Supply. research & forecast report industrial market report. 4Q 2012 i the knowledge.

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1 4Q 2012 i the knowledge research & forecast report industrial market report Industrial land prices in Greater Jakarta increased significantly by 44% in Karawang to an average of US$155.80/ sq m. Meanwhile, a 37% YoY increase was also seen in Bekasi with the average price at US$206.20/sq m and in Serang with a 32% increase (average price at US$114.60/sq m). On the sales front, the total industrial sales in 2012 only amounted to 51% (636.4 hectares) of the total sales in 2011, not because of slow demand but mainly because of a lack of industrial land stock. Supply This quarter saw the opening of 20 hectares of land in Delta Silicon in the Bekasi region as part of their expansion plan. We have revised our supply information during 2Q since the land will only ready by the middle of Except Delta Silicon, the overall greater Jakarta industrial market did not see any new industrial land. Thus, the total serviceable industrial land in the six regions (Serang, Tangerang, Jakarta, Bekasi, Karawang and Bogor) became 8,686.3 ha. The major issues in the industrial supply during 2012 are strong demand for industrial land and the limited stock of land on offer. This land issue has been a paramount problem since 2011 when significant absorption of industrial land started to occur. During the quarter, a similar situation was reported in which buyers looking for industrial land have to search around several estates and most frequently cannot decide because land is not available. This situation has put industrial landlords into a better bargaining position in offering adjusted prices and choosing the tenants they want. In some cases, some developers, particularly in the Bekasi or Karawang regions, are able to sell raw land at the price of readyto-use land (even though the land is not ready for sale). This will be beneficial for both parties when landlords will receive some of the cash in advance while buyers get the current price in anticipation of further increases when land is in a ready-to-use condition. The limited land situation should be perceived as an opportunity for providing more land amid mounting inquiries. Several industrial estates are speeding up their expansion plans to be able to deliver land on schedule in For example, two prominent industrial estates in Bekasi are preparing land for their land bank in One estate is rushing the progress to develop a gross area of 150 ha, while the other is focusing on delivering a gross area of 50 ha by the end of Thus, in total, from these two industrial estates alone, it is anticipated that there will be around 140 ha of saleable industrial land (from 200 ha gross). Further west but still in the Bekasi region, one industrial estate is rushing to deliver land because they sold a significant amount of land in 2012 and are obliged to make it ready in In Karawang, two industrial estates have committed to delivering land that they have transacted during We estimate that there will be around 90 ha of saleable industrial land provided by these two estates in Other existing industrial estates are also planning to develop their raw land. For example, one parcel of industrial land in Karawang is planning to develop their land bank of around 386 ha in 2013 and 2014 period (in staging). Potential supply will also come from a new industrial estate in Karawang area but planning cannot be confirmed. One new industrial estate indicates that it will open a total of 662 ha of land and another is planning to develop a total of 342 ha but so far there is no further confirmation of this plan. One big industrial developer in Bekasi that holds and controls big parcels of land in Cilegon and Kendal, Semarang (out of this market report coverage) is planning to open industrial land in those areas. In conclusion, available and ready-to-build land may be limited this year but the industrial market holds a big parcel of land to be developed as an industrial location.

2 distribution of industrial land in SIX regions Serang 21% Jakarta 10% Bogor 2% Bekasi 26% Demand Karawang 36% Tangerang 5% Total industrial land being transacted during 2012 reached ha or only 51% of the total transactions recorded in The main reason is not because of demand reduction because demand remains strong. Limited land stock availability is the major issue which will lessen total sales during all of Limited stock also changes the overall composition of land being transacted where ha or 37% of total sales in 2012 are pre-commitment sales or sales done this year but to be delivered sometime in According to our records, such transactions were completed in two industrial estates in Karawang and three in different locations in Bekasi. In the last quarter of 2012, the biggest transaction occurred in the Serang area, with both industrial estates recording significant land transactions of ha. The Bekasi region, which recorded the highest amount of land sales last quarter, is in second position with a total of 60.4 ha. Meanwhile, despite being lower than the two regions, total sales in Karawang in this quarter were higher QoQ, i.e ha. With no update in sales for the other regions, total land being transacted during 4Q 2012 in the greater Jakarta area is ha higher than the figure in 3Q During 2012, Kota Bukit Indah, operated by Indotaisei, ranks first in terms of amount of land being sold. The latest transaction to Astra Honda Motor of around 84 ha made up all of the sales for this estate, even though the land will only be ready by March Suryacipta is ranked number two, selling around 90.6 ha during 2012 with the most transactions occurring in the first semester of annual industrial land sales hectares land absorption during 4Q 2012 The largest land transaction during the quarter was recorded in Krakatau Industrial Estate Cilegon (KIEC). The country s largest steel maker, PT. Krakatau Steel set up a new factory with Nippon Steel and Sumitomo Metal Corporation to produce what is called coldrolled-coil. This transaction was officially announced at the end of December, involving a land acquisition of around 40 ha. Apart from that, another 5 ha were sold to local steel related companies, bringing total sales during the quarter to 45 ha. Still in Serang, Modern Cikande confirmed their sales to three buyers, including to a building materials company of around 14.7 ha, to the chemical industry of 5 ha and smaller parcel of half a hectare to the fabrication industry, totalling around 20.3 ha. p. 2 Colliers International

3 The total land being transacted in Bekasi was registered at 60.4 ha with all operating industrial estates contributing to the sales. Greenland at Kota Deltamas reported a total sales of 24 ha in five transactions mostly done by the automotive industry and a small portion by a logistics company. This transaction is recorded as precommitment sales because the land will only be ready from March to September Greenland has been consistently recording around 20 ha every quarter, and most transactions during 2012 were concluded by the automotive industry. Other significant precommitment sales were also monitored in Bekasi Fajar where 16 ha of land were released to an automotive company and 2 ha were absorbed by the food industry. During the year, Bekasi Fajar has successfully sold around 61 ha, mostly to the automotive industry. All 61 ha of land being sold will also be delivered in Likewise, the MM2100 which is located side by side with Bekasi Fajar, recorded pre-committed sales during 4Q 2012 by existing tenants of around 7 ha. And in Jababeka, a total of less than one hectare was actually from seven companies (chemicals, warehouses, automotive, manufacturers, trading and machinery). Delta Silicon witnessed three transactions totalling 11 ha comprising 4 ha by the beverages industry, 6 ha by a warehouse company and 1 ha by a company for workshop purposes. In Karawang, all industrial estates only sold less than 7 ha in total during the quarter. Suryacipta sold the most in this region. A total of 6.4 ha was sold to two automotive companies (5.3 ha) with the remainder sold to the casting industry. Thus far, this quarter s transactions were the lowest but overall, Suryacipta was recorded as one of the industrial estates selling the most land for the full year of After recording the biggest transaction during 2012, Kota Bukit Indah Indotaisei had no transactions recorded this quarter. Their counterpart, Kota Bukit Indah, operated by Besland Pertiwi, sold around 5.2 ha to their existing tenants (they only sell land to their loyal existing tenants because they typically offer land for lease). Again this transaction is pre-committed sales because the land sold is still under construction. Leasing activity in Kota Bukit Indah (Besland Pertiwi) was concluded by an automotive company which leased land and buildings of 600 sq m. Meanwhile, two transactions were completed by automotive parts and construction machinery industries, totalling 7.2 ha in KIIC. land sales recorded during 2012 in each industrial estate Kota Bukit Indah (Indotaisei) Delta Silicon Suryacipta Greenland (Kota Delta Mas) Krakatau Industrial Estate Cilegon Bekasi Fajar Modern Cikande KIIC Jababeka KI Mitrakarawang MM2100 Industrial Town Kota Bukit Indah hectares Colliers International p. 3

4 cumulative supply, demand and take-up rates 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Cumulative Supply (ha) Cumulative Demand (ha) Take-up Rate (%) With more than 55% of the overall sales during 2012, automotive and related industries remained the key drivers for industrial land sales. Up to 4Q 2012, transactions concluded by automotive industries accounted for a total of almost 360 ha. The majority of land transactions by automotive and related industries occurred in either the Bekasi or the Karawang area. Other active industries during 2012 were steel-related industries in the Serang area, followed by logistics, F&B, building materials, SFB developers, oil and gas, consumer goods, and manufacturing industries. types of active industries in 2012 Consumer Goods 2.3% Pharmaceutical 0.7% Food & Beverage 4.2% Plastics 0.9% Electronics 0.1% Steel-Related 9.5% Chemicals 1.0% Manufacturing 2.6% Oil & Gas 3.5% Logistics/ Warehouse 4.8% Packaging 0.1% Metal 0.3% Machinery 0.6% Textiles 1.4% Building Material 4.9% Develope 4.4% Others 3.9% Automotive 54.8% Industrial Land Prices Having experienced land scarcity coupled with continued inquiries for industrial land, average land prices in the greater Jakarta area rocketed by an average 27% YoY (December December 2012). By region, Karawang recorded the highest jump of 44% YoY while Bekasi registered a 37% increase YoY and Serang, 38%. Albeit lower, an increase in price was also monitored in Bogor where prices were up by 18% YoY. The determinant factors (supply and demand performance) have led industrial land prices to keep moving upward. p. 4 Colliers International

5 During the quarter, three industrial estates in Karawang introduced new prices. Over the quarter, prices climbed by 17% which was the highest increase for a region during 4Q In Bekasi, prices edged up by 10% QoQ as a result of new prices introduced by five industrial estates in this region. Still in Bekasi, we witnessed one industrial estate introducing a significant jump in industrial land prices during the reviewed quarter, achieving IDR3 million / sq m (equivalent to US$312 / sq m). And in the Serang area, one industrial estate, with limited land to offer, introduced new prices which caused the average price for this region to move up by 7%. Industrial tenants were generally astonished with the increasing prices but their expansion plans cannot wait amid the competitive market. In particular, for highly invested industries where a land component only takes a small part of the overall investment cost, this condition would not be a great concern. We anticipate that the continued increase in land prices will still take place in At least one industrial estate in Bekasi has indicated a price rise of 20% in Another industrial estate in Bekasi also signalled a price increase in 2013 although less than the increase in greater jakarta industrial land prices U S $/s q m $240 $210 $180 $150 $120 $90 $60 $30 $ Bogor Tangerang Karawang Bekasi Serang industrial maintenance cost No industrial estates have reported an increase in service charges during the reviewed quarter. Overall, service charges are fairly flat in all regions. Service charges will potentially increase in 2013 given the plans to increase electricity tariffs and fuel prices which will affect operational costs. greater jakarta industrial maintenance cost $0.10 $0.08 US $/sq m/month $0.06 $0.04 $0.02 $ Bogor Tangerang Karawang Bekasi Serang Colliers International p. 5

6 INDUSTRIAL LAND PRICES AND MAINTENANCE COSTs* Region Land Price (sq m) Maintenance Costs (/sq m/month) Lowest Highest Average Lowest Highest Average Bogor US$ US$ US$ US$ 0.07 US$ 0.08 US$ 0.07 Tangerang US$ 83.3 US$ US$ US$ 0.04 US$ 0.11 US$ 0.06 Karawang US$ US$ US$ US$ 0.05 US$ 0.06 US$ 0.06 Bekasi US$ US$ US$ US$ 0.06 US$ 0.07 US$ 0.06 Serang US$ US$ US$ US$ 0.03 US$ 0.05 US$ offices in 62 countries on 6 continents United States: 147 Canada: 37 Latin America: 19 Asia Pacific: 201 EMEA: 118 $1.8 billion in annual revenue *1US$ = Rp 9,600 1,250 million square feet under management Over 12,300 professionals Outlook Notwithstanding the surge in land prices, greater Jakarta locations are irreplaceable. The number of industries relocating from this location to other areas like Semarang (Central Java province) or Surabaya (East Java province) is negligible. When the issue like whether there will be relocations to other area outside greater Jakarta arises, only a very few companies will, amid the fear of increasing land cost. In particular for the existing operating industries, when they expand, moving to the surrounding locations is the most feasible option. One of the considerations is whether the upstream downstream process has been established in the surroundings. For example, an automotive related industry would be comfortably located in the area where they can see the vendor, the logistics, the raw material and other supporting industries. If they are an auto parts industry, their best location is within the catchment of their anchor industry. Besides, as the region (greater Jakarta) is highly populated with auto-related industries, moving to another location would not be an option because for a highly invested industry like automotive, the change in land price would not entirely affect the whole investment plan. In short, the greater Jakarta market has transformed into an established place for some industries given its good infrastructure and its huge market share. The population in the Jakarta metropolitan area (including sister cities in the surroundings) has reached 28 million which is a tempting market for any industry. In fact, even though land prices have been moving upward for the last three years, the absorption keep proliferating. With the expectation that the momentum of economic progress will be maintained in 2013, industrial land sales next year should be robust because the combination of the influx of new industrial land will be well counterbalanced by continued inquiries from growing companies. Automotive and related industries will continue to dominate the transactions. Now, with the fear of land shortages, several industrial estates are thinking about earning recurring income from the leasing market. Some estates have started allocating the remaining land to create a commercial compound where they are building SFBs for rent. This will help maintain periodic income (not only from selling water, etc.) when the land sales activity slows down. COLLIERS INTERNATIONAL INDONESIA: World Trade Centre 10th & 14th floor Jalan Jenderal Sudirman Kav Jakarta Indonesia tel FAX Michael Broomell Managing Director World Trade Centre 10th & 14th floor Jalan Jenderal Sudirman Kav Jakarta Indonesia tel ext 131 FAX Ferry Salanto Associate Director, Research World Trade Centre 10th & 14th floor Jalan Jenderal Sudirman Kav Jakarta Indonesia tel ext 134 FAX Ferry.Salanto@colliers.com Copyright 2012 Colliers International The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has bee made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Accelerating success.