Construction Thematic
Built during the Soekarno presidential era, Semanggi flyover is widely known as an iconic structure of Jakarta over the years. Located in the heart of Jakarta, the clove-shaped flyover connects the most crowded areas including Sudirman Central Business District (SCBD), Thamrin, Senayan and Kuningan within its 3-km radius. These areas cover the city’s 2 major roads, Sudirman and Gatot Subroto that have been the centre of Jakarta activity with large numbers of office buildings, apartments, and shopping centres.
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Indonesia’s property sector has been facing a slower demand growth since early 2015, which leads to lower supply in 2016 amid the companies’ decision to delay the construction projects. Our ground check reveals that 50% of the construction projects around the Semanggi flyover are still concentrated towards the Sudirman road. We think that this is aligned with the government’s recent infrastructure development, including its MRT plan.
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During the ground check, we counted that there are 19 different projects and 66 total cranes on the 3-km radius of Semanggi. Most of these constructions are office buildings with 14 projects visible. According to Colliers, Jakarta CBD has recorded a total of 5.27m sqm (+7.7% YoY) of office area supply as of 1Q16. Moreover, Based on Colliers data, it shows that 75% of the 1m sqm projected office supply in 2019 will be located in Sudirman, Kuningan and Gatot Subroto.
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Apartment sector comes second with 7 total projects with some projects from highly-known property developers including Ciputra Group, Astra Group, and Lippo Group. We see that there are not as many apartment projects near the CBD area amid the low take up rate for luxury apartment. There are two infrastructure projects, including the MRT construction and Semanggi flyover extension. During our ground check, we counted 4 cranes for the infra projects alone. The Semanggi flyover extension will provide alternative connection from the Sudirman road to Gatot Subroto and otherwise. The project recently started and is targeted to be ready on August 17 2017. The Semanggi flyover contract was won by Wijaya Karya with contract value to be estimated at IDR563bn.
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District 8 is located at the heart of Sudirman CBD, and is on the top of our list with the most total crane counts with 10 tower cranes. The superblock project will stand on 4.8ha of land and will provide the CBD area with additional apartments, office space, hotel, and retail area. The project is developed by Agung Sedayu Group and is consist of 2 office towers, 3 apartments, and 2 hospitality towers. The three apartments will provide additional 680 strata title units of high end apartments and 180 units of serviced-apartments for the CBD. Moreover, the 2 towers of office building will provide an additional SGA of more than 210,000 sqm. Moreover, the District 8 project is located in SCBD alongside with 2 other projects, Sequis Tower and Grade A at Lot 10. These three projects alone contribute 22.7% or 15 cranes out of the total cranes in the 3-km radius of Semanggi.
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Anandamaya and Astra project
Located on the other side of Sudirman road, lies two Astra projects, Anandamaya Residences and Astra Tower. Anandamaya Residences comprises of 3 apartment towers on a 1.6ha prime land. We counted that the three towers have a total of 6 tower cranes in the construction site. The apartment is developed by Astra International and Hongkong Land and will have 500 luxurious apartment units. The apartment project value reach USD150m is set to operate later in 2017. On the other hand, Astra’s other project, Astra Tower, is located right next to the luxury apartment. The office tower has a total of 47 floors and 80,000 sqm of SGA space available for lease. Astra targeted that the office lease will start in the first quarter of 2018. The total value of the office building is estimated to be around IDR3.5trn.
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The Astra Tower construction is won by the joint venture between Total Bangung Persada (TOTL IJ, NR) and Shimizu. Total Bangun Persada own 40% of the construction project that is valued at IDR1.1trn. On the other hand, Anandamaya Residences construction is won by a local private contractor, Tata.
MRT as main catalyst
We think that the main catalyst for the development along the CBD area is still the MRT construction. The MRT itself is planned to be built with total length of 15.7km, connecting Lebak Bulus (South Jakarta) and Bundaran HI (Thamrin, Central Jakarta) for the first phase of the construction. Along the street of Sudirman, we counted that there are at least 2 mobile cranes and 2 crawler cranes on the site. The construction has started back in 2013 and is expected to start to operate by the end of 2018 or early 2019. The year to date progress has reached 43% of the construction and will be ready to serves 212,000 passengers per day and a maximum capacity of 960,000 per day. The total construction value for the MRT project reached USD1.29bn.
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The construction project is divided into 8 civil project and one operation& maintenance consulting. These civil projects include elevated civil works, underground works, railway systems & track work and rolling stock. Wijaya Karya (WIKA IJ, Neutral, TP: IDR) is one of the many contractors for the first phase of the project. Wijaya Karya is responsible for the construction of CP 101-102 for elevated works with Tokyu and CP 104-105 for underground works with Shimizu, Obayashi and Jaya Konstruksi.
Outlook
Currently, we see that the CBD area within 3-km radius of Semanggi is already diversified and well-developed with the mix supply of apartments, office buildings and retail spaces. Most of the available land plots are already included in the next three years development plan. Future development within the CBD will mostly centralize around the revitalization of old buildings. Therefore, we expect to see more skyscrapers in Jakarta’s CBD in the future.
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On the other hand, we also see recent government’s plan to accelerate infrastructure and public transportation development in both CBD and outside of CBD area. This plan includes the development of MRT and LRT. Jakarta Propertindo (Jakpro) recently announced that it will continue the construction of inner-city LRT in September. The inner-city LRT is planned to connect North Jakarta to South Jakarta and West Jakarta to East Jakarta. With the improvement in infrastructure and public transportation, we see that the CBD area in Jakarta will not be as centered as today, but will be widened to other areas. In the future, we see potential skyscrapers projects to be developed on the outer CBD area, including Kuningan and TB Simatupang.
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We still believe with a strong outlook on the construction sector, supported by many infra projects across the nation. Therefore, state owned contractors such as Adhi Karya, Waskita Karya, Pembangunan Perumahan and Wijaya Karya will be the biggest beneficiary of it. We also think infrastructure development will trigger higher demand on property segment in the future which also benefit construction companies.
