The Jakarta Property Market Update for the first quarter of 2019 released by Real Estate and Investment firm Jones Lang LaSalle (JLL) recently revealed several interesting insights. The aggressive growth of coworking space growth might be the solution to declining demand for the Grade A and Premium office spaces around Jakarta’s bustling CBD.
The market update divulged that the office space property net absorption is currently at 97,500 square meters (sqm). James Taylor, JLL’s Head of Research revealed that in Q1 2019, 55% of office spaces were leased by tech-based companies such as online marketplaces, travel booking services, online games and fintechs, as well as coworking spaces.
Coworking spaces have grown rapidly, from 74 thousand sqm in 2016 to 160 thousand sqm in 1Q19, which is an impressive 115% growth in three years. And the research revealed Flexible office/coworking spaces was identified as the most active tenant type with more than 40% of office spaces leased in the first quarter of 2019.
Their research found 47 coworking spaces operators in Jakarta with CoHive dominating at 26%, followed by WeWork with 14%, Regus with 11% and Gowork with 10%. The rest of the coworking providers, such as Marquee, Kolega and CEO Suite occupy less than 4%. A good majority of coworking spaces as well as conventional office spaces are located in Jakarta’s Central Business District (CBD), covering Thamrin – Sudirman, Rasuna Said, SCBD, and Mega Kuningan Area.
It is no surprise to see coworking spaces’ growing exponentially, they have managed to answer modern office space needs. A typical coworking space can provide new, exciting, communal experiences that inspire the people working from their locations. They fulfill the current technological standard requirement, if not more and as a result they can trigger innovation and increase productivity.
Aside from that, established coworking spaces such as CoHive can also be one-stop solution to several corporate challenges when establishing a new location. These issues include complex legal title requirements, huge upfront deposits to establish as well as high fit-out costs, especially when looking for locations with good access to community and services.
Conventional offices will sell their space in bulk with a long term contract, which might pose an issue for SMEs and startups, or even large corporations that are just looking for space to house a smaller division.
Currently, more and more large enterprises as well as State-owned Enterprises (BUMN) are eyeing on coworking spaces due to their flexibility and efficiency, as there won’t be any wasted assets once the lease period ends.
Coworking space operators are contributing the CBD occupancy rate, which is currently at a healthy 76%. However, the Grade A and premium office spaces populating the CBD area are facing a down trend with a negative 1.1% quarter-on-quarter growth. In contrast, occupancy at non-CBD areas such as TB Simatupang is growing steadily with time.
Soon CBD grade A and premium property owners will face an issue with finding occupants. The declining occupancy rate is caused by the massive increase in supply, which exceeds the increase in demands, thus resulting in unoccupied premium office spaces in the CBD.
One possible solution to this occupancy challenge might come in the form of the thriving coworking space operators, expanding to meet the dynamic demands for tech startups and SMEs. Just like how travel agents maintain a steady stream of passengers to fill airline seats, coworking spaces with their many flexible offerings, can keep all those CBD office spaces occupied.