Social restrictions’ impact on Greater Jakarta real estate
In mid-March, Indonesian President Jokowi urged citizens to work from home, study from home and worship at home, to ensure social distancing. When the situation escalated globally in late March, more companies instructed their staff to work remotely in Jakarta. In early April, the governor of Jakarta declared an official large-scale social restriction policy (locally named Pembatasan Sosial Berskala Besar). Also implemented by leaders in surrounding cities (Bogor, Depok, Tangerang and Bekasi), the policy will be in place at least until 22nd May. The enforcement of this policy has implications for all property sectors in the Greater Jakarta area.
What is happening in the real estate market?
While net absorption for the office market remained healthy in Q1 of this year, fewer new leases are likely to be signed in Q2. Rental rates have been falling for over five years in Jakarta, and we are now practically touching the bottom of the market. Hence, the impact of COVID-19 is likely to be more on short-term demand rather than headline rents.
Shopping malls are temporarily partially or fully closed. Grocery stores and pharmacies remain open with certain health protocols to follow. Moreover, restaurants stay open only for take-away and home delivery services. Given that this policy inevitably affects footfall, tenant expansions are unlikely during this period.
While some residential developers postponed their launching events, others went online for launching new products, choosing units, paying a deposit and for pre-booking units. Many are likely to focus more on landed housing during this period, where end-user demand is the most robust. More flexible and attractive payment terms are expected while buyers are probably extremely cautious in the short term, but should return to the market once normalcy resumes.
The modern logistics warehouse market remains strong. Over the past few weeks, some consumer goods groups and third-party logistics companies have been looking to lease space, particularly for the storage and distribution of food and health-related products. E-commerce groups are also likely to see a surge in demand as more consumers stay at home.
What does it mean for the future?
This mass work-from-home experiment could lead occupiers to re-examine their office space requirements and underline the need for technology. Moreover, interest in health and wellness might increase. This situation could also be a catalyst for the adoption of technology in real estate transactions and marketing.
While Q2 2020 is anticipated to be a difficult period, developers, investors and tenants are responding to the ever-evolving situation as best as they can. We continue to believe in the medium to long-term resilience and attractiveness of the Indonesian property market.