Surabaya saw no additional supply nor any newly launched apartments for lease, both serviced and non-serviced, during the first half of 2016. Total units of apartment for lease in Surabaya remained at 773 according to the latest market research report from Colliers International.
The majority of these apartments are located in West Surabaya. Two apartments including Citadines Marvell Surabaya and Oakwood Serviced Apartment (totaling 432 units) are slated to complete in 2017. Both Citadines Marvell Surabaya and Oakwood Apartment Surabaya are located in East Surabaya and are part of mixed-use development.
Citadines Marvell Apartment will become the third property managed by The Ascott Limited (Ascott), after Somerset Surabaya and Ascott Waterplace Surabaya which started operating in 2001 and 2015, respectively. Located in Ngagel area, close to Rungkut Industrial area, the serviced apartment is targeting the corporate market and travellers. Meanwhile, Oakwood Apartment Surabaya will be the first Oakwood worldwide property in Surabaya. Unlike the Oakwood Premier brand in Jakarta, the Oakwood Apartment provides fully-equipped units with limited service.
Occupancy
The market of apartment for lease in Surabaya remained stable with a modest increase in the overall occupancy rate. As of H1 2016 the average occupancy rate increased by 1.3 percent from the previous period, bringing the occupancy rate to 61.1 percent.
The various national holidays and Surabaya food festival, as well as Surabaya Fair, added further interest in the city, particularly from domestic travellers. In addition, many governmental events and exhibitions held in Surabaya have resulted in high occupancy level, especially serviced apartment located in Central Surabaya. In other words, the increase of average occupancy level is helped by short-term occupiers during H1 2016.
On the other hand, leasing inquiries from expatriates were seen to surface during the first half of 2016, mainly from industrial estate and infrastructure projects which Surabaya is currently heavily involved in here.
Overall, in this environment where there are a combination factors, such as slower incoming of expatriates, reduced rental budgets, and increasing competition from individual-owned strata-title apartments, landlords of apartments for lease will have to ex cogitate to draw in tenants. Despite the lack of demand from expatriates, short-term tenants come mostly from individual business travellers and weekend family holiday makers who continue to be the main contributors to keep the overall occupancy rate stable.
Rental Rate
Overall, the serviced apartment market in Surabaya experienced a slight rental increase of 1.5 percent month-on-month (MoM) and 7.8 percent year-on-year (YoY) to IDR 226,376 per sqm per month. The rental increment occurred only in the particular project which achieves good performance during previous year. However, in general, sluggish demand and head-to-head market competition with individual-owned strata-title apartment left no room for rentals to grow significantly.
Most serviced apartment operators are in the position to maintain the existing rates but are also offering various rental concessions to entice prospective tenants, both from individual and corporate tenants. It should be noted that only Ascott Waterplace Surabaya increased the rental tariff by 12 percent compared with previous semester due to their offer of better quality buildings, equipped with better facilities and modern furnishing as well as good performance during the reviewed period. On the other hand, as the only non-serviced apartment in Surabaya, Puncak Marina has maintained their rental rate of IDR 96,537 per sqm per month for the last two years.
Currently, a typical one bedroom serviced apartment in Surabaya is offered at around IDR 18.5 million per unit per month, while two- and three-bedroom are offered at around IDR 19.6 million per unit per month and IDR 22.2 million per unit per month.
