TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Industrial estates see record weak demand
It has been a quiet year for the industrial estate market in Jakarta, Tangerang and Bogor, with miniscule demand being seen so far this year
Change Size
It has been a quiet year for the industrial estate market in Jakarta, Tangerang and Bogor, with miniscule demand being seen so far this year.
Overall, industrial estates in Greater Jakarta saw 13.4 hectare net absorption in the second quarter of the year, a record low and just a tenth of what was recorded in the same period last year: 143.7 ha. Most demand has come from industrial estates in Bekasi and Serang.
“It has been quiet for the last few months,” Indonesian Industrial Estate Association (HKI) chairman Sanny Iskandar said, citing reasons such as global economic uncertainties and weak domestic activity.
Indonesia’s economic growth slowed to its lowest level in six years at 4.79 percent in 2015, as slumping exports dragged down Southeast Asia’s largest economy, with most of its trading partners worldwide, from the US to China, still struggling to recover their economies.
The overall sales rate for industrial estates in Greater Jakarta was 67.3 percent in the April-June period, lower than the historical average of 71.5 percent. Even so, the overall average price is at Rp 2.66 million (US$201) per square meter, higher than Rp 2.34 million in the same period a year ago.
This trend goes against the government’s drive for more activity in industrial estates, manifest in economic policy packages that stimulate investment and industry, including by offering three-hour licensing services for investors in industrial estates and easing
procedures for them to construct factories.
Sanny, who is also a director at Karawang International Industrial City (KIIC), explained that many businesses had opted to wait and see before spending their money, with potential investors in industrial estates currently offering below the asking price.
Potential investors in Karawang, West Java, considered the area with the most land for expansion, have asked for lower prices of $150 to $170 per sqm, Sanny said. That is lower than the average price of $185 per sqm according to property consultant Colliers International Indonesia.
“Demand is expected to recover in coming quarters, albeit with no dominant demand generator,” property consultant Cushman & Wakefield wrote in its recent report about the second-quarter Greater Jakarta property market.
“Developers are expected to remain cautious and may postpone launching any new estates.”
Colliers International Indonesia associate director Ferry Salanto said the outlook was dim for the rest of the year as demand had plunged due to the economic slowdown. The market will feel the impact of the government’s 12 economic stimulus packages only in 2018, he predicted.
On the other hand, a domestic economic recovery and growth of 5.2 percent is expected this year, up from 4.79 percent last year, which would mean more industrial expansion.
“The market will need to breathe heavily to catch up with last year’s sales performance considering that total transactions last year were mainly composed of enormous single transactions that lifted overall performance,” Colliers International wrote in a recent report.
“This year will definitely need such transactions to keep up with last year’s performance. And that would be a miracle.”
In other parts of the archipelago, new industrial estates are being launched as businesses take advantage of incentives in the government’s stimulus packages, including the “direct construction investment incentive” (KLIK).
Fourteen industrial estates joined the first round of the KLIK program, which was launched in February and allows investors to begin factory construction before securing building and environmental permits from local authorities. This rule has been used in industrial estates in West Java, Banten, Central Java, East Java, South Sulawesi and North Sumatra.
As of June 23, the incentive program has seen 49 projects utilize 782 ha of land with a total value of Rp 63.3 trillion, including five projects in Bantaeng, South Sulawesi, according to data from the Investment Coordinating Board (BKPM).
--------------
To receive comprehensive and earlier access to The Jakarta Post print edition, please subscribe to our epaper through iOS' iTunes, Android's Google Play, Blackberry World or Microsoft's Windows Store. Subscription includes free daily editions of The Nation, The Star Malaysia, the Philippine Daily Inquirer and Asia News.
For print subscription, please contact our call center at (+6221) 5360014 or subscription@thejakartapost.com
