Jakarta real estate cautiously confident for 2023
With social restrictions being lifted in 2023, is the Jakarta real estate market on the road to recovery?
There are reasons to be optimistic that Jakarta’s real estate market is on the road to recovery in 2023, after improvements seen during 2022.
At the end of December 2022, the government officially ended the imposition of activity restrictions in all regions of Indonesia, which would support economic growth. Despite global macro headwinds, most economists projected Indonesia’s economic outlook to remain positive with healthy growth expected. Increments in benchmark interest rate are likely to taper off, while the inflation rate is expected to be lower than last year. In addition, exchange rates of the Indonesian Rupiah against major currencies are anticipated to be relatively stable compared to the previous year. On the other hand, infrastructure remains one of the government’s priorities. After being postponed, the first Greater Jakarta Light Rail Transit (LRT) is expected to be operational this year.
Following the trend from 2020, modern logistics warehouses and landed residential properties continued to receive a positive response from occupiers in 2023.
Even though the government’s tax incentives ended in September 2022, landed residential developers remain active and are likely to continue launching new products as they enjoy healthy demand. Similarly, modern logistics warehouse investors and developers are expected to stay active to capture the healthy market driven by 3PLs and manufacturers/end-users, as there are new projects to operate that would impact the occupancy rate. Data centres will continue to increase, not only in Greater Jakarta but also in outer islands such as Batam.
With low vacancy rate and a solid demand base, many prime malls are already in place for strong growth. Limited prime shopping mall supply in the pipeline will support a healthy occupancy rate. Some non-prime new projects, mostly part of mixed-use developments, will enter the market this year, with some already obtained pre-commitments.
Regarding the office market, leasing demand will still be driven by relocation to upgrade and cost-saving opportunities with sustainability requirements, especially from multinational companies. Several new completions will put the occupancy and rental rates under pressure. In addition, the downsizing trend continues as tenants adopt workplace strategies and hybrid working arrangements.
Despite the slow condominium market, projects located within mixed-use developments with proximity to public transportation will likely receive a better response.
JLL Indonesia held a webinar on market outlook on 8 Feb. Our clients attending the event sounded upbeat about the Jakarta market prospects in 2023. We look forward to a recovery in Jakarta real estate market this year!