Keppel Land expands commercial property business in Indonesia

Keppel Land is expanding its commercial property business in Indonesia with a new office tower in Jakarta.

After more than 20 years in Jakarta, Keppel Land has broke ground for a new office tower right next to its 18 storey development – The International Financial Centre.

International Financial Centre was completed in 1985.

The new International Financial Centre Tower 2 will feature green features.

Most importantly, the property arm of Keppel Corp said it is all part of its strategy to expand its presence in the region.

With a gross floor area of 64,000 square metres, the new Tower 2 will be almost double the size of Tower 1 and is set to be completed by 2015.

The International Financial Centre Tower 1 is currently fully leased on the back of the healthy office market.

This marks Keppel Land’s further expansion into Indonesia where it also manages a shopping mall in Surabaya.

Tan Swee Yiow, President, Singapore Commercial and Head, Regional Investments, Keppel Land, said: “In the last few years, we can see Indonesia is growing with steady economic growth, declining interest rates, improving inflation. We have been watching this country carefully and we decided that we need to deepen our presence.”

While development costs are still being negotiated, analysts estimate the new office tower will not tip Keppel Land’s asset allocation towards Southeast Asia.

As at March this year, four percent of Keppel Land’s S$10.1 billion (US$8.2 billion) of assets are from properties in Indonesia.

More than half of its assets (52 percent) are located in Singapore, and one third (33 percent) in China, where analysts note that Keppel Land have been focusing more on commercial properties lately.

The balance are in Vietnam, Indonesia and the Philippines.

Bryan Go, Analyst, PhillipCapital, said: “At the moment, they have been going towards more commercial (investments) because for certain cities, especially the first tier cities, they have been seeing more demand for office towers. But in the longer term, they will see more demand for the residential, especially Keppel Land, where they are strong in township development so that’s a more long term strategy.”

Analysts note that unlike the more developed countries like Singapore, office properties in developing countries where Keppel Land have established commercial properties in, may need to build on the quality of their tenants, which may not provide steady income.

This is because their tenures will fluctuate according to the volatility of the economies they operate in.

Source: Channel NewsAsia – 28 Jun 2012