Global Business Guide Indonesia

Property in Indonesia Property in Indonesia Property in Indonesia Property in Indonesia Property in Indonesia
Sign up for the GBG Indonesia Quarterly Business Intelligence Report for the latest news on your sector.
Sign Up
Property | Industrial Land & Property

With continued economic growth, political stability and relatively low labour costs; Indonesia is becoming an attractive destination for manufacturing. A number of multinational companies have recently set up facilities in the country in light of rising wages in China’s coastal provinces, such as Panasonic, L’Oreal, Nestle and Yamaha. This has had a knock on effect on the demand for industrial property around the Greater Jakarta area and industrial land prices have increased dramatically last year.

Indonesia’s position as a manufacturing base lost its lustre after 1998 when the country came to be seen as too risky for the large scale of investments needed to set up (see Overview of the Manufacturing Sector). The rise of China and even Vietnam as an alternative base in Asia overshadowed Indonesia in the competition to attract foreign companies. The rise in income per capita to $4,300 at PPP and a growing recognition of the scale of the domestic market has led companies to think again on the merits of Indonesia for not only a hub to deliver to the region, but also having close proximity to 250 million people.

The demand for industrial land from both domestic and international investors has increased, reflected in the sales of developers and land prices for the main industrial areas. Industrial land and estates are in short supply with the need for adequate supporting infrastructure such as electricity and being close to transport links such as roads and ports. The price of land is closely connected to their proximity to existing and future infrastructure projects such as toll roads. A report from property consultants Cushman and Wakefield showed that industrial land prices for Greater Jakarta and West Java rose by 11.1% in the first quarter of 2011 from the previous quarter, reaching an average of 800,000 RP per square metre. This jump is a result of the lack of supply in the face of high demand; 322 hectares were purchased in Q1 but only 70 hectares were added. This brings the total amount of nationwide land available to 9,700 hectares up from 7, 900 in 2000. Availability of land for industrial purposes is not growing fast enough due to stalling on land acquisition reforms, which is in turn holding back infrastructure projects that would make more land suitable for industrial use.

The price of industrial land has been on a steady rise, Cushman and Wakefield’s report states that 2010 was the best year for the past 5 years. Jones Lang LaSalle research shows a 162.5% increase in realisation of industrial areas for 2010, with a total of 420 hectares mainly taken up by automotive, foodstuff and consumer goods manufacturers. Indonesia still remains globally and regionally competitive for the price of industrial land, being third globally behind Ecuador and Vietnam despite of China’s recent efforts to cut the cost of their land by 30%. The sharp rise in demand could see land prices rise by 20-30% by the end of 2011 as a market correction considering prices were probably kept low by developers to attract investors following the global crisis.

While land is still cheap on paper, the costs of setting up and the development of infrastructure are issues that must be factored into the price. Power plants for electricity and reliability of supply are still an issue for the manufacturing sector and indeed the country as a whole; large scale manufacturers have actually chosen to build their own power plants to ensure reliability of supply. Other logistical infrastructure including transport pushes up the price of production, Indonesia has some of the highest logistical costs in the region at 25% of total GDP compared to 16% for Thailand and came 75th out of 155 countries in the World Bank Logistics Performance Index. Obtaining the necessary permits and other bureaucracy is a further issue to contend with.

The sharp rise in demand for industrial land is indicative of how desirable Indonesia has become as a manufacturing hub. While prices remain low, more multinationals are expected to come into the market and prices will continue to rise in line with increasing demand. To keep the country attractive for manufacturers, the government must speed up on proposed infrastructure projects that are vital for companies to produce and distribute their goods. The stage of development on the various infrastructure projects around the plot of land in questions must therefore be carefully looked into by those seeking to purchase industrial land.

A selection of Industrial Parks in Indonesia

Full list of industrial estates in Indonesia

Global Business Guide Indonesia - 2012

icone share

Indonesia Property Snapshot - Real Estate

Contribution to GDP: 2.79% (Q3 2015)
Mortgage to GDP Ratio: 3.5% (2015)
Housing Backlog: 15 million (estimated 2016)
Average Condominium Price: 48,100,000 IDR/sqm (CBD, Jakarta, Q3 2015)
Average Retail Space Rental Price: 500,00 IDR/sqm/month (CBD, Jakarta, Q1 2016), 545,968 IDR IDR/sqm/month (Jakarta, 2016)
Average Office Space Rental Price: 401,010 IDR/sqm/month (CBD, Jakarta, Q1 2016)
Average Industrial Land Price : $221.51 USD/sqm (Bekasi, Q1 2016), $144.16 USD/sqm (Tangerang, Q1 2016)
Relevant Law: Government Regulation No. 41 of 1996 on Housing or Residential Ownership for Foreign Citizens Based in Indonesia allows foreigners to own leaseholds of up to 70 years subject to renewals at 25, 20 and 25 year intervals.