We are already one month into 2019 and throughout January many of our research clients have been asking about our views on what’s in store for the coming year. Here is what we think you should be paying close attention to.

Infrastructure development to boost accessibility 

Indonesia’s first Mass Rapid Transit (MRT) network will be operational before the end of this quarter, providing improved access to numerous commercial and residential developments in the CBD and South Jakarta. The MRT will connect with the airport rail link and, later, with the Light Rail Transit (LRT) system which will connect the center of the city with locations further afield to east and south.

The residential sector is of constant interest to investors who are able to build an investment case based on Indonesia’s attract socio-economic fundamentals. Interest in mixed use Transit Oriented Developments (TODs) has increased as the Mass Rapid Transit (MRT) and Light Rail Transit (LRT) projects near completion and emerging asset classes (in Indonesia) such as data centres and co-living facilities are increasingly on the radar for investors.

Sectoral drivers and trends to watch

 Office demand, driven by co-working and technology companies, is expected to remain strong while more new supply is likely to continue to put pressure on occupancy levels and rents. Retail landlords are likely to continue to adapt to changing consumer preferences by making room for food & beverage tenants, fast fashion retailers and entertainment occupiers. Mobile payment platforms are likely to continue to aggressively expand and retailers with strong on-line as well as off-line presences will be best place to capture consumer demand. 

The appetite for office development from both international and local groups remains extremely strong and a number of large scale longer term projects are currently being planned. Occupancy levels and rents are likely to remain pressured in 2019 with some stability in subsequent years while demand is likely to remain healthy with technology and co-working companies leading the way in terms of space requirements.

Real estate to benefit from infrastructural investment

Transit Oriented Developments (TODs) represent a unique opportunity for residential and commercial developers as new infrastructure opens up previously less accessible areas of the city. However, in the short term, investor sentiment, as well as that of residential buyers, is likely to be impacted by the presidential election in April. After a seasonal slowdown during Ramadan and the subsequent Lebaran holiday, we would expect a quick return to normal business activity in the third quarter.

Serviced apartment demand is driven by embassy staff and expatriates; particularly those from South Korea and Japan. These demand sources are likely to remain fairly stable and this should comfort investors but competition from secondary market condominiums, which are often more affordable, is likely to remain strong.

Logistics set to shine

We expect the modern logistics warehouse market to continue to be a stand-out sector as developers continue building high specification facilities and occupiers look to increase the sophistication of their supply chains with last-mile delivery centers. We will also keep an eye on other emerging asset classes (in Indonesia) such as data centers and co-living which are likely to attract the attention of investors. 

We are cautiously optimistic on the year ahead and, on a personal note, I am very hopeful on the positive impact the MRT and LRT will have on Jakarta’s infamous traffic congestion. 

PWC sites significant foreign investment in logistics

Logistics has been a favoured sector for investors for the last couple of years with international groups such as Logos aggressively growing their portfolio. Other international investors such as Singapore sovereign wealth fund GIC (in partnership with local group MMP) and Japanese developer Daiwa House are also major players in the Logistics sector.

Related reading:

Transparency trends in Indonesia

Understanding regulatory changes in Indonesia

Not all doom and gloom in Indonesia