Indonesian property sector proved pessimists wrong in 2020

Some sectors’ actual performance was better than anticipated.

As the economy was profoundly shaken by the pandemic in 2020, the property sector in general suffered a significant reduction in transaction volumes and accordingly developers and investors took a step back. Despite this, Savills’ numbers show that in some sectors, actual performance was slightly better than they had anticipated earlier. In the Jakarta CBD office market, net take-up is down by around 50% from last year but is still at positive levels, thus vacancy remained stable through to the end of 2020.

Similarly, the condominium sector in both Jakarta and Bodetabek region (satellite cities of Jakarta) experienced a big drop in sales, but total volumes – especially in Bodetabek – were still relatively encouraging. The retail sector in Jakarta was the most affected by the current pandemic with negative net take-up, but the vacancy rate was still lower than in other sectors.

Here’s more from Savills:

Meanwhile, logistics sector demand has increased recently. Supported by a robust expansion in e-commerce companies accelerated by online shopping and lifestyle changes during the current pandemic, the market saw growing enquiries for modern warehouses and distribution centers around major cities. Aside from e-commerce, demand for industrial land is also seen to rise as the country has been attracting more investment in the automotive, data center and IT/tech sectors recently.

To compete with other neighboring countries, the government has put a lot of effort into building infrastructure and creating investor-friendly regulations in order to attract overseas companies to Indonesia. In the industrial sector, several new industrial estates have been prepared to accommodate the growing demand. Major global companies such as Tesla, Samsung and Amazon have reportedly committed to expand in the country.

Furthermore, the Omnibus Law, which was issued in October, is believed to be a successful catalyst for a more conducive investment climate, enhancing Indonesia’s competitiveness in the regional and global economy. In a sign of the newfound optimism, several developers recently jump into industrial sector development – the focus area is located alongside the Trans-Java toll road and is supported by the opening of Patimban Deep Seaport and Kertajati Airport in West Java. The region has attracted many investors in recent years and is expected to develop in the medium to long term.

For 2021, many economists expect Indonesia’s economy to grow by between 6% and 7%, which will represent a strong come-back from 2020. On this basis, Indonesia is in a good position to attract new investment and overseas capital. Accordingly, we hold out hope for a V-shaped recovery. With a lot of property assets currently offered at relatively low values we expect more deals to be done in 2021.