Jakarta’s office space faces a critical challenge as millions of square meters remain vacant. The city’s office market is struggling with an oversupply and shifting work trends.
Businesses transitioning to hybrid or remote setups have reduced the need for traditional office spaces, leaving entire buildings unoccupied. This growing problem raises questions about the future of Jakarta’s commercial property sector and how landlords plan to address these vacancies.
Vacant Jakarta Office Space: The Scale of the Problem
The decline in Jakarta office space demand has reached unprecedented levels. According to Colliers’ report, Market Insights: Colliers’ Perspective on the Property Market Conditions in Jakarta Post-IKN Transition, the average annual absorption of office space in Jakarta from 2012 to 2019 was around 327,235 m².
However, since the COVID-19 pandemic began in 2020, the average annual absorption turned negative, reaching -54,244 m² as of Q2 2024. This stark shift highlights the market’s ongoing struggles.
Senior Director of Office Services at Colliers Indonesia, Bagus Adikusumo, explained how the oversupply occurred. “So, from 2011 to 2015, the office business was booming, with very high demand, reaching 400,000 m² per year if I’m not mistaken. Then suddenly, COVID-19 caused a massive drop. Many had already built office spaces while demand decreased, leading to an oversupply,” he said, as reported by Detik.com.
This oversupply is exacerbated by companies downsizing their physical spaces and adopting hybrid work systems. Bagus also explained that since the COVID-19 pandemic hit Indonesia, the demand for office space has generally declined.
This is due to the overall poor business conditions, compounded by many companies reducing office space as they implement hybrid work systems. Such trends have left millions of square meters unoccupied, contributing to Jakarta’s significant vacancy rate.
Incentives to Fill Empty Jakarta Office Space
Landlords in Jakarta are responding to the crisis with aggressive strategies to attract tenants. Many are offering significant rental discounts and flexible lease terms to accommodate businesses navigating uncertain economic conditions.
Some building owners are also investing in renovations to modernize office spaces, integrating facilities that support hybrid work environments, such as co-working areas and enhanced internet infrastructure. Additionally, some tenants are expanding their office spaces to relocate business units previously situated outside office buildings.
The Head of Research at Colliers Indonesia noted this trend, highlighting how these relocations could help fill the gap. These incentives aim to make vacant spaces more appealing while addressing the evolving needs of potential tenants. Efforts like these highlight the adaptability of landlords in a challenging market, though filling the vast amount of empty space remains a daunting task.
What Does This Mean for Jakarta’s Office Market?
Despite the challenges, some sectors continue to generate demand for office spaces in Jakarta. Landlords still receive interest from industries such as fintech, mining, retail, and insurance, though budget constraints often limit tenant choices. This selective demand adds complexity to the oversupply crisis, as only certain spaces meet tenant requirements.
However, there is optimism for recovery. “In the long term, as business activities recover, the demand for office space is anticipated to rise and is expected to make the office market more dynamic,” said Ferry Salanto, as reported by Kompas.com. This hopeful outlook underscores the potential for Jakarta’s office market to regain stability over time, provided the right strategies are implemented.
Looking Ahead: Hope for Jakarta’s Office Market
Jakarta’s office market is at a crossroads, grappling with oversupply, shifting work trends, and economic uncertainty. However, pockets of demand from certain industries and creative efforts by landlords provide glimmers of hope.
As Ferry Salanto suggested, the market’s recovery depends on adapting to the evolving needs of businesses and ensuring affordability. With innovative strategies and a focus on affordability, Jakarta’s office spaces could see a resurgence, revitalizing the city’s commercial property market.
Source: kompas.com, medcom.id, detik.com
Image: Creativa Images