Automotive, tech firms scrambling for industrial land in Jakarta

There were at least 3 transactions of 13 hectares for data centre companies in Q3.

The industrial sector has been one of the most resilient segments during the pandemic due to the sudden surge in online retail and other technology-related products and services. According to Colliers, automotive-related firms made up 58% of total industrial transactions in Indonesia.  

For instance, a global automobile manufacturer from South Korea bought almost 32 hectares of land in Karawang New Industry City (KNIC). The auto company is planning to make Indonesia a hub for car battery and electric vehicle manufacturing in Southeast Asia. This sizeable investment in battery and electric vehicle production is a strategic plan for the Korean auto manufacturer to secure a larger share of the vehicle market in Indonesia, where Japanese companies have held a dominant share of the market. 

“This huge land transaction, which occurred in Q3, has helped fuel the entire performance of industrial transactions in the greater Jakarta area. From our records so far, total land transactions in 2021 YTD, are composed of about 64% of total land transactions made last year. This is quite satisfactory in light of the obstacles we have been facing as a result of the currently sluggish economy.”

Here’s more from Colliers:

Meanwhile, the expansion of high-tech industries continues. The pandemic-driven digitalisation is highlighted by increasing traffic online and for enterprises which require infrastructure to support their transition from offline to online and on-premises to the cloud. Post-pandemic, the online world is real, viable and the way forward for tomorrow. Both private and corporate customers are demanding 100 percent connectivity with no downtime. 

Growing data centre operations in some locations, mainly within industrial estates, noted the increasing needs of performance and efficiency, while reducing costs. They have expanded their presence since a couple years ago. A data centre can be built anywhere with power and connectivity, but the location has an impact on the quality of service it can provide to its customers. On the flipside, a poor location can result in unstable connections and efficiency problems. YTD data centre expansion has contributed to about 14% of total land transactions. 

Automotive-related industries YTD make up about 58% of total transactions, or about 68 hectares. This is a repeat of a few years ago when the automotive sector was the main driver for land absorption. The need for logistics and warehouse facilities still prevails but not necessarily within industrial estate locations. 

For high-tech industrial, we recorded three transactions of around 13 hectares involving data centre companies at the Greenland IE and Jababeka IE. Two land plots totalling about 12 hectares were acquired by data centre companies in Greenland IE while about one hectare was sold to the same industry in Jababeka. 

In total, Jababeka sold 5.1 hectares this quarter. Apart from the transaction concluded by a local data centre company, a Korean leather industry bought about 4.2 hectares. Still in Bekasi, BFIE reported a one hectare transaction to a local packaging company. Other industrial estates in Bekasi are now focusing more on the operations side, maintaining their existing tenants because most of the land plots have been sold out. 

In Karawang, aside from the substantial sales made by KNIC, Suryacipta also registered a deal with the chemical industry of around 1.3 hectares. Kota Bukit Indah (Besland Pertiwi) confirmed a leasing deal about 0.5 hectare for a Japanese company (music instruments) to store their goods. Meanwhile, other active estates in Karawang have yet to conclude any transactions this quarter but remain optimistic of receiving more inquiries in Q4. 

We did not record any leasing transactions in the southern area this quarter. One industrial estate in Bogor that focuses on leasing both land and buildings noted that some tenants are not in a position to expand their presence, while a few have even retreated from the location, especially those that rent land. While one tenant added to their rental area, overall leasing activity in the southern part of greater Jakarta area was quite dormant. As land stocks are limited in Bogor, we do not expect transactions at significant amounts in this region. Sentul reported selling two warehouse units this quarter, totalling almost 800 sq m of land.

Griya Idola in Tangerang has so far sold one warehouse unit. This small transaction might be followed with a bigger transaction in Q4. Overall, transaction activity, albeit relatively small, has signalled a prosperous outlook. Further west, Serang has so far only contributed a somewhat small transaction from local building material companies composing a total of 0.8 hectare in Modern Cikande and warehouse leasing in KIEC. Going forward, we expect a sizeable transaction in Serang.

Of all the transactions, in both sales and leasing, the industrial market concluded about 52.7 hectares, slightly lower than in Q2. Total transactions YTD accounted for a total of 134.9 hectares or about 70% of the total in 2020.