Lingering high interest rates and rising operating costs will slow demand for office real estate after last year's record growth, a property research company says.

Jones Lang LaSalle said in 2005, Jakarta's central business district (CBD) saw a take-up of 127,000 square meters (sqm) of new offices as against some 60,000 sqm reported in 2004.

However, there were already signs growth was slowing down in the last quarter of 2005, the company said. This was mainly because of the average 126 percent hike of fuel prices in October, which had prompted companies to delay expansions.

"The take-up rate was down in the last quarter because tenants were awaiting further developments after the fuel price hike," LaSalle corporate solutions head Robin Holdsworth said last week.

As of December 2005, there were 3.1 million square meters of office space stretching along the golden triangle area of Jl. Jend. Sudirman, Jl. MH Thamrin and Jl. HR Rasuna Said.

The average occupancy rate during the last three months of 2005 stood at 80.4 percent, up from the 77.4 percent recorded for the same period in 2004.

If high operating costs persisted, the office property sub-sector would grow at a slower pace this year, LaSalle capital markets group director Lucy Rumantir said.

According to LaSalle, the office space take-up rate had decreased from 2000 to 2002 but slowly picked up again in 2003. The 2005 figure was a record high, indicating a positive economic spinoff from increasing business activity.

Another research company, Colliers International Indonesia, projected that the CBD location could become less popular for non-serviced tenants.

Without strong motivation to be in the CBD, tenants would also look for competitive rental rates, less traffic congestion and restrictions, such as the 3-in-1 regulation, and time-efficiency in traveling, it cited in its quarterly report.

Occupancy rates could drop slightly in 2006 given the large supply and because transactions were likely to remain dominated by relocation activities, it said.

Last year, five large projects supplied some 112,000 sqm to the market. Among the new office buildings opened in 2005 were Plaza Asia Sudirman in Jl. Jendral Sudirman, and Menara Nusa and Menara Kuningan in Jl. HR Rasuna Said.

Several projects began last year would lead to 440,200 sqm of new supply by 2008, LaSalle said.

Colliers predicted supply would peak in 2007, with almost 300,000 square meters entering the market.

Some 61 percent of the total CBD's supply is located along Jl. Jend. Sudirman and Jl. MH Thamrin, with Jl. HR Rasuna Said and Jl. Gatot Subroto accounting for 23 percent and 16 percent respectively.