average take-up rates climbed from 84.9% in the previous quarter to 85.6% in Q Transactions during the period are largely underpinned by the sales activities of newly launched projects and some that are still under construction that have competitive advantage such as easy accessibility, good brand, acceptable price and infrastructure support. The table below reveals that both existing apartment projects and those under construction recorded an upward sales trend, albeit moderately, compared to the previous quarter. Take-up Comparison Between Existing and Under- Construction Projects Q3 Q Q QoQ YoY Existing projects 96.3% 96.1% 96.2% 0.1% -0.1% Under-construction 68.5% 64.6% 66.5% 1.9% -2.0% projects Average 86.9% 84.9% 85.6% 0.7% -1.3% Take-up Rates Between Existing and Under- Construction Projects 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q1 Q2 3Q Existing Project 4Q Q1 Q2 Q3 Q4 Q Q Under Construction Projects Q Despite positive news about encouraging sales performance in quite a few newly launched projects, sales situation at other older projects remained soft. In general, market has yet to pick up. Overall, we expect the market to continue to subdue at least until the end of 2017 as market sentiment remains weak. 19 Colliers Quarterly Q3 2017

20 The generally slow rental market has reduced the appetite of investor type of buyers to purchase more units. Investors might be discouraged by the subdued capital appreciation in the recent years, despite the generous freebies offered by developers for newly launched projects. With the current market situation, we noted that it has become normal for developers to offer 5-8% discounts for KPA (mortgage facilities) and cash instalment or even bigger at 10-25% discounts for hard cash payment, as take-up rate remains uninspiring. Investors are becoming more selective in acquiring properties as they are eyeing high rental yields. Although these investor buyers acknowledge that the overall rental market remains weak and furthermore competition in the rental market has risen, they are still in the view that rental market in the CBD and certain areas in South Jakarta remains strong, compared to other areas. Take-up Rate Changes in Different Locations in Jakarta Q3 Q Q QoQ YoY CBD 94.4% 91.3% 91.5% 0.2% -2.9% South Jakarta 86.1% 86.1% 87.1% 1.0% 1.0% Non-Prime area 86.1% 85.0% 84.2% -0.8% -1.9% Interest Rates for Property Ownership Financing in Several Major Bank INTEREST RATE (%) NATIONAL BANK BRI Mandiri BNI BTN BCA Danamon OCBC NISP Bank Mayapada OVERSEAS BANK Citibank 8.25 CTBC Bank 9.65 UOB HSBC 9.00 Source: OJK Approaching the end of September, Bank Indonesia (BI) decided to lower its seven-day reverse repo rate from 4.50% to 4.25%. We expect that the impact on the property demand is likely to be limited, as we see that the current supply and demand imbalances in the market are more inelastic to the rate cut. Moreover, the Central Bank policy in cutting the benchmark rate is not automatically followed by the Central Bank when directly cutting interest rates. The rate cut was clearly targeted at supporting economic growth amid lower inflation. The Central Bank is also planning to change lending rules and the financing ratio calculation in order to boost lending volume. Changes will likely include different down payment rules for home loans to apply by regions (spatial LTV regulation), which will determine different LTV ratio per region by its economic growth and purchasing power. The apartment market seems to be recovering in a slow pace. Several key aspects such as steady economic growth, stable political condition and supportive regulation/ policy will help buyers muster their confidence to purchase an apartment. 420, , , , , , , , , , ,000 Source: OJK Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 8% 7% 6% 5% 4% 3% 2% 1% 0% -1% Total Property Loan (LHS) BI Rate (RHS) 7 day rrr (RHS Property Loan Growth (RHS) Asking Price LTV Jun-16 Amid the relatively stagnant market condition, the average asking price of apartment units continued to demonstrate a rising trend. As of Q3 2017, the average asking price of apartments in Jakarta edged up slightly by 0.9% QOQ and 4.6% YOY to IDR32.7 million/sq m. Prices in areas other than the CBD and South Jakarta posted the highest increment. During this challenging period, prices are relatively stagnant. The upward adjustment was largely due to the overall calculation particularly when we include new projects with good specification and location coming on stream and offered at a high price. 20 Colliers Quarterly Q3 2017

21 Apartment Price Changes (in IDR) in Three Different Areas Q3 Q Q QoQ YoY CBD 48,949,148 50,076,415 50,468, % 3.1% South 36,923,783 37,705,647 37,959, % 2.8% Jakarta Non-prime 23,454,168 24,356,919 24,795, % 5.7% Area Average 31,252,369 32,404,090 32,702, % 4.6% Quarterly Asking Prices of Apartment in Three Different Areas 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 APARTMENT FOR LEASE Supply Unlike the strata-title apartment market, the apartment-forlease market remained quiet, as reflected by the lack of new projects; there were no new projects completed between July and September Somerset Kencana Jakarta, situated at Pondok Indah area, was initially scheduled to start operation in Q but was delayed and rescheduled to open in early The operator of Ciputra World 2 serviced apartment changed from previously Frasers Hospitality, with Fraser Suites brand, to Ascott Limited, namely Ascott Sudirman Jakarta. Ascott Sudirman Jakarta will be available in early 2018, should it catch up with its finishing phase. This property will be the sixth serviced apartment managed by Ascott in Jakarta, besides Somerset Grand Citra, Somerset Berlian, The Ascott Jakarta, The Ascott Kuningan and Citadines Rasuna. Furthermore, in the upcoming years, Ascott plans to open another three serviced apartment projects in Jakarta, including Somerset Kencana Jakarta, Somerset Sudirman Jakarta and The Ascott Menteng Jakarta. 10,000,000 0 The Distribution of Apartment for Lease by Number of Units Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Q CBD South Jakarta Non-prime Area Most of the existing projects still introduce the latest price in order to maintain competitiveness in this softening market situation. Q Central Jakarta 10.11% South Jakarta 34.70% North Jakarta 5.16% East Jakarta 0.06% West Jakarta 5.80% CBD 44.17% 21 Colliers Quarterly Q3 2017

22 Serviced Apartment Projects Pipeline Name of Project Year of Operation Location Area #unit Ascott Sudirman Jakarta 2018 Jl. Prof Dr Satrio CBD 192 Oakwood at District 8 Senopati 2018 SCBD CBD 180 Somerset Kencana Jakarta 2018 Pondok Indah South Jakarta 148 Ascott Menteng Jakarta 2021 Menteng CBD 151 Fraser Suites Kebon Melati 2022 Kebon Melati, Tanah Abang CBD TBA Overall, the total supply of apartments for lease (either serviced or non-serviced) stood at 8,860 units, of which 60% are categorised as serviced apartment. The majority of these apartment units are located in the CBD (44%), followed by South Jakarta (35%). More developers opt to assign international hotel operators to manage their serviced apartments in an attempt to attract broader market coverage, particularly expatriates. Occupancy The average occupancy rate of apartments for lease in Jakarta in Q rose slightly from 70.2% to 71.3%, mainly generated from new short-term lease contracts in serviced apartments. The short-term deals were generally composed for business and leisure purposes, with rental tenure from daily to three-month rents. Such transactions helped increase the occupancy for serviced apartments from 62.2% to 65.6% this quarter. Active corporate clients that generate demand for apartments include those in the telecommunications sector, embassy staffs, non-government organisations (NGOs) and expatriates who are working on a project basis such as infrastructure works and other projects that are related to the Asian Games 2018 that will be held in Jakarta and Palembang. In contrast with serviced apartments, occupancy of nonserviced apartments fell slightly by 0.13% to 74.7% in the reviewed quarter. Besides the frequently reported reason such as lease contract expiration, some apartments also reported that most of their new tenants are currently expatriates without family members and who do not require big units, such as a three-bedroom unit. Sizeable units are typically offered by aged non-serviced apartments and as a result, tenants shifted to rent newer strata-title apartment units. Average Occupancy Rates of Apartment for Lease by type of Service Q2 Q Q QoQ YoY Non-serviced 76.20% 74.60% 74.47% -0.13% -1.73% Serviced 62.83% 62.24% 65.55% 3.31% 2.72% Average Occupancy Rates of Apartment for Lease in Three Different Areas Q2 Q Q QoQ YoY CBD 76.1% 72.5% 75.2% 2.7% -0.9% South Jakarta 70.4% 68.4% 69.0% 0.5% -1.4% Non-Prime area 68.0% 69.3% 69.5% 0.2% 1.5% Rental Rate Overall, average rental rate for apartments for lease (both serviced and non-serviced) remained flat. Minor adjustments occurred during the quarter mainly due to the correction of the exchange rate. In Q3 2017, the average asking rental rate in the CBD was registered at IDR362,789/ sq m/month, moderately down by less than 1% compared to the previous quarter. Meanwhile, South Jakarta, including other non-prime areas, was registered at IDR218,369/ sq m/month. With substantial amount of serviced apartment projects in the pipeline, vacancy rate would potentially rise over the next few years. In this competitive rental market where apartments for lease have to compete with individually owned strata-title apartment units that are offered for rent, some landlords have to adjust their rental rate lower, and this particularly affected mostly local operators. Average Rental Rate (in IDR/sq m/month) changes of Apartment for Lease Based on Region Q2 Q Q QoQ YoY 371, , , % -2.6% -1.73% 223, , , % -2.4% 2.72% 22 Colliers Quarterly Q3 2017

23 Concluding Thought Despite the encouraging pre-sales result of some newly launched projects, we are in the view that overall apartment demand has not picked up yet. Opportunistic buyers generally characterise pre-sales activities of newly launched projects, making an impressive sales record only at the beginning. The initial stage of products, as typically offered, lures buyers who wish to make investments, notably because developers come up with compelling discounts and bonuses, as well as provide payment flexibility. Overtime, as more construction works progress, prices are inevitably raised and sales start to diminish. Furthermore, at the same time, the market continues to see new projects coming on stream, thereby heightening competition amongst new projects. Given the limited number of transactions, we expect to see the apartment market continue to subdue, at least in the remainder of On the other hand, the fact that loan growth remains lacklustre, the Central Bank decided to further cut its repo rate by 25bps to 4.25%, and also deposit and lending facility rate 25bps to 3.5% and 5%, respectively. BI now expects loan growth to recover to 10-12% only by 2018 instead of this year. We think that BI may also consider the other monetary policies to be exercised, such as further ease LTV or down payment policies to help prevent properties from further deceleration. 23 Colliers Quarterly Q3 2017

24 Retail Sector Ferry Salanto Senior Associate Director Research The current occupancy figure of Jakarta s retail market was recorded as the lowest, at least for the last 10 years. Besides the entry of large, newly operating shopping centres bringing more vacant spaces, the shutdown of two big department stores by the end of September 2017 has also rubbed salt to the wound. The retail market itself is entering a very challenging period, as consumers spending power declines and some prominent stores and mall outlets shut down. Thanks to the prevailing shopping centre moratorium in Jakarta, the supply side was controlled during the current slowdown. Forecast at a glance Demand The limited supply projection will likely help occupancy improve slightly, reaching the end of the year, especially because we still expect to see the expansion of certain growing retail sectors, such as food and fashion. Supply The cumulative supply is expected to only increase by less than 2% YOY by the end of Meanwhile, Greater Jakarta area will close its book for any additional supplies in the remainder of 2017; new supplies will only be available in Vacancy Rate A few shopping malls contributed to the overall increase in vacancy to 16.2% this quarter or up 2.3% QOQ. Without any additional supply, occupancy in 2018 is projected to increase marginally to 84.5%. Rent Over the short-term period, rents are unlikely to improve primarily because landlords would reduce the vacancy level and therefore have to offer an interesting occupancy cost package. By the end of 2018, average rental rate will improve marginally by 2% to IDR629,312/sq m/month. Jakarta Supply Annual Retail Space Supply in Jakarta sq m 180, , ,000 90,000 60,000 30, F 2018F 2019F 2020F Annual Supply Under Construction In Planning Cumulative of Retail Space in Jakarta sq m 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , F 2018F 2019F 2020F Existing Supply Annual Supply Future Supply

25 Aeon Mall Jakarta Garden City added 68,000 sq m of retail spaces during the quarter, bringing cumulative supply to 4.63 million sq m in Jakarta. In the remaining three months of 2017, Jakarta will only have a slight number of retail spaces from Shopping Mall at SOHO Pancoran. The combined spaces of Aeon and SOHO Pancoran will bring the total retail space in Jakarta to 4.64 million sq m by the end of 2017, up 1.6% YOY. We anticipate a fair number of additional retail spaces from 2018 onward, partly due to the permit limitation policy (moratorium) for new shopping malls set out by DKI Jakarta government. Based on current construction progress, we estimate to see only four retail centres meeting their completion and bringing the total number of additional retail spaces around 165,000 sq m in Based on area, except New Harco Glodok in West Jakarta, all other future shopping centres will be located in South Jakarta. Retail Space Distribution Based on Region in Jakarta West Jakarta East Jakarta North Jakarta South Jakarta Central Jakarta CBD 0 350, ,000 1,050,000 sq m Cumulative Supply Future Supply in 2017F F New Supply Pipeline Shopping Center Location Region Developer NLA (sqm) Development Status Additional Information 2017 Shopping Mall at SOHO Pancoran Pancoran South Jakarta Agung Podomoro Land 8,000 Under Construction Part of integrated mixed-use project including apartment 2018 New Harco Plaza Glodok West Jakarta Agung Podomoro Land 60,000 Under Construction Stand-alone strata-title retail center 2019 D'Entrance TB Simatupang South Jakarta Loka Mampang 10,000 Under Construction Part of integrated mixed-use project including office park 2020 Shopping Mall at South Gate Lenteng Agung South Jakarta Sinarmas Land & Aeon 35,000 Under Construction Retail center within mixeduse development Pondok Indah Mall 3 Pondok Indah South Jakarta Metropolitan Kentjana 60,000 In Planning Stand-alone retail center 25 Colliers Quarterly Q3 2017

26 Demand Occupancy Rates in Jakarta 100% 95% 90% 85% 80% 75% The current period recorded the lowest occupancy rate ever since A few shopping malls reported of having more vacant spaces after some retailers closed. Such condition, coupled with the opening of new shopping centres with substantial number of vacant spaces, dropped the overall occupancy level to 83.8%, down 2.3% QOQ. Research on the Global Retail Development Index can also explain the current Indonesian retail market. Indonesia was ranked 8th, three levels lower than in the previous year, although retail sales in Indonesia in 2017 increased by 8.02% YOY. Both inside and outside the CBD, occupancy declined by 2% QOQ. Occupancy in the CBD was registered at 87.8%, whilst in other areas outside the CBD, the figure is lower and registered at 82.2%. Almost all regions outside the CBD showed a relatively steady occupancy rate, except East Jakarta. This was mainly due to the inclusion of Aeon Mall Jakarta Garden City (20% physical occupancy rate) to the supply, which affected the overall occupancy calculation. A substantial 15% QOQ decrease in occupancy brought the performance of overall shopping centres in East Jakarta down to only 69.1%. CBD Outside the CBD Jakarta From retailers standpoint, the weakening retail market may stop local and foreign retailers from expanding to Indonesia. In 2017, the growth on retail sales was not in parallel with the number of visitors. Approaching the end of September, Matahari Department Store announced the closure of their two outlets located in Blok M and Manggarai because the number of visitors has scaled down, further declining sales. Subsequently, the company aims to be more intensive in online retailing through MatahariMall.com and run only several brick-and-mortar stores. Overall, the retail industry currently seems to be lukewarm and no longer as enticing as before. This also pushed other department stores, including Ramayana, to transform their retail concept, especially for stores outside Jakarta. Some have made conceptual changes from being supermarkets to department stores, considering that there is more promising potential market for department stores than supermarkets. Apart from the closure of several stores and outlets, we recorded several new retailers started operating in Jakarta. Fashion and F&B are still the typical expanding tenants in Q Such category comprises infants and kids clothing apparel, sportswear, bags and shoes, which represent around 60% of the total leasing transactions being recorded, followed by F&B with 30%, and the rest are health and beauty products and jewellery retailers. Occupancy Rate Based on Mall Grade in Jakarta 100% 95% 90% 85% 80% 75% Premium Middle Upper Middle Middle Lower 26 Colliers Quarterly Q3 2017

27 Several Committed Tenants at Existing Mall with Space Above 300 sq m Shopping Centre Location Tenant Name Product Lippo Mall Puri Puri, West Jakarta Uniqlo Fashion & Accessories One Belpark Pondok Labu, South Jakarta Miniso Fashion & Accessories Pasaraya Blok M Blok M, South Jakarta Transmart Carrefour Hypermarket Pasaraya Blok M Blok M, South Jakarta Outback Restaurant Pondok Indah Mall 2 Pondok Indah, South Jakarta Farmers Market Daily consumption Grand Indonesia Thamrin, Central Jakarta Miniso Fashion & Accessories Kota Kasablanka Casablanca, South Jakarta Miniso Fashion & Accessories Pacific Place SCBD, South Jakarta Hermes Paris Fashion & Accessories Mall Kelapa Gading 3 Kelapa Gading, North Jakarta Miniso Fashion & Accessories Committed Tenants at New and Future Shopping Center Shopping Centre Area Year Operation Tenant Name jakarta Aeon Jakarta Garden City Cakung, East Jakarta 2017 Footgear, Ichiban Sushi, H&M, Clarks, Charles & Keith, Uniqlo, Guess, Wood, Wrangle, CGV Blitz, Colorbox, Wrangler, Pepper Lunch, Yoshinoya, Starbucks, Ta Wan, Solaria Greater Jakarta (bodetabek) Lagoon Avenue Mall Kalimalang, Bekasi 2017 CGV Cinema, Funworld, Hero Supermarket, Sports Station, Skechers, Optik Melawai, Solaria, Miniso, Optik Seis, Converse, Es Teler 77, Kidz Station, Platinum Resto, Gokana, Ta Wan, Batik Keris, Tous Les Jours Galleria Vivo Mall Sentul Cibinong, Bogor 2018 Centro Department Store, Lulu, Cinema CGV Blitz, Fun World, Lotte Mart Through Presidential Regulation No. 44/, foreign retailers are allowed to set up department stores in Indonesia, with retail area from 400 to 2,000 sq m and a maximum of 67% foreign involvement. UAE-based retailer, LuLu Group Retail International aims to open up to 10 stores in the next two years. The next two outlets will be opened in Sentul and Cikarang before the middle of In addition, Korea s GS Supermarket unveiled its plan to expand and currently open its third store in Indonesia, complementing its presence in this domestic market for almost a year already. Occupancy might be the best reference to justify a shopping mall s performance, but trading volume is much more important in sustaining a shopping mall. The recent study titled Indonesian Ocean of Opportunities conducted by Nielsen best explains the current phenomenon from the perspectives of both retailers and consumers. Economic indicators suggest that growth is quite on track, yet spending power is weakening. Retailers generally suffer from declining sales, and in many cases leading to the closure of their outlets. The Nielsen report describes that the drained middle-low class consumers have lost their buying power because of their declining take-home pay, stagnant or negligible salary increase, and soaring cost of living. Meanwhile, the mid-upper class segment has been relatively solid, but according to the data released by Lembaga Penjamin Simpanan/LPS (Indonesia Deposit Insurance Corporation), the number of bank savings accounts with an amount above IDR2 billion is increasing. This suggests that this segment is becoming more prudent and selective in spending. The presence of online stores to some extent undermines brick-and-mortar stores, although the Nielsen study revealed that only 1% of consumers buy online groceries regularly. The majority population of Indonesia still considers it more convenient to shop in brick-and-mortar stores rather than online. Comparatively, Indonesia scores the lowest of all Asian countries as depicted in the chart in terms of buying online groceries regularly. Based on purchased product category, most online sales were generated from clothes and accessories, followed by gadgets and cosmetics. 27 Colliers Quarterly Q3 2017

28 Asia Shopping Scheme 100% 80% Rental Rates Average Asking Rents in Jakarta IDR1,000,000 60% 40% 20% 0% IDR800,000 IDR600,000 IDR400,000 China HongKong Indonesia India Japan Korea Malaysia Philippines Singapore Thailand Taiwan Vietnam IDR200,000 Buy online groceries regularly IDR0 Bought groceries online in past, but not recently Don't buy groceries online now, but consider in near future Buy groceries at physical store - will not buy online Source: Nielsen Purchase Product Category Car Motorbike Beauty Services Furniture Others Books, ebooks Sports/Picnic Equipment Travel Computer/Laptop High Technology Products Home Appliences Food & Beverage Personal Care Cosmetics Mobile Phones/Tablets Clothes/Accessories 0% 10% 20% 30% 40% 50% 60% Source: Nielsen CBD Outside the CBD Jakarta Average Asking Rents Based by Mall Grade in Jakarta IDR1,500,000 IDR1,250,000 IDR1,000,000 IDR750,000 IDR500,000 IDR250,000 IDR0 Premium Middle Upper Middle Middle Lower The recent figure of average asking rental rates in Jakarta was recorded at IDR610,863/sq m/month, suggesting a growth of 5% for the last three consecutive quarters. Some shopping centres review their offering rents regularly (every three years), and this mainly triggered the overall rental increase in Jakarta. Malls in premium category have been showing a relatively steady rental tariff for some periods, and this seems to continue at least in the short term. 28 Colliers Quarterly Q3 2017

29 The CBD area saw a slight rental increase by 3% for the last three quarters, due to the rental adjustment made by a shopping centre in Thamrin. The overall rental average in the CBD is now IDR885,182/sq m/month. Likewise, rental tariff adjustment in some shopping centres in South Jakarta pushed a 9% increase in 2017, pegging the average rent outside the CBD at IDR618,474/sq m/month. Service Charges Average Service Charges in Jakarta IDR175,000 IDR150,000 IDR125,000 Less than 10% of all shopping centres in Jakarta have adjusted their service charges higher than the previous year. Some of these shopping centres previously maintained the tariff stable over the last three years. The overall increase in service charges in 2017 is registered at 5.5%, bringing this quarter figure to an average of IDR133,284/sq m/ month as of Q The maintenance tariff for middle to upper class shopping centres is generally between IDR150,000 and IDR200,000/ sq m/month. In the lower class segment, we still record a few shopping centres offering below IDR100,000/sq m/ month for the monthly cost of looking after their property. Typical shopping arcades functioning as supporting facilities of a bigger commercial and residential compound or aged shopping centre have maintained a lower service charge policy below IDR100,000/sq m/month. IDR100,000 IDR75,000 IDR50,000 IDR25,000 IDR0 CBD Outside the CBD Jakarta Service Charges Based on Mall Grade in Jakarta 210, , , ,000 90,000 60,000 30,000 0 Premium Middle Upper Middle Middle Lower 29 Colliers Quarterly Q3 2017

30 Greater Jakarta (BoDeTaBek) Supply Annual Retail Space Supply in Greater Jakarta 350,000 Grand Kamala Lagoon, a multi-tower residential and commercial estate located in Bekasi, opened its 21,367-sq m Lagoon Avenue Mall, a retail shopping facility, which added to the total retail space in Greater Jakarta area at 2.55 million sq m as of Q Lagoon Avenue Mall will be the latest shopping centre this year. Together with BTC City shopping mall, they will be the only retail buildings available for the entire 2017, contributing a total of 77,367 sq m. sq m 300, , , , ,000 In 2018, we will only see two shopping centres to be placed in the market; they are Galleria Vivo and Aeon Mall Sentul City. We have revised the completion schedule of Grand Dhika City from 2018 to most likely 2019, due to how its construction is progressing. Each of the shopping centres that started operating this year and those within the next three years are either part of a mixed-use project or built within a commercial and residential compound as supporting facilities or even targeting shoppers in a greater radius. 50, F 2018F 2019F 2020F Annual Supply Under Construction In Planning Cumulative of Retail Space in Greater Jakarta 5,000,000 4,500,000 4,000,000 3,500,000 Based on Greater Jakarta s sub-market, Tangerang is currently the largest contributor for retail spaces even when compared to other regions in Jakarta. (North Jakarta holds the largest retail spaces in Jakarta.) Looking ahead, the number of retail spaces in Bekasi will surpass Tangerang by 2020 with at least five new shopping centres coming on stream, totalling to almost 290,000 sq m. One of these shopping centres is Aeon Deltamas, which will be Aeon s fifth shopping mall in Indonesia. Cumulative of Retail Spaces Based on Area in Greater Jakarta Bekasi sq m 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 Tangerang Depok F 2018F 2019F 2020F Bogor Existing Supply Annual Supply Future Supply 0 300, , ,000 1,200,000 sq m Cumulative Supply Future Supply in 2017F F 30 Colliers Quarterly Q3 2017

31 New Supply Pipeline Shopping Center Location Region Developer NLA (sqm) Development Status Additional Information 2018 Galleria Vivo Sentul Cibinong Bogor Megapolitan Land 35,000 Under Construction Retail center within mixed use development Aeon Mall Sentul City Sentul Bogor Sentul City & Aeon 71,000 Under Construction Retail Center within mixeduse development 2019 Grand Dhika City Mall Bekasi Bekasi Adhi Persada Property 24,000 Under Construction Part of integrated mixed-use development 2020 Shopping Mall at Pesona Square Plaza Indonesia Jababeka Juanda Depok Menara Depok Asri 40,000 Under Construction Part of integrated mixed-use development Cikarang Bekasi Plaza Indonesia Realty & Graha Buana Cikarang 55,685 Under Construction Part of integrated mixed-use development Kota Harapan Indah Kota Harapan Bekasi Hasana Damai Putra 51,000 In planning Stand-alone retail center Shopping Mall at Kota Wisata Bekasi Sinarmas Land 45,000 In planning Stand- retail center Kota Wisata Aeon Mall Deltamas Deltamas Bekasi Deltamas & Aeon 90,000 In planning Stand-retail center Demand The general cause of the falling occupancy is the addition of new vacant spaces in newly operating shopping malls. This is true from Q1 to Q in the Greater Jakarta areas. In, occupancy level was registered at 82.5% and continued to slide down moderately to 82.2% in Q In Bekasi, two new shopping malls caused average occupancy in this city to go down by 6%. Other cities, however, still performed well and therefore helped maintain the overall occupancy performance in Greater Jakarta at 82.2%. New mall tenants in Jakarta and Greater Jakarta were dominated by fashion and food. We still expect to see some retailers to open stores in the next three months. Occupancy Based on Mall Area in Greater Jakarta 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Bogor Depok Tangerang Bekasi All Areas 31 Colliers Quarterly Q3 2017

32 Several Committed Tenants at Existing Mall with Space Above 300 sq m Shopping Centre Location Tenant Name Product Depok Town Center Sawangan, Depok Ace Hardware Home Equipment Aeon Mall BSD Serpong, Tangerang Miniso Fashion & Accessories Grand Metropolitan Kalimalang, Bekasi Miniso Fashion & Accessories Mall Citra Gran Cibubur, Bekasi Miniso Fashion & Accessories Supermall Karawaci Karawaci, Tangerang Sports Station Fashion & Accessories Committed Tenants at New and Future Shopping Center Shopping Centre Area Year Operation Tenant Name Lagoon Avenue Mall Kalimalang, Bekasi 2017 CGV Cinema, Funworld, Hero Supermarket, Sports Station, Skechers, Optik Melawai, Solaria, Miniso, Optik Seis, Converse, Es Teler 77, Kidz Station, Platinum Resto, Gokana, Ta Wan, Batik Keris, Tous Les Jours Galleria Vivo Mall Sentul Cibinong, Bogor 2018 Centro Department Store, Lulu, Cinema CGV Blitz, Fun World, Lotte Mart Rental Rates Average Asking Rents Based on Mall Area in Greater Jakarta IDR450,000 IDR400,000 IDR350,000 IDR300,000 IDR250,000 IDR200,000 IDR150,000 IDR100,000 IDR50,000 IDR0 Due to the confidence of having only a limited number of vacant spaces, some middle class shopping centres in Tangerang and Bekasi offer their unoccupied retail spaces quite high, starting from IDR400,000 up to IDR700,000/sq m/month. Service Charges Service Charges Based on Mall Area in Greater Jakarta IDR120,000 IDR100,000 IDR80,000 Bogor Depok Tangerang Bekasi All Areas IDR60,000 IDR40,000 IDR20,000 Shopping centres in the Greater Jakarta areas predominantly maintained their rental tariff flat during the last three consecutive quarters of Only a few shopping centres located in Bekasi intended to adjust their current base rental. However, we also monitored that there were still quite a few shopping centres in Bekasi and Tangerang that offer base rental tariff below current average market prices, and thus the overall rent in the Greater Jakarta is up by 2.3% from early this year until 2017 YTD to IDR369,705/sq m/ month. IDR0 Bogor Depok Tangerang Bekasi All Areas 32 Colliers Quarterly Q3 2017

33 Generally, shopping centre landlords in Greater Jakarta still see that there is no immediate action needed to adjust service charges. Over the quarter, a moderate QOQ growth of 2% in Greater Jakarta only sends the overall service charges to register at IDR102,477/sq m/month as of Q In our record, around 60% of shopping centres categorised as middle and mid-low class in Jakarta and Greater Jakarta are still offering maintenance tariff below the average market price. Each city in the Greater Jakarta area has relatively similar operational costs (mainly the minimum wages) and for sure the same utilities cost. Therefore, we see a similar service charge trend over the last few years, and there is also no big gap amongst the cities. Outlook The journey of Jakarta s retail market has entered its most challenging period yet, marked by the declining spending power that has led to the shutdown of retail outlets. In Jakarta, the retail market has been underpinned by a retail moratorium that maintains the number of additional retail spaces. Due to the moratorium, the retail sector has been quite safe from an oversupply situation. However, more incentives are needed to enliven trading activities. The middle to low class consumers will need more incentives from the government to recover their purchasing capability. Such incentives could include maintaining utilities prices (water, electricity, gas, etc.), stabilising transportation costs and lowering interest rates. Meanwhile, the middle to upper class segment needs more confidence over the current economic and political situation, which may include a friendlier tax regulation and more ease in doing business. 33 Colliers Quarterly Q3 2017

34 Industrial Estate Sector Ferry Salanto Senior Associate Director Research This quarter, transaction volume reduced in number, registering only hectares from in the previous quarter. Landlords opted to keep prices unchanged in this particularly slow market. Forecast at a glance Demand The needs for logistics infrastructure were derived from other sectors such as manufacturing, food, trading and even automotive. These industries will continue to invigorate demand for industrial land and building, at least in the near future. Supply A significant amount of new land supplies will significantly come from the operation of several industrial estates within the consortium of Trans Hexa Karawang. The combination of six different companies composed a total of more than 2,100 hectares of land. Furthermore, the expansion of several existing industrial estates in other areas in Karawang, as well as other operating estates in Tangerang and Serang, will potentially provide a substantial amount of land in the future. Vacancy Rate If there is no significant new industrial land plot being introduced, vacancy rate would reduce moderately by Rent Rental tariff of land and standard factory building remains unchanged and will likely stay by at least the first semester of Price We do not anticipate price increase at least until the end of the year. Most industrial landlords have so far indicated industrial land price will remain stable at least until the early part of Industrial Land Supply Land inventory issue in the eastern part of Greater Jakarta may be resolved by the intense construction activity taking place in some new industrial estates within the consortium of Trans Hexa Karawang (THK). The THK consortium consists of several major developers such as Gajah Tunggal, Salim, Artha Graha, Agung Podomoro and foreign developer CFLD. Gajah Tunggal Group developed GT Karawang with a total gross area of around 400 hectares. Some of the plots were predominantly taken by companies of their group or affiliated to the group. GT allocated around 100 hectares for the proving ground of their tyre product. Artha Graha Group, which holds a total of 390 hectares of land (or 273 hectares of saleable industrial land), developed Artha Industrial Hill. Thus far, two blocks are already available to sell, comprising a total of 73 hectares, of which around 5.2 hectares were sold to a Korean-based textile company. This year, a giant Chinese developer, China Fortune Land Development (CFLD) formally acquired part of Agung Podomoro land property with a total gross area of around 205 hectares. CFLD named the estate as Karawang New Industry City (KNIC) and will commence land cut, land fill and infrastructure works in Q The KNIC comprises three industrial clusters automotive industry park, construction material park and logistics service industry park. Other operating industrial estates in Karawang holding a considerable amount of ready-to-use land for sale are KIIC and Suryacipta. KIIC is now focused on selling their latest stage of development totalling around 160 hectares, whilst Suryacipta has approximately 70 hectares of land to sell. Further east, part of Kota Bukit Indah managed by Indotaisei has yet to start the expansion of their current raw land (Phase 3), which could potentially provide more than 200 hectares. The shortage in land bank remains the main drawback for the Bekasi region. Two estates stopped selling land parcel for more than 10 years, whilst other estates may find it difficult selling sporadic and small land parcels because they do not have enough stock to sell. Only a few industrial estates in Bekasi still have the ability to sell land in considerable size, and some are even shifting in selling industrial buildings on small land plots due to land scarcity.

35 Industrial Land Stock Status in Some Active and Future Industrial Estates Hectares 4,000 3,500 3,000 2,500 2,000 1,500 1, Existing Stock Bogor Tangerang Karawang Bekasi Serang Potential Land To Be Developed Demand Remaining Unsold Land Sales volumes diminished this quarter, with so far a total transaction of only 1/3 of last quarter s sales, i.e., hectares. In 2017 YTD, however, total industrial land absorption accounts for about 82% of the total sales last year of hectares, suggesting that sales volume is still in line with the trend in. There was no noteworthy transaction during the quarter, as sales recorded below 10 hectares for one industrial estate. There was no big discrepancy amongst active industrial regions (Bekasi, Karawang and Serang) in the number of land being absorbed. Two industrial estates registered two transactions including KIIC and the newly operating Artha Industrial Hill. KIIC sold 3.5 hectares to the expanding German-based container system company. Meanwhile, Artha Industrial Hill concluded a single transaction of 5.16 hectares to a Korean-based textile company, which also became the outset of their sales. These two transactions were so far the biggest in Karawang since. For Karawang, the total sales this quarter was so far the biggest compared to those in Q1 and Q For some periods, two industrial estates, Suryacipta and KIIC, have been the main drivers for industrial transactions in Karawang. Going forward, however, transactions would seemingly come from other new industrial estates located within THK. Artha Industrial Hill is seemingly ready to offer their ready-to-use land. Meanwhile, Kota Bukit Indah (Indotaisei) has yet to report any transaction since the last one they recorded in. The classic land issue is still the main reason for the absence of sales in this location. Total sales in Karawang this quarter was registered at 8.66 hectares, the highest compared with other regions. There are more active industrial estates selling land in Bekasi than any other regions, including Jababeka, Delta Silicon, Bekasi Fajar, GIIC and KITIC. Mainly due to the lack of ready-to-use land, we have not recorded any transaction in MM2100 since early. After reporting a significant transaction of around 20 hectares last quarter, Bekasi Fajar has no transaction during this period. Similarly, GIIC recorded the highest amount of sales last quarter, but only registered 1.5 hectares this quarter from selling land to an automotive vendor. Two estates including Jababeka and Delta Silicon saw a moderate increase in sales volume QOQ. Jababeka reported multiple small transactions done by trading, manufacturing, food processing, machinery and auto parts companies, which accounted for only 0.6 hectare. Meanwhile, Delta Silicon reported a total of 2.93 hectares (slightly higher than last quarter) from also relatively small transactions involving industrial sectors such as the expansion of a distributor warehouse and workshop and cold storages for fish and meat products. KITIC intended to sell around 1.2 hectares to a company for warehouse purposes. Total sales in Bekasi was 6.23 hectares, as contributed by the four industrial estates. The only transactions concluded in Tangerang this quarter occurred at Griya Idola Industrial Park, selling three SFB units (warehouses for furniture and food, and pharmacy) and one land plot sold to a traditional medicine company with a total land size of about 6,605 sq m. Albeit small, Griya Idola has showed consistent sales since it was launched in. On the other hand, Millennium industrial estate experienced land stock issue that hindered them from selling during the quarter. The last is Serang, with two active industrial estates. For the last two consecutive quarters, Modern Cikande has been selling less than two hectares for each period. We recorded two relatively small transactions totalling to 1.2 hectares made by a local company in the transportation business and a Korean company in drum packaging. KIEC reported a single but fairly big transaction to a building material company of around six hectares. This was so far the biggest transaction for KIEC in 2017, and it helped lift the overall sales performance for the Serang region that reached 7.20 hectares. The overall land transactions recorded in 2017 YTD were mainly with food-related industries, reaching hectares or 29% of the total transaction, as well as automotive-related industries with a total of hectares (25%). Demand for land for warehouse or logistics purposes was somewhat reduced compared to last year. It only represents around 7% or 9.38 hectares thus far. If no single significant transaction would be made in the next quarter, the composition of the active sector would remain the same. 35 Colliers Quarterly Q3 2017

36 Land Absorption in Q Krakatau Industrial Estate Cilegon Artha Industrial Hill KIIC Delta Silicon Greenland International Industrial Centre KITIC Types of Activities Industries During Logistics/ Warehousing 6.50% Packaging 0.76% Manufacturing 3.41% Chemicals 2.60% Steel-related 0.23% Pharmaceutic al 0.76% Plastics 0.11% Metal 2.51% Machinery 0.14% Textiles 3.58% Building Material 5.20% Energy 4.16% Others 15.18% Modern Cikande Jababeka Griya Idola Food & Beverages 29.41% Automotive 25.45% hectares Annual Industrial Land Absorption Hectares 1,400 1,200 1, Land Price In line with the sluggish sales performance, industrial landlords decided to maintain prices. For some periods during the current slow-moving market, prices have been relatively flat. The overall price increase in Tangerang was mainly due to the operation of Griya Idola that came to the market in and they are offering a relatively higher price compared to the other estates in the region. Bekasi still fetched the highest average price, for reasons that include land scarcity, continued and stable enquiries, and the good quality of overall industrial estates located in this region Increasing land price will not be an option particularly in the short term. However, price increase may be possible for estates with asking price below the average market, particularly when the enquiry volume rises and land availability remains the issue. Jakarta Bogor Tangerang Karawang Bekasi Serang Industrial Land Prices and Maintenance Costs (in USD equivalent) region Land price (in USD/sq m) maintenance costs (in usd/sq m/month) lowest highest average lowest highest average Bogor Bekasi Tangerang Karawang Serang *1USD = Rp 13, Colliers Quarterly Q3 2017

37 Greater Jakarta Industrial Land Prices USD/sq m USD USD USD USD USD USD USD USD75.00 USD50.00 USD25.00 USD Bogor Bekasi Tangerang Karawang Serang Maintenance Cost For several years, maintenance tariff has remained unchanged and will likely continue at least until the end of the year. The majority of industrial estates in greater Jakarta still quote the tariff in USD. The average service charge costs in Karawang, Bekasi and Bogor still remain the highest at an average of USD0.07 or around IDR /sq m/month. Greater Jakarta Industrial Maintenance Costs USD/sq m/month USD0.10 USD0.09 USD0.08 USD0.07 USD0.06 USD0.05 USD0.04 USD0.03 USD0.02 USD0.01 USD0.00 Rental Market Only a few industrial estates offer land or industrial building for lease, including three industrial estates in Karawang, namely Kota Bukit Indah (Besland Pertiwi), Suryacipta and state-owned Kawasan Industari Kujang Cikampek; Cibinong Centre Industrial Estate (CCIE) in Bogor and KIEC in Serang. The average rents for industrial buildings in Karawang ranged from IDR50,000 to IDR53,000 per sq m/month. For Suryacipta, renting industrial buildings is also optional and which is now offered at IDR70,000/sq m/month. Meanwhile, the leasing tariff for industrial building in Serang and Bogor is similar at around IDR45,000/sq m/month. Land is also available for lease in certain industrial estates. In Karawang, the average cost for land leasing is IDR13,500/sq m/month, whilst in Serang, the same object is offered for lease at an average of IDR15,000/sq m/ month. In Bogor, the tariff is relatively lower at IDR5,000/ sq m/month. This quarter, there was no leasing transaction recorded. Concluding Thought The year-to-date overall transaction activities including land and SFB sales, as well as building and land leasing, have been weakening particularly in Q Such condition seems to continue particularly because the anticipation for big transactions that might occur by the end of the year is low, and such pre-enquiries looking for industrial space are relatively small to medium size, ranging from manufacturing industries and mainly for logistics purpose. Thus far, the total transaction during the three quarters represents 82.5% of last year s total sales, suggesting that sales performance for this year might possibly catch up with that in Bogor Bekasi Tangerang Karawang Serang 37 Colliers Quarterly Q3 2017

38 Hotel Sector Ferry Salanto Senior Associate Director Research Hotel occupancy performance in the third quarter of the year was the best for the last three years for the same period. Thus far, the number of additional hotel rooms was quite limited at least until Q3 2017, but would probably inflate at the end of the year, albeit still lower than last year s figure. The ADR has stabilised and is still in the same line with the previous trend, only that it has not exceeded the figures over the last three years. Forecast at a glance Demand Demand continues to be dominated by corporate guests for business purposes, which will maintain higher occupancy on weekdays. As 2018 will be recognised as a political year, demand for hotel rooms will be propelled by increasing activities from political parties for internal consolidation, as well as the big event the Asian Games 2018, which will be held in Jakarta and Palembang. Supply Jakarta is expecting 1,767 additional new rooms up to the end of The supply was still dominated by four-star hotels (three hotels) with 983 rooms, followed by three-star hotels (four hotels) with 534 rooms and five-star hotels (one hotel) with 250 rooms. Occupancy Rate/AOR The level of hotel room absorption in Jakarta is fairly low at 56.5% year-to-date. Both intense political activities and the Asian Games next year might help fuel demand for hotel rooms. However, given a significant hotel room supply projection next year, occupancy might still hover at around the current figure. Hotel Supply Star-rated Hotel In general, the number of new hotel supplies in Jakarta for the entire 2017 is quite limited. Jakarta only saw one new four-star hotel (Verse Luxe Wahid Hasyim) coming to the market in Q Up to the end of Q3 2017, the total room supply registered at 39,430, consisting of 11,250 three-star hotel rooms, 15,337 four-star hotel rooms and 12,843 five-star hotel rooms. The total supply for 2017 is 70% lower than last year s figure, with only 462 rooms. Cumulative Supply of Star-rated Hotel Projects in Jakarta star 4-star 5-star 2017F 2018F 2019F Rent/ADR The year-to-date ADR was recorded at USD We anticipate only small increment in the ADR for 2018 because corporate and group guests will push room rates down.