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Indonesia is Not Just Jakarta!

October 25, 2019

Discussions on the Indonesian property market tend to focus on Jakarta and the broader capital city region (known as Jabodetabek to represent the five cities that make up Greater Jakarta – Jakarta, Bogor, Depok, Tangerang and Bekasi). After all, Greater Jakarta is home to around 35 million people, more than three times the population of Greater Surabaya (around 10 million), the second city. Jakarta drives the Indonesian economy and serves as the starting point for property market investors looking to gain a foothold in Indonesia.

The recent announcement that Indonesia’s capital city would relocate to East Kalimantan (you can read my colleague Yunus’ views on the move here) was due in part to a need for decentralization of the Indonesian economy. A number of our investor clients are keeping a close eye on what’s going on at the site of the new capital but many have been deploying capital outside of Jakarta for years.

Developers in Surabaya (East Java) are active in all core residential and commercial sectors but international investors tend to be interested in the modern logistics warehouse market. This sector has taken off in a big way over the past few years and Surabaya’s status as a gateway city to eastern Indonesia is an obvious place to expand.

Other cities across the archipelago are also on the radar for Industrial developers. Medan (North Sumatra), Makassar (South Sulawesi) and Semarang (Central Java) are all worthy of a mention while Balikpapan and Samarinda (East Kalimantan) are likely to see interest levels spike due to the relocation of the new capital city. Flexible space operators that have been so active in Jakarta over the past few years have also started to spread their footprint to the cities mentioned above along with Bali and many other locations.

A moratorium on shopping mall development has been in place in Jakarta since 2011 but this does not apply to Jabodetabek or other locations throughout Indonesia. Japanese developer Aeon already has two malls in Greater Jakarta with more in the pipeline while other international groups have been exploring options in other key cities in Java, Bali and beyond.

So while new market entrants to Indonesia nearly always start in Jakarta, there are also options throughout Indonesia for those with an appetite for expansion. Infrastructure is constantly improving, and projects like the Trans Java and Trans Sumatra toll roads mean that the Indonesian archipelago is better connected than ever before. Because of this and the relocation of the capital city, we only expect interest for non-Jakarta locations to increase.

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