RealEstat.id (Jakarta) - Property investment in Indonesia began to improve in the last quarter of 2021, especially after the impact of the deadly delta variant subsided. Indonesia’s economy is slowly recovering from the downturn with GDP growth in the third quarter standing at around 3.5% YoY. Overall, annual GDP growth in 2021 is estimated to reach around 3.5% - 4.0%, as the country continued to fight the adverse impact of the pandemic.
According to the report entitled "Asia Pacific Investment Quarterly Q4/2021" released by Savills Research, aggressive efforts from the Indonesian government on vaccination programs has resulted in a significant drop in new cases, which are currently among the lowest in the region (despite the latest Omicron variant outbreak), helping to lift business confidence.
With more promising outlook for the economy, developers and investors in Indonesia are slowly returning to rollout their expansion plans as seen in the number of new launches–particularly in the residential and industrial sectors.
For example, Sinar Mas Land, Summarecon, and Alam Sutera recently added new housing clusters at their flagship townships in Serpong and Bogor to cater to growing demand from millennials. Some of these developers collaborated with overseas developers (particularly from Japan) to build their projects.
Meanwhile, KIIC (Karawang International Industrial City–developed by Sinar Mas Land and Itochu) recently added another 105 hectares of land to their industrial estate to cater for growing enquiries from e-commerce, logistics as well as auto companies.
"Furthermore, we also saw increased activity levels in the development of data centers in several major cities particularly around the Greater Jakarta area and Batam," said Anton Sitorus, Director Research & Consultancy Savills Indonesia.
Following the launch of data center projects by Princeton Digital Group, Pure DC and STT GDC earlier this year in Jakarta, other foreign companies have announced that they will build new projects in Batam island. These include Data Center First from Singapore and GDS from China, which recently announced their first projects in Nongsa area.
Batam has emerged as a popular location for data centers as well as industrial/logistics facilities due to its strategic location (proximity to Singapore) and relatively good infrastructure.
In addition, various tax incentives given to companies and investors in Batam (due to its status as a Free Trade Area and Special Economic Zone) continue to lure not only domestic but also foreign corporations to invest.
Meanwhile, the commercial office and retail sectors in Jakarta grew throughout 2021 with both supply and demand increasing quite significantly compared to 2020. However, the growth of new supply still out paced market absorption, which resulted in more vacancies across sub-markets.
"Such conditions continue to benefits tenants/occupiers and we saw some of these 'profit-taking deals concluding in the last two years. This tenant market is expected to continue over the 2022 - 2023 period in view of high vacancy and a robust development pipeline in some areas," Anton added.
However, with strong sentiment towards Indonesia as the host for the G20 meeting this year, the government has prepared more aggressive plans for domestic economic acceleration. On this basis, it is quite possible to see an earlier market turn around before the end of 2023.
“Restored business confidence supported market absorption across most commercial sectors in 2021. We expect more expansion in 2022 in view of the promising outlook for the economy helped by better sentiment towards Indonesia as the host of the G20 meeting in Bali later this year,” said Anton Sitorus.