Indonesia Real Estate Report Q3 2012
The Indonesia Real Estate report examines the Commercial Office, Retail and Industrial segments in the context of a consistently strong performing market which, in spite of efforts to improve the business environment and continued investor interest, is slowing. With a focus on the three principal cities of Jakarta, Bandung and Bali, the report covers the rental market performance in terms of rates and yields over the past 18 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of international headwinds on a market which has historically proven itself to be resilient. The key potential growth areas driven by increasing activity on the part of international investors, favourable fundamentals and the potential of the archipelago’s consumption driven economy are also explored alongside corporate growth strategies looking to both domestic and international channels for growth.
As such there is considerable optimism in the Indonesian commercial property market. The last few years have seen impressive growth in the Indonesian real estate sector. Rents were hardly touched by the global financial crisis and have, in fact, generally increased over the past few years. Our latest data collection revealed – in line with global conditions in 2011 – reflects a more volatile year with regards to rents and yields, however the result on the year-on-year growth trend has been somewhat negligible as rents continue to soar across the majority of cities and commercial real estate sub-sectors. One substantial hindrance to both the industry and the economy as a whole is that Indonesia''s physical infrastructure is substandard. The extent of future growth depends very much on the government’s ability to push through bureaucratic reforms that will allow much-needed infrastructure investment, and the recent approval of the land acquisition bill is an important step in the right direction
Key Points We have raised our end of period 2012 headline consumer price inflation forecast from 4.5% to 5.0% due to the effects of rising oil prices and an imminent reduction of government fuel subsidies.
We have lowered our external trade forecasts for 2012 on the back of expectations of weakening external demand and dampened consumer confidence as a result of rising oil prices. We now expect real export growth to hit 7.3% versus a previous forecast of 8.5%, and import growth to total 8.5% instead of 9.5%.
We have slightly revised down our 2012 construction forecasts for Indonesia, with real growth expected to reach around 6.9% in 2012 (previously 7.1%). This revision is primarily due to a recent plan by the government to cut fuel subsidies, which in our opinion, will most likely reverse the conducive monetary conditions for construction activity. In addition, we see a real risk for Indonesia''s construction sector to fail to realise its long-term growth potential as key regulatory reforms have failed to transpire or have been overturned over the past quarter. We believe these are negative signals to attract private investment and we have revised down construction real growth to 7.7% (previously 7.9%) between 2013 and 2016.
As such there is considerable optimism in the Indonesian commercial property market. The last few years have seen impressive growth in the Indonesian real estate sector. Rents were hardly touched by the global financial crisis and have, in fact, generally increased over the past few years. Our latest data collection revealed – in line with global conditions in 2011 – reflects a more volatile year with regards to rents and yields, however the result on the year-on-year growth trend has been somewhat negligible as rents continue to soar across the majority of cities and commercial real estate sub-sectors. One substantial hindrance to both the industry and the economy as a whole is that Indonesia''s physical infrastructure is substandard. The extent of future growth depends very much on the government’s ability to push through bureaucratic reforms that will allow much-needed infrastructure investment, and the recent approval of the land acquisition bill is an important step in the right direction
Key Points We have raised our end of period 2012 headline consumer price inflation forecast from 4.5% to 5.0% due to the effects of rising oil prices and an imminent reduction of government fuel subsidies.
We have lowered our external trade forecasts for 2012 on the back of expectations of weakening external demand and dampened consumer confidence as a result of rising oil prices. We now expect real export growth to hit 7.3% versus a previous forecast of 8.5%, and import growth to total 8.5% instead of 9.5%.
We have slightly revised down our 2012 construction forecasts for Indonesia, with real growth expected to reach around 6.9% in 2012 (previously 7.1%). This revision is primarily due to a recent plan by the government to cut fuel subsidies, which in our opinion, will most likely reverse the conducive monetary conditions for construction activity. In addition, we see a real risk for Indonesia''s construction sector to fail to realise its long-term growth potential as key regulatory reforms have failed to transpire or have been overturned over the past quarter. We believe these are negative signals to attract private investment and we have revised down construction real growth to 7.7% (previously 7.9%) between 2013 and 2016.
Indonesia Real Estate Report Q3 2012
Executive Summary . 5
SWOT Analysis . 7
Indonesia Real Estate/Construction SWOT 7
Indonesia Political SWOT .. 8
Indonesia Economic SWOT ... 9
Indonesia Business Environment SWOT .. 10
Real Estate Market Overview 11
Market Analysis – Office 15
Rents and Yields ... 15
Table: Historic Rents – 2010-2011 (USD per m2/month) . 15
Table: Net Yield, 2011-2012 (%) . 16
Table: Terms of Rental Contract/ Leases - Mid 2011 .. 16
Supply and Demand . 16
Industry Forecast Scenario ... 17
Table: Forecast Rents - (USD per m2/month).. 17
Table: Forecast Net Yield, 2008-2016 (%) .. 17
Market Analysis – Retail 18
Rents and Yields ... 18
Table: Historic Rents – 2010-2011 (USD per m2/month) . 19
Table: Net Yield, 2011-2012 (%) . 19
Table: Terms of Rental Contract/ Leases - Mid 2011 .. 19
Supply and Demand . 20
Industry Forecast Scenario ... 22
Table: Forecast Rents - (USD per m2/month).. 22
Table: Forecast Net Yield, 2008-2016 (%) .. 22
Table: Indonesia Retail Sales Indicators . 23
Market Analysis – Industrial .. 24
Rents and Yields ... 24
Table: Historic Rents – 2010-2011 (USD per m2/month) . 24
Table: Net Yield, 2011-2012 (%) . 24
Table: Terms of Rental Contract/ Leases - Mid 2011 .. 25
Industry Forecast Scenario ... 26
Table: Forecast Rents - (USD per m2/month).. 26
Table: Forecast Net Yield, 2008-2016 (%) .. 26
Forecast Scenarios 27
Infrastructure Report 27
Table: Indonesia Construction And Infrastructure Industry Data ... 27
Table: Indonesia Construction And Infrastructure Industry Data ... 28
Construction And Infrastructure Forecast Scenario . 30
Macroeconomic Outlook ... 35
Table: Indonesia - Economic Activity .. 38
Real Estate Risk Reward Ratings . 39
Real Estate/Construction Risk/Reward Ratings 39
Table: Real Estate/Construction Risk/Reward Ratings 39
Indonesia’s Business Environment 39
Table: BMI Business And Operation Risk Ratings ... 40
Institutions ... 41
Table: BMI Legal Framework Rating .. 43
Infrastructure ... 44
Table: Labour Force Quality ... 46
Market Orientation .. 47
Table: Asia, Annual FDI Inflows . 48
Table: Trade And Investment Ratings .. 50
Table: Top Export Destinations, 2001-2008 51
Operational Risk .. 52
Competitive Landscape . 53
Company Profiles ... 56
Adhi Karya ... 56
Holcim Indonesia . 57
Jakarta Propertindo . 58
Lippo Karawaci ... 59
Pakuwon Jati Tbk 61
Semen Gresik ... 62
Demographic Data .. 64
Table: Indonesia''s Population By Age Group, 1990-2020 (''000) . 65
Table: Indonesia''s Population By Age Group, 1990-2020 (% of total) ... 66
Table: Indonesia''s Key Population Ratios, 1990-2020 ... 67
Table: Indonesia''s Rural And Urban Population, 1990-2020 .. 67
BMI Methodology ... 68
How We Generate Our Industry Forecasts .. 68
Construction Industry .. 69
Bank Lending ... 70
Real Estate/Construction Business Environment Rating .. 70
Table: Weighting Of Indicators ... 71
Sources 73Table: Historic Rents – 2010-2011 (USD per m2/month) . 15
SWOT Analysis . 7
Indonesia Real Estate/Construction SWOT 7
Indonesia Political SWOT .. 8
Indonesia Economic SWOT ... 9
Indonesia Business Environment SWOT .. 10
Real Estate Market Overview 11
Market Analysis – Office 15
Rents and Yields ... 15
Table: Historic Rents – 2010-2011 (USD per m2/month) . 15
Table: Net Yield, 2011-2012 (%) . 16
Table: Terms of Rental Contract/ Leases - Mid 2011 .. 16
Supply and Demand . 16
Industry Forecast Scenario ... 17
Table: Forecast Rents - (USD per m2/month).. 17
Table: Forecast Net Yield, 2008-2016 (%) .. 17
Market Analysis – Retail 18
Rents and Yields ... 18
Table: Historic Rents – 2010-2011 (USD per m2/month) . 19
Table: Net Yield, 2011-2012 (%) . 19
Table: Terms of Rental Contract/ Leases - Mid 2011 .. 19
Supply and Demand . 20
Industry Forecast Scenario ... 22
Table: Forecast Rents - (USD per m2/month).. 22
Table: Forecast Net Yield, 2008-2016 (%) .. 22
Table: Indonesia Retail Sales Indicators . 23
Market Analysis – Industrial .. 24
Rents and Yields ... 24
Table: Historic Rents – 2010-2011 (USD per m2/month) . 24
Table: Net Yield, 2011-2012 (%) . 24
Table: Terms of Rental Contract/ Leases - Mid 2011 .. 25
Industry Forecast Scenario ... 26
Table: Forecast Rents - (USD per m2/month).. 26
Table: Forecast Net Yield, 2008-2016 (%) .. 26
Forecast Scenarios 27
Infrastructure Report 27
Table: Indonesia Construction And Infrastructure Industry Data ... 27
Table: Indonesia Construction And Infrastructure Industry Data ... 28
Construction And Infrastructure Forecast Scenario . 30
Macroeconomic Outlook ... 35
Table: Indonesia - Economic Activity .. 38
Real Estate Risk Reward Ratings . 39
Real Estate/Construction Risk/Reward Ratings 39
Table: Real Estate/Construction Risk/Reward Ratings 39
Indonesia’s Business Environment 39
Table: BMI Business And Operation Risk Ratings ... 40
Institutions ... 41
Table: BMI Legal Framework Rating .. 43
Infrastructure ... 44
Table: Labour Force Quality ... 46
Market Orientation .. 47
Table: Asia, Annual FDI Inflows . 48
Table: Trade And Investment Ratings .. 50
Table: Top Export Destinations, 2001-2008 51
Operational Risk .. 52
Competitive Landscape . 53
Company Profiles ... 56
Adhi Karya ... 56
Holcim Indonesia . 57
Jakarta Propertindo . 58
Lippo Karawaci ... 59
Pakuwon Jati Tbk 61
Semen Gresik ... 62
Demographic Data .. 64
Table: Indonesia''s Population By Age Group, 1990-2020 (''000) . 65
Table: Indonesia''s Population By Age Group, 1990-2020 (% of total) ... 66
Table: Indonesia''s Key Population Ratios, 1990-2020 ... 67
Table: Indonesia''s Rural And Urban Population, 1990-2020 .. 67
BMI Methodology ... 68
How We Generate Our Industry Forecasts .. 68
Construction Industry .. 69
Bank Lending ... 70
Real Estate/Construction Business Environment Rating .. 70
Table: Weighting Of Indicators ... 71
Sources 73Table: Historic Rents – 2010-2011 (USD per m2/month) . 15
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