RealEstat.id (Jakarta) – Currently, the world is being shocked by the issue of global economic pressure and is facing supply and liquidity shock problems. Furthermore, the war between Russia and Ukraine is not expected to end anytime soon. Since the war began, energy prices have soared where the difference between coal or gas prices and oil prices benefits Indonesia. However, non-energy prices slumped along with fears of a potential global recession.
According to David Sumual, Chief Economist of Bank Central Asia (Bank BCA), Indonesia is benefiting from the current energy and geopolitical crisis in the world since Indonesia is included in three categories of relative winners, such as: being an exporter of conventional energy such as coal, oil and gas; exporters of metals used in the energy transition (lithium, nickel, copper, cobalt); and a country who is able to replace China's role as a manufacturing outsourcing center.
The value of the Rupiah currency is considered quite strong compared to the values of other countries' currencies as it is supported by adequate foreign exchange reserves, surpluses both in the current account and balance of payments.
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Various sectors in Indonesia have shown improvement from the impact of the pandemic that started in 2020, including the property sector. From CBD Jakarta offices, there is an increase in demand for office space, while for retail, the return of retail visitor traffic to the malls in the Jabodetabek area was seen throughout 2022. However, with various issues circulating regarding global economic pressure in 2023 has raised questions and concerns entering 2023.
As one of the world's leading property service companies who serves with dedication and innovation in the property sector, Cushman & Wakefield reviewed the Jakarta property market conditions in 2022 and explore 2023 projections in a virtual press conference on Monday, 19 December 2022 by presenting Arief Rahardjo, Director of Strategic Consulting from Cushman & Wakefield and David Sumual, Chief Economist from Bank Central Asia.
Below is the data summary each sector as summarized by Arief Rahardjo, Director of Strategic Consulting, Cushman & Wakefield:
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Jakarta CBD Office 2023
About 136,000 sqm of new office space from two projects is expected to enter the Jakarta CBD market in 2023. Those two projects, Mori Tower and Luminary Tower, expect to complete in the first quarter of 2023. Currently, they have a combined pre-commitment level of below 50%. Beyond 2023, supply is more uncertain with several shovel-ready projects yet to begin construction.
Demand rebounded strongly in 2022, driven by corporate consolidation and a flight to quality. Net absorption of office space in overall Jakarta CBD market is forecast to reach 100,000 sqm in 2022. Net absorption is expected to stable in 2023 as tenants will remain be cautious and hold off on major decisions in anticipation of the predicted global economic slowdown. Vacancy is expected to remain high with the completion of large office projects in 2023 which may exceed forecast demand.
Despite ongoing positive net absorption, rents are expected to remain under pressure in 2023 due to the tough competition in a relatively ‘thin market’. Some landlords will likely continue offering very ‘generous’ discounts to their published rates to attract new tenants into their buildings. Rental growth is expected to return to positive territory starting in 2024 following the improved economic forecast.
The robust economy of Indonesia and smooth political campaign process in 2023 towards general election in 2024 will maintain office demand within positive territory.
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Jakarta Retail 2023
Six projects were completed during 2022, adding a total of 43,800 sqm retail space to Jakarta retail market. About 123,200 sqm of new retail space from four major projects, namely Mall Menara Jakarta, Lippo Mall East Side, and Thamrin Nine Retail Podium are expected to enter the Jakarta retail market in 2023.
Net absorption of retail space is expected to grow along with the completion of major retail projects in 2023 and improved of customer traffic. Vacancy is projected to decrease (-2.3%) in the upcoming year with increased leasing inquiries expected.
Despite the continuous positive net absorption, base rents are expected to remain unchanged in 2023 pending the full recovery of the retailer’s business. However, rental incentives are unlikely to continue in 2023 following the full operation hours of the malls and the return of retail center’s footfall.
Although economic growth accelerated during the last quarter of 2022, the on-going elevated consumer price, inflation, and rising interest rates are expected to balance off household spending in the subsequent year. Post-pandemic period, the ease of Covid-19 restrictions, continuation of vaccination, and improved resistance towards the disease among population, however, will positively impact retail center’s footfall.
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Jakarta Condominium 2023
Projects which postponed their handover schedules in 2022 are expected to be delivered in 2023 as developers plan to revive their construction activities, and a total of 26,059 (+70% YoY) condominium units are projected to be completed. By the end of 2022, there are approximately 3,138 units condominium expected to enter the market. Most of them come from lower-middle segment. Middle and lower-middle segment projects will continue to dominate the proposed supply in 2023. Related to the anticipated economic uncertainty in 2023, developers are expected to conduct NUP (pre-launch sales) before launching their projects, as a form of anticipation of market appetite.
In 2023, the net take-up rate is expected to improve and bounce back to the same pre- pandemic net absorption level as in 2019. Transaction in 2023 is projected to be dominated by middle segment developments with price ranges from Rp14 – 22 mio psm and are likely to occur in secondary area such as Tangerang and Bekasi. Sales transactions may still be dominated by the existing projects. Occupancy rate in 2023 may continue to increase to the level of 59%, along with the return of the normal university and working activities starting the second semester of 2022.
Prices are projected to remain stable with soft price growth due to the unpredicted economical situation. The highest price increment is predicted to occur in the secondary area, whilst the price increment in other areas will be relatively stable.
Condominium market is projected to improve in 2023 and may bounce back to the pre- pandemic demand level. However, the condominium supply growth and sales price growth are expected to only grow in modest rates.
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Jakarta Rental Apartment 2023
2023 will continue to see additional supply from Condominium for Lease projects, yet two service apartment projects, namely Ascott Stature Menteng and Park Royal Service Suites will be completed in 2023.
Net absorption and demand are projected to grow in 2023 with short stay demand being the new trend as business trips resume. Lower vacancy is expected with the return of the new inquires which will be converted into occupancy which new supply level remain low as developers will still hold the project pending the recovery of the general market condition.
Despite the ongoing positive net absorption, rents are expected to stable in 2023 in anticipation of the unpredicted economical situation. However, the negative rental growth will not continue as the occupancy rate improves.
During post-pandemic recovery period, economic recovery has brought positive impact to the Rental Apartment market. Short stay demands has risen during post-pandemic period, founded as a new trend and poses as an adjustment to maintain the occupancy in the Service Apartment sub-sector.
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Greater Jakarta Industrial 2023
Despite the slow demand, about 200 hectares of industrial land supply is expected to enter the market in 2023. Future supply will likely come from expansion of estates in the eastern area of Greater Jakarta, in Cikarang and Karawang.
Demand in 2023 is expected to be slightly better than in 2022. The highest demand is expected to come from high tech industries such as data centers, and the automotive industry, particularly the electric vehicles. Other sectors such as consumer goods, food and beverages industry are also expected to be the source of demand for industrial properties.
About 100,000 sqm of new warehouse space is expected to enter the market in 2023. Despite the high occupancy rate of the market, the tight competition is expected to hold the average rental growth of the warehouse market, limited only to high demand areas such as Jakarta and Bekasi. Meanwhile, holding of the land price observed in the past several years is expected to continue in 2023.
High tech industries such as data center, and automotive (electric vehicle industry) are still expected to be the main demand generator in 2023. The easiness for investors to invest in Indonesia (through the OSS system), is expected to help demand for industrial land and warehouses.
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Jakarta Hotel 2023
As per end of 2022, the total supply of 3-star to Luxury hotel rooms stood at about 42,500 rooms (+1.6% YoY), comprising 27%, 42%, 20%, 11% for 3-star, 4-star, 5-star and Luxury hotel rooms respectively. The hotel market is still in the recovery stage. The total supply that is expected to operate in 2023 is only 600 hotel rooms, still far below the total new supply before the pandemic in 2019 of 2,400 rooms. The average new supply in the last 10 years is only around 1700 hotel rooms per year.
The lifting of Indonesia’s international travel ban on 12 January 2022 was a critical milestone for the recovery of the country’s tourism and hotel sectors in 2022. The improvement of PPKM (restrictions on community activities) level further increased the movement of travelers and hotel guests in Jakarta. During 2022, the increasing of FIT business travelers and corporate meeting activities were observed to contribute to the lowered vacancy level from 63% in 2021 to 52% in 2022. Increased meeting activities from government circles and political parties will continue to lower vacancy level in 2023 which is the year of preparation for general election.
The lowered vacancy level was seen to have impact on the increasing ARR across market segment during 2022. By end of 2022 the ARR / Night will reach: 3-star - Rp. 400,700 (10% YoY); 4-star - Rp. 687,600 (25% YoY); 5-star - Rp. 1,435,700 (45% YoY); and Luxury - Rp. 1,966,100 (28% YoY). ARR growth is expected to return to positive normal level in 2023 as the occupancy also improved.
In 2023 is expected to see a continuing recovery of the domestic travel market to the pre- pandemic level, with the rebuild of the inbound market will take place. However, the global economic conditions, higher inflation and energy costs, a geopolitical tensions, and the risk of new COVID-19 variants which may put further downside risks to the recovery of the market.
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Greater Jakarta Landed Residential 2023
Landed residential's cumulative supply is expected to rise by 2.9% YoY by the end of 2022. Tangerang may continue to provide the majority of new supply, while a new estate is entering the landed residential market in Bekasi area, adding around 400 new supply to 2022's market. In 2023, many estates are expected to continue providing higher segment products. Another new estate is expected to enter the Tangerang market in early 2023, offering products starting from the Lower-Middle segment. The trend of more projects offering upper segment 3-storey houses in 2022 is expected to continue to 2023.
Cumulative demand is projected to increase at around 3% YoY by the end of 2022, with a relatively stable growth in 2023 as well. As the pandemic has been more under control and economy starts to improve in 2022, general purchasing power has become more apparent as shown by the well receipt of the Upper-Middle and Upper segment products by the market. This trend is expected to continue in 2023. Despite the global economic concern in 2023, landed residential demand is projected to be relatively steady in 2023 since most of demand are coming from end-users with the need of purchasing their first home. The crisis, however, may impact the mortgage interest rate, which gradually affect demand particularly from buyers intended to purchase units using second-mortgage onwards.
With the newly opened toll infrastructure in some parts of Tangerang and Bekasi area, land price growth in 2023 is projected to be slightly higher than in the early pandemic years. With the rising inflation which affects building materials cost, average lump sum sales price is expected to increase in 2023. To keep price affordable, estates are expected to keep their land price growth conservatively in 2023.
Considering the relatively stable landed residential market during the pandemic in 2020-2021 and the improving market conditions in 2022, landed residential market in 2023 will maintain a positive trend in both supply and demand.