OFFICE SECTOR. Highlight. Office Spaces Offered For Lease. Research & Forecast Report Jakarta Office 3Q 2015

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1 Research & Forecast Report Jakarta Office 3Q 215 Accelerating success. OFFICE SECTOR Highlight Poorer performance at newly operating office buildings brought occupancy in the CBD to 92.7% as of 3Q 215, down moderately by 3% YoY. Occupancy rates in the CBD are projected to plunge to 78% by 218 due to the huge upcoming supply and lower GDP growth. Following the mandatory use of rupiah, Grade A and Premium office buildings previously charging in US dollars converted to the local currency and average asking rents denominated in rupiah soared by 35.5% YTD as a result. Office Spaces Offered For Lease Supply CBD Cumulative Office Space Supply in the CBD 7,, 6,, 5,, 4,, Two office buildings, namely AIA Central (in Jalan Sudirman) and Noble House (in Mega Kuningan), have begun operations and brought 92, sq m of new additional office space to the CBD as of 3Q 215. At the same time, an office building in Jalan Thamrin (Wisma Kosgoro) was officially closed temporarily due to fire. The three office buildings mentioned above brought the cumulative supply in the CBD to 4.98 million sq m as of 3Q 215, growth of only 4.3% YoY. The progress of construction work on office buildings in the CBD is continuing. The additional supply projected for 215 to 218 in the CBD as of 3Q 215 is less than when it was forecast at the end of. Including newly operating office buildings in 215, as of 3Q 215, it is expected that 2.16 million sq m of new additional office space will be completed by the end of 218. This projected additional supply will be around 1% lower than when it was announced at the end of. This is due to some projected office buildings, that were previously projected to be operating in 218, having rescheduled their completions to 219. Cumulative Office Space Supply on the CBD Main Thoroughfares Satrio Gatot Subroto Mega Kuningan 3,, 2,, 1,, Rasuna Said Sudirman Thamrin 215YTD 215F 216F 217F 218F 1,, 2,, 3,, 4,, Existing Supply Annual Supply Existing Supply (215YTD) Future Supply ( ) 1 Research & Forecast Report 3Q 215 Office Colliers International

2 Although the majority of future office buildings show construction progress, there is still the possibility that some office buildings will postpone their completion dates and reschedule for several months in the future, particularly in anticipation of the recent sluggish market. Based on the progress monitored in the field, some office buildings need to accelerate construction work because there is only one quarter remaining for those buildings to meet the deadline of completion and be operational by the end of 215. Annual Future Office Space Supply in the CBD 6, 5, 4, 3, 2, 1, There was no additional new office space in the outside CBD during the quarter and thus, the total remained at 2.58 million sq m as of 3Q 215. In the short term, this helps regulate the already large supply in the market during tough times. In the long term, it is projected that the cumulative supply in the outside CBD by the end of 218 will grow by more than 5% compared to the total existing supply as of 3Q 215. This projected growth will be higher than in the CBD. Most of the future office supply is located in West, Central and South Jakarta, and West and Central Jakarta will contribute 2 and 18%, respectively, of the total projected supply in the outside CBD by the end of 218. Overall, the total future office supply in all other municipalities in Jakarta is smaller than in South Jakarta. The total new additional office space in South Jakarta is expected to contribute 54.4% of the total projected supply in the outside CBD in 215F - 218F. The cumulative supply is projected to reach almost 2 million sq m in South Jakarta by the end of 218. Half of the total projected additional office space in South Jakarta will be located in TB Simatupang, where it is anticipated that 1 future office buildings will bring 362,932 sq m of new supply by the end of 218. Around 7% of that projected office space is under construction and only three office buildings are still in the planning stages as of 3Q 215. Distribution of Office Space in the Outside CBD Area Strata-title offices were quite in demand, particularly before the recent economic turmoil. Buying strata-title offices became preferable for investors because rental rates had become high. The current condition of a huge upcoming supply of offices for sale (strata-title offices) actually began during the office market s boom time in around - ). Almost 1 million sq m of new office supply for sale is expected on the market from 215 to 218. That additional space will be similar to the amount of existing supply of strata-title offices as of 3Q 215. Outside CBD Cumulative Office Space Supply in the Outside CBD 4,, 3,5, 3,, West Jakarta 14% East Jakarta 4% TB Simatupang 17% North Jakarta 5% Central Jakarta 18% South Jakarta 42% 2,5, 2,, 1,5, 1,, 5, 215F 216F 217F 218F Should all of those future office buildings be completed, the cumulative supply in TB Simatupang will exceed one million sq m in 218. As of 3Q 215, the cumulative office supply in TB Simatupang was 739,343 sq m, representing 28.7% of the total supply in the outside CBD. Outside CBD excluding TB Simatupang TB Simatupang 2 Research & Forecast Report 3Q 215 Office Colliers International

3 Annual Supply in the Outside CBD 3, 25, Progress of Construction Work in the Outside CBD 8, 7, 2, 15, 1, 5, 6, 5, 4, 3, 2, 215F 216F 217F 218F 1, TB Simatupang Outside CBD Outside CBD excluding TB Simatupang TB Simatupang Under Construction In Planning Since, the number of strata-title offices for sale has mushroomed in TB Simatupang. Four office buildings for sale have been operating in there in - 215YTD. However, the projected additional office space for sale will shrink and only provide around 4, sq m for the rest of 215 and there will be no office space for sale in In other areas of outside the CBD, Kemayoran (Central Jakarta) and Puri Indah, including Kebun Jeruk (West Jakarta) will be the main areas for office supply for sale by the end of 218. Those areas will provide around 4% (almost 17, sq m) of the total additional office space for sale in the outside CBD, excluding TB Simatupang. Office Building Development in the Pipeline projected completion Office building name location SGA Marketing scheme status development CBD 215 Sinarmas MSIG Sudirman 75, For Lease Under Construction 215 Cemindo Tower Rasuna Said 6,995 For Lease Under Construction 215 Telkom Landmark Tower II Gatot Subroto 65, For Lease Under Construction 215 Bank Muamalat Tower (Satrio Square) Satrio 24,6 For Lease Under Construction 215 BTPN Tower (Bahana Office Tower) Mega Kuningan 5, For Lease Under Construction 215 Wisma Mulia 2 Gatot Subroto 65, For Lease Under Construction 216 Convergence Rasuna Said 36,367 For Lease & Sale Under Construction 216 International Financial Center 2 Sudirman 5, For Lease Under Construction 216 Menara Pertiwi Mega Kuningan 41,456 For Sale Under Construction 216 Capital Palace (Office ST Regis) Gatot Subroto 9,511 For Lease Under Construction 216 Menara Palma 2 Rasuna Said 5, For Lease Under Construction 216 Centennial Tower Gatot Subroto 1, For Sale Under Construction 216 Ciputra World Jakarta 2 Satrio 7, For Lease & Sale Under Construction 216 Satrio Tower Satrio 31,64 For Lease Under Construction 216 The Tower Gatot Subroto 56,492 For Sale Under Construction 216 Lippo Thamrin Office Tower Thamrin 16,5 For Sale Under Construction 216 T Tower Gatot Subroto 24, For Sale Under Construction continued 3 Research & Forecast Report 3Q 215 Office Colliers International

4 projected completion Office building name location SGA Marketing scheme status development continuation 217 Mangkuluhur Tower Gatot Subroto 53, For Lease & Sale Under Construction 217 Sequis Tower Sudirman 78, For Lease Under Construction 217 Prosperity Distict 8 Sudirman 71,545 For Sale Under Construction 217 Treasury District 8 Sudirman 139, For Sale Under Construction 217 Sopo Del Tower A Mega Kuningan 8, For Lease & Sale Under Construction 217 Sopo Del Tower B Mega Kuningan 4, For Lease In Planning 217 Office Tower Lot.1 SCBD (PCPD Tower) Sudirman 9,6 For Lease Under Construction 218 Sudirman 7.8 (ex Nugra Santana) Sudirman 52, For Sale Under Construction 218 Tower Two at The City Center Sudirman 11,26 For Sale Under Construction 218 World Trade Center III Sudirman 7, For Lease Under Construction 218 Tower Ciputra World Jakarta 1 Satrio 7, For Lease & Sale Under Construction 218 Thamrin Nine Thamrin 97,5 For Lease Under Construction 218 The Hundred Mega Kuningan 45, For Lease Under Construction outside CBD EXCLUDING TB SIMATUPANG 215 Menara Sentraya Blok M 52,72 For Sale Under Construction 215 St Moritz Office Tower Puri Indah 19,5 For Sale Under Construction 215 The Suites Pantai Indah Kapuk 13,2 For Sale Under Construction 215 Harton Tower Kelapa Gading 8, For Lease Under Construction 215 Nariba Office Suites Mampang 4,2 For Lease Under Construction 216 Puri Indah Financial Tower Puri Indah 38,5 For Sale Under Construction 216 One Belpark Office Pondok Labu 17,4 For Lease Under Construction 216 Gallery West Kebun Jeruk 29, For Sale Under Construction 216 L'Office Pasar Minggu 41,597 For Sale Under Construction 216 Sky 18 Tower Pasar Minggu 27,5 For Sale Under Construction 216 Soho Capital Slipi 36, For Sale Under Construction 216 Altira Sunter 4, For Sale Under Construction 216 Tamansari Parama Wahid Hasyim 1,8 For Sale Under Construction 216 BKP Office Tower Sunter 16, For Lease Under Construction 217 Soho Pancoran Pancoran 3, For Sale Under Construction 217 One Tower Kemayoran 21,4 For Sale Under Construction 217 Ciputra Business District Kemayoran Tower 1 Kemayoran 4, For Sale Under Construction 217 MNC Tower II Kebon Sirih 2, For Lease Under Construction 217 Ciputra Business District Kemayoran Tower 2 Kemayoran 4, For Lease Under Construction 217 Hermina Office Building Kemayoran 2, For Sale Under Construction 217 Lippo Tower Holland Village Cempaka Putih 27, For Sale In Planning 217 Ciputra International Puri 1 Phase 1 Puri 15, For Lease In Planning 217 Ciputra International Puri 2 Phase 1 Puri 2, For Lease In Planning 217 Ciputra International Puri 3 Phase 1 Puri 3, For Lease In Planning 218 Kota Kasablanka Office Tower 2 Casablanca 9, For Lease Under Construction 218 Jakarta Box Tower Kebon Sirih 36, For Lease In Planning 218 Ciputra International Puri Phase 2 Puri 15, For Lease In Planning 218 Ciputra International Puri 1 Phase 3 Puri 15, For Lease In Planning 218 Ciputra Internatinal Puri 2 Phase 3 Puri 15, For Lease In Planning continued 4 Research & Forecast Report 3Q 215 Office Colliers International

5 projected completion Office building projects name SGA Marketing scheme status development continuation TB SIMATUPANG 215 Graha MRA 13, For Lease Under Construction 215 South Quarter Tower 1 4,778 For Sale Under Construction 215 South Quarter Tower 2 4,778 For Lease Under Construction 216 South Quarter Tower 3 4,778 For Lease Under Construction 216 Zuria 6,584 For Lease Under Construction 216 Cibis Tower 6,8 For Lease Under Construction 217 The Sima 6, For Lease Under Construction 217 Beltway Office Park Tower 4 3,839 For Lease In Planning 218 Arkadia Tower G 3, For Lease In Planning 218 The Manhattan Square Tower 2 39,375 For Lease & Sale In Planning Demand CBD Occupancy Changes in the CBD 3Q YoY 3Q 215 QoQ 2Q % -2.7% 92.7% -1.% 93.7% Cumulative Amount of Office Space Absorbed vs Vacant Space in the CBD 5,, 4,, Poorer performance at newly operating office buildings brought occupancy in the CBD to 92.7% as of 3Q 215, decreasing moderately QoQ. Based on grade, the occupancy at Premium and Grade A office buildings declined more than at other classes. Businesses that are slowing due to the current economic conditions also impacted some tenants that are starting to reduce their operational costs. Tenants will face the difficult choice of staying at existing office buildings with high rents or relocating. However, tenants also have to consider higher fit-out budgets to move to other office buildings. Therefore, some tenants prefer to renew and renegotiate their leases due to the comfort of staying at their existing office space, although there are options for lower rents. Those conditions are expected to help the projected occupancy to stay at a healthy level, although it is expected to continue decreasing in the future. Average Occupancy Rates in the CBD 1% 3,, 2,, 9% 8% 7% 6% global financial crisis economy slowdown 1,, 5% 4% 3% Space Absorbed Vacant Space 215YTD 2% 1% % YTD Grade A & Premium All Class 5 Research & Forecast Report 3Q 215 Office Colliers International

6 Occupancy rates in the CBD are projected to weaken from now until 218. The office market is anticipating a huge upcoming supply and further lower Gross Domestic Product (GDP) growth and this may cause a further decline in the occupancy rate. As mentioned above, around 54, sq m of new additional space per year will be on the market in At the same time, GDP growth is forecast between 5.6 and 5.8%, and using this as the basis for projecting future demand, it is expected that there will be an annual demand for around 28, sq m until 218. Given the huge annual supply projection, we estimate that the occupancy between 215 and 218 will gradually decrease and may reach around 8% in 218. Office Space Pre-leased at Future Office Buildings for Lease in the CBD Outside CBD Occupancy Changes in the Outside CBD 3Q YoY 3Q 215 QoQ 2Q % -.8% 91.2% -.5% 91.7% Cumulative Office Space Absorbed vs Vacant Space in the Outside CBD 3,, 2,5, 218F 217F 2,, 1,5, 1,, 5, 216F 215F Space Absorbed 29 Vacant Space 215YTD 9, 18, 27, 36, 45, Space Absorbed Space Unabsorbed The chart above illustrates that space absorption at office buildings projected to be in operation during is still far from the projected total annual supply for each year. In the remaining three months of this year, finding tenants for the vacant 226,5 sq m will be arduous. The CBD also anticipates large vacancy at spaces previously marketed for sale because buyers of strata-title office space will not automatically be converted into occupiers of the space they bought. After an increase in the previous quarter, occupancy for outside the CBD saw a moderate slump as of 3Q 215. The average occupancy in Central and North Jakarta dropped QoQ and there were new vacant spaces above 1, sq m at some office buildings located in both municipalities. That in West Jakarta was also lower, although the average occupancy only decreased minimally. TB Simatupang Occupancy Changes in TB Simatupang 3Q YoY 3Q 215 QoQ 2Q % % 86.% 1% 85.% Occupancy in TB Simatupang climbed 1% QoQ to 86% as of 3Q 215. However, the large projected additional supply will create a challenge in keeping the occupancy high in TB Simatupang for the remainder of 215. Furthermore, TB Simatupang still anticipates abundant new additional office space in , which can restrain the growth of occupancy rates in TB Simatupang. 6 Research & Forecast Report 3Q 215 Office Colliers International

7 Average Occupancy Rates in the Outside CBD & TB Simatupang 1% 9% Asking Rents Average Asking Rental Rates at Offices in the CBD IDR 5, USD 4. 8% 7% 6% 5% 4% 3% 2% IDR 4, IDR 3, IDR 2, IDR 1, USD 32. USD 24. USD 16. USD 8. 1% % YTD Outside CBD TB Simatupang Office Space Pre-leased at Future Office Buildings for Lease in the Outside CBD IDR Average Asking Rental Rates at Offices in the Outside CBD 215YTD IDR Average (IDR) USD USD. 218F IDR 3, IDR 24, USD 25. USD F IDR 18, USD F IDR 12, USD F 6, 12, 18, 24, 3, Space Absorbed Space Unabsorbed IDR 6, IDR 215YTD IDR Average (IDR) USD USD 5. USD. 7 Research & Forecast Report 3Q 215 Office Colliers International

8 Average Asking Rental Rates at Offices in TB Simatupang Gap of Asking Rental Rates of Different Grades of Building QoQ IDR 3, USD 25. IDR 6, IDR 24, USD 2. IDR 5, IDR 18, USD 15. IDR 4, IDR 12, USD 1. IDR 3, IDR 6, IDR USD 5. USD. IDR 2, IDR 1, 215YTD IDR Premium Grade A Grade B Grade C IDR Average (IDR) USD In order to curb the dwindling rupiah value against the US dollar, Bank Indonesia issued a publication to explain the recent Central Bank regulation about the mandatory use of rupiah for any transactions done in the country. Bank Indonesia is authorised to ask for reports related to the obligation to use rupiah, and for the price of goods and/or services in rupiah. Bank Indonesia also explained about the penalty for breaching this regulation. Due to the abovementioned regulation, the majority of office buildings that previously offered rents in US dollars have converted to quoting rents in rupiah. There are some cases where they ask for rent in US dollars but convert it using the prevailing rate when the transaction occurred. Some developers that continue to ask for rent in US dollars are even using an above-market exchange rate to hedge against further rupiah deterioration. All in all, the policy to maintain high rental rates is perplexing for developers because on one side they have to maintain their investment return but on the other, the market is down and competition is becoming tougher. Since most of the buildings, particularly in the CBD, have converted from quoting in US dollars to rupiah, from 3Q 215 onward, our reports will only show asking rental rates in rupiah. 3Q 215 2Q 215 Since the regulation has been released and completed by publication, more office buildings previously charging in US dollars converted to the local currency. As a result, average asking rents in rupiah soared 35.5% YTD. In general, the buildings that were offered in US dollars were better quality and therefore were more expensive than those quoted in rupiah. As of 3Q 215, the average asking rent in the CBD was IDR342,581 sq m/month. Some Grade A and Premium office buildings have registered their asking rents between IDR5, and 87, sq m/month currently. At Premium Grade office buildings, the average asking rent was IDR444,454 sq m/month as of 3Q 215. In fact, the average asking rent at Premium Grade buildings dropped significantly by 31% QoQ. Average asking rents at Grade A office buildings also showed a decrease QoQ, albeit a moderate one. Landlords that own or are developing Grade A and Premium office buildings are seemingly considering more flexibility in their asking rents to keep their occupancy rates at a healthy level. Some newly operating and future office buildings also charged asking rents at the market average. Moreover, with slowing inquiries for office space at least in the last two years, landlords have started offering large discounts in asking rents particularly for sizeable occupation areas. The growth of asking rents outside the CBD also showed a similar trend to the CBD. As of 3Q 215, office buildings in South Jakarta have revised the overall rental cost that brought the average asking rents in the outside CBD to IDR211,95/sq m/month, growing 1.5% YTD. Average asking rent in South Jakarta itself was higher than that outside the CBD at IDR253,642 sq m/month. There is a big gap in asking rents between South Jakarta and West Jakarta, which ranked the second highest, at IDR176,931 sq m/ month as of 3Q Research & Forecast Report 3Q 215 Office Colliers International

9 There were still high asking rents in South Jakarta at office buildings in TB Simatupang and surrounding areas. As of 3Q 215, asking rents in TB Simatupang were IDR259,85 sq m/ month, decreasing 6% QoQ. The decreased asking rents in TB Simatupang were due to some office buildings that lowered their rents by converting to rupiah after previously charging in US dollars. Service Charges Range of Service Charges in the Three Main Areas in Jakarta 15, Strata-title Office Pre-Committed Take-up Rates of Future Strata-title Offices for Sale in the CBD 218F 217F 216F 12, 215F 9, 6, 5, 1, 15, 2, 25, Space Absorbed Space Unabsorbed 3, CBD Outside CBD TB Simatupang On the contrary, average service charges dropped significantly. The decreasing trend of the average service charges in the CBD was caused by the ceasing of operations of an office building in Thamrin that previously charged a higher than average maintenance fee. Several office buildings lowered their service charges QoQ, between IDR3, and 1, sq m/month together with the newly operating large-scale office buildings that quote service charges below the market average. The average service charge was IDR85,439 sq m/month (aggregate IDR and USD) as of 3Q 215, which is lower by 11% QoQ. Service charges outside the CBD were IDR67,327 sq m/month, and IDR65,461 sq m/month in TB Simatupang. These service charges remained relatively flat QoQ. Similar to offices for lease, strata-title demand is expected also to face tough conditions in the future. It was reported that space absorption has been slowing down, particularly since mid However, including absorption at a newly operating office building during 215, as of 3Q 215, the unsold space is only 48% of around 1 million sq m of the total supply of future offices for sale in the CBD until 218. By expecting a more conducive economy, the pre-commitment take-up rate has made a good start towards accelerating absorption in the future. Slowing demand caused asking prices to only grow modestly to IDR51.6 million/sq m in the CBD as of 3Q 215. Most future offices for sale currently charge prices between IDR5 and 65 million/sq m. In the secondary market, some large vacant spaces (2, to 8, sq m) are still marketed with asking prices between IDR55 and 75 million/sq m. The biggest office leasing transaction of almost 15, sq m was recorded at an office building in Rasuna Said involving a telecommunications company. 9 Research & Forecast Report 3Q 215 Office Colliers International

10 Pre-Committed Take-up Rates of Future Strata-title Offices for Sale Outside the CBD Average Asking Prices of Strata-title Office Space in Several Areas in Jakarta IDR 6,, 217F IDR 5,, IDR 4,, 216F IDR 3,, IDR 2,, 215F IDR 1,, IDR 5, 1, 15, 2, 25, Space Absorbed Space Unabsorbed 215YTD CBD Outside CBD exclude TB Simatupang TB Simatupang Areas outside the CBD, excluding the TB Simatupang area, also showed high absorption for office space for sale. Around 545, sq m is anticipated as the total additional supply in of which almost 6% was absorbed as of 3Q 215. However, even with high demand, it is seemingly difficult to raise the average asking price any higher, and it was still around IDR26 million/ sq m. Most office supply for sale outside the CBD in 215 was concentrated in the TB Simatupang area (58.3%). Up to 72% of around 18, sq m of space for sale in TB Simatupang has been absorbed and helped to bring the asking price to IDR33.6 million/sq m as of 3Q 215, a growth of 4.6% QoQ. 1 Research & Forecast Report 3Q 215 Office Colliers International

11 52 offices in 67 countries on 6 continents United States: 14 Canada: 31 Latin America: 24 Asia: 39 ANZ: 16 EMEA: 18 $2.3 billion in annual revenue Primary Authors: Ferry Salanto Associate Director Jakarta ext 134 Ferry.Salanto@colliers.com Colliers International Indonesia World Trade Centre 1th & 14th floor Jalan Jenderal Sudirman Kav Jakarta 1292 Indonesia TEL million square meters managed 16,3 professionals and staff About Colliers International Colliers International is a global leader in commercial real estate services, with over 16,3 professionals operating out of more than 52 offices in 67 countries. A subsidiary of FirstService Corporation, Colliers International delivers a full range of services to real estate users, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and insightful research. The latest annual survey by the Lipsey Company ranked Colliers International as the secondmost recognized commercial real estate firm in the world. colliers.com Copyright 215 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been 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.