Capital move won’t come at expense of Jakarta property market: CBRE

Relocation in fact augurs opportunities for Indonesia’s premier metropolis

Sunset view of Jakarta with skyscrapers and air pollution. Creativa Images/Shutterstock

Jakarta will remain Indonesia’s business and financial hub in the aftermath of the capital’s relocation from Java to Borneo, opines market observers with CBRE Research.

The archipelagic nation’s future capital will only play host to political and administrative functions, relegating the more commercial aspects to the country’s largest city.

“Any downside for the Jakarta property market will therefore be limited, as while some companies may set up a representative office in the new capital, most occupiers will retain their existing presence in Jakarta, which will continue to play host to the stock exchange, essential financial and business organisations and company headquarters,” CBRE Research said in a statement.

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Last month, President Joko ‘Jokowi’ Widodo formally requested permission from parliament to transfer Indonesia’s capital from Jakarta to Kalimantan.

If anything, the relocation will lead to new investment and development opportunities for Jakarta. Authorities recently mulled the idea of selling or leasing out state-owned buildings in the city’s prime areas for developers to redevelop during the relocation. In turn, development firms would be compelled to develop facilities and infrastructure in the new capital.

A large portion of such government-owned assets will be older properties, however, making them a challenge to let in what is an already oversupplied market, CBRE researchers cautioned.

More than one million government employees are expected to move to the new capital over the next decade, galvanising investors and developers to capitalise on real estate opportunities. Migrants will require housing, roads, railways, offices, and other supporting infrastructure, market observers predict.