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September 6, 2017

Indonesia’s tech sector boom is becoming a strong driver of growth in Jakarta’s office space. E-commerce firms are among the most active industries in Jakarta’s Central Business District, according to JLL’s latest research, with significant demand from online travel booking firms, fintech, payment companies, and gaming start-ups during the last quarter alongside Facebook’s recent opening of a permanent office in the city.

“As the world’s fourth most populous country with a huge growing economy, Indonesia offers the scale required by tech firms, and the industry is taking off,” says James Taylor, Head of Research for JLL Indonesia.

“The middle class is growing, the working age population is expanding and internet as well as mobile phone penetration is increasing. Other factors which have historically held e-commerce back – such as infrastructure and the regulatory environment – are improving.”

According to Taylor, co-working is also taking off in Jakarta with international firms like Regus entering the scene which is currently dominated by local players. “Some firms are looking to move into grade A buildings given that there is a large volume of that type of space coming on the market and, as a result, rents are falling.”

Demand and supply
And, major Indonesian companies are responding to the tech boom accordingly.

The Salim Group recently partnered with Singapore’s National University Singapore Enterprise to set up Blk 71, an incubator and co-working space in Kuningan, South Jakarta while property developer, Sinarmas Land, is constructing a US$524.9 million integrated digital hub in Bumi Serpong Damai (BSD), Greater Jakarta. With the first phase expected to be completed in 2019, it has already seen several multinational tech firms such as Apple, Huawei and Dimension and IT services firm Dimension Data committing to join. The Lippo Group is also developing a US$21 billion centre near Jakarta that is billed as the “Shenzhen of Jakarta”, with a focus on the electronics sector.

But Taylor foresees that, with most of these projects still a long way from completion, the city of Jakarta will continue to be attractive in the short term. “Decentralised township locations could be popular for some firms – particularly as infrastructure and connectivity improve – but given the volume of recent and upcoming office supply within city limits, there are likely to still be many options for those firms looking for a core location,” he explains, adding that Jakarta will see new supply in areas like Sudirman Central Business District (SCBD), with rents projected to fall until next year, which could bode well for tech firms looking to expand.

As Indonesia continues to develop, the ease of doing business is also improving – the country was ranked in 91st place last year by the World Bank compared to 109th the year before. And, with President Jokowi Widodo recently declaring plans to produce 1,000 technopreneurs by 2020, investors can look forward to a more supportive government environment giving a boost to the fast-developing tech sector.

Read more about how Indonesia’s real estate market is set for a stable 2017

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James Taylor

Head of Research, JLL Indonesia

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