COLLIERS QUARTERLY Ferry Salanto Senior Associate Director | Research | Jakarta +(62 21) 3043 6729 Ferry.Salanto@colliers.com INDUSTRIAL ESTATE | JAKARTA & GREATER JAKARTA | RESEARCH | Q3 2019 | 9 OCTOBER 2019 2019 YTD SALES HAS ALREADY SURPASSED TOTAL SALES IN 2018 Summary & Recommendations Foreign direct investments from China mainly flew to Vietnam or other peer countries, not Indonesia as mentioned by the recent World Bank report. This is not good news for Indonesia’s industrial market. Nevertheless, the industrial market in the greater Jakarta area (Bogor, Bekasi, Tangerang, Karawang and Serang) continues to benefit from the expansion activities of their existing tenants. For some years, industrial companies have generally performed quite well, underpinned by big consumers in the country, particularly from the expansion of companies that need more warehouses or logistical support for their storage and distribution, as well as consumer goods that are being consumed daily in Indonesia, which is the fourth-most populous nation in the world. Q3 2019 > Industrial demand is still well-supported by the automotive, logistics, food and consumer goods sectors. Going ahead, we see that the Demand chemical and petrochemical industry will become more active. > Supply of industrial land will grow in line with sales performance. Landlords will monitor the general sales activity or make prior Supply commitment before launching any land expansion. Price > Land price will stabilise by the year-end. Going forward, land price might increase by less than 10% per annum. Source: Colliers International 94.46 ha Full Year 2019 257.2 ha 2018–23 Annual Average 337.1 ha 50 ha 50 ha 220 ha 0.8% 0% 4.8% USD194.93 USD194.93 USD230.50 COLLIERS QUARTERLY INDUSTRIAL ESTATE | JAKARTA & GREATER JAKARTA | RESEARCH | Q3 2019 | 9 OCTOBER 2019 STIIL FOCUS ON SELLING THE REMAINING UNSOLD LAND In the greater Jakarta area, most of the future land banks will come from the Karawang region. From the existing and operating industrial estates in the region, we estimate that around 200 hectares are available in the inventory as a ready-to-use land. Karawang has a total of around 492 hectares (gross) of land available for sale, excluding the expansion of future and existing industrial estates. Due to land scarcity in Bekasi, there is not much change in the supply pipeline, and industrial land plots are mainly available within the operating estates. Active estates in Bekasi generally have between 60 and 150 hectares of land ready for sale. In total, there are more than 426 hectares (gross) of industrial land for sale in Bekasi. Meanwhile, Serang currently holds around 100 hectares of potential land to be developed, as contributed by two main industrial estates and from the new industrial estate, Bojonegara Industrial. Industrial Land Stock Status in Some Active and Future Industrial Estates For now, only less than two hectares are left in one estate in Bogor, but it is very expensive at IDR5 million/sq m. Apart from the abovementioned, Bogor still holds around 24.5 hectares of land, but they are mainly offered for lease. IMPRESSIVE SALES RECORD With the total amount of industrial transactions in Q3 2019, the 2019 YTD sales and leasing surpassed the entire sales of 2018. A substantial amount of sales and leasing deals this quarter was evenly distributed amongst main industrial estates, such as Greenland International Industrial Centre (GIIC), Suryacipta, and Krakatau Industrial Estate Cilegon (KIEC) and Modern Cikande in Serang. Although lower than that in Q1 2019, the overall sales in Q3 2019 represent an equal performance in the respective regions, including Bekasi, Karawang and Serang. Total leasing and sales transactions were close to 94 hectares, thus bringing the accumulative amount of industrial deals to 227.23 hectares 2019 YTD. This has exceeded last year’s sales by 22%. KIEC reported an unprecedented amount of sales transactions totalling to 40 hectares, the highest in Q3 2019. Two existing Japanese and Americanbased petrochemical companies concluded the deal as part of their expansion plan. We indicate that the chemical-based industry has been quite active in expanding, specifically companies that produce base materials for the plastic industry. Some big names in the petrochemical industry have been progressively growing their businesses, in line with the increasing need for plastic materials. Serang has been the most active region in concluding industrial deals. As the best performing industrial estate in Q1 2019, Modern Cikande remained consistent in securing sales commitments this quarter with a total 12.43 hectares, ranking them fourth in sales volume. In fact, Modern Cikande fetched the top sales amongst other industrial estates with a total sales volume of 82.67 hectares throughout 2019 YTD. There were six companies – textile, food, metal, plastic, packaging and steel-related companies – that bought land (1 to 4 hectares) in Modern Cikande. Total land sales in Serang from Q1 to Q3 2019 was 123.67 hectares or 55% of the total sales in the greater Jakarta area. Source: Colliers International 2 COLLIERS QUARTERLY INDUSTRIAL ESTATE | JAKARTA & GREATER JAKARTA | RESEARCH | Q3 2019 | 9 OCTOBER 2019 GIIC has been constantly reporting transactions for the last couple of years with significant amount of sales. In Q3 2019, they registered five companies (one interior equipment and four automotive-related companies) as their new tenants, totalling to 17.2 hectares. For the last three consecutive quarters in 2019, GIIC has secured 42.5 hectares. Land Absorption in Q3 2019 After being dormant for one year, Suryacipta at last recorded a substantial amount of sales this quarter, including four transactions with an IT company, building material, packaging and warehouse. The IT company took the biggest portion at 13.2 hectares, building material comes next at 2.4 hectares and the two others totalled to 16.5 hectares. In Bekasi, Jababeka consistently registered sales at about the same amount every quarter. This time they secured transactions from food, consumer goods and light manufacturing companies, totalling to around 2.6 hectares, just like in the previous quarter. KIIC sold around 1.5 hectares to a packaging company (Japan-Indonesia JV) for their expansion. For their first transaction in 2019, one local automotive company bought about 1 hectare of land in Bekasi Fajar this quarter. Other smaller transactions came from Sentul Industrial Estate in Bogor that sold three warehouse units to a German-based pharmaceutical company and fragrance company, involving around 0.23 hectare of land. Similarly, Griya Idola in Tangerang only captured 0.20 hectare from two local chemical companies that expanded their operation. Source: Colliers International Land Absorption in 2019YTD In the leasing market, only Kota Bukit Indah was able to transact around 0.6 hectare from a local company in laboratory services and a Japan-based company in plastic injection company. Source: Colliers International 3 COLLIERS QUARTERLY INDUSTRIAL ESTATE | JAKARTA & GREATER JAKARTA | RESEARCH | Q3 2019 | 9 OCTOBER 2019 Annual Industrial Land Absorption Types of Active Industries Involved in the Transactions in Q3 2019 Source: Colliers International Source: Colliers International PRICES ARE GENERALLY STABLE BUT ADJUSTMENTS OCCURRED IN BOGOR In general, prices of industrial land remained unchanged during the quarter. Despite substantial sales so far, landlords typically are aware of the general slowdown in economy and rising competition amongst themselves, and therefore opted to maintain their price. We see just one industrial estate in Sentul, Bogor that charged higher in Q3 2019. Due to industrial land scarcity in Bogor and the limited amount of land they currently hold, the land price of IDR4.75 million, which was already high, was adjusted to IDR5 million/sq m. 4 COLLIERS QUARTERLY INDUSTRIAL ESTATE | JAKARTA & GREATER JAKARTA | RESEARCH | Q3 2019 | 9 OCTOBER 2019 Greater Jakarta industrial land prices Source: Colliers International Rental Rate Greater Jakarta Industrial Maintenance Costs Source: Colliers International Industrial Land Prices and Maintenance Costs (in USD equivalent) With only a few absorptions every quarter and plenty of land banks for lease, rental tariff remained unchanged. Furthermore, we do not expect any rental adjustments at least in the short term. Maintenance Costs Similarly, there will not be any maintenance cost adjustments. Maintenance costs need plenty of time to be reviewed and mainly related to the jump in operating costs, including labour costs and electricity tariff. Further, our inflation rate has been quite low for several years, and therefore there is not enough fundamental reason to increase maintenance cost. 5 Land Prices (/sq m) Average Maintenance Costs (/sq m/month) Lowest Highest Average Lowest Highest Bogor Tangerang Bekasi 212.30 336.14 274.22 0.06 0.06 0.06 141.53 240.10 182.81 0.03 0.08 0.06 150.00 170.00 161.67 0.05 0.10 0.06 Karawang 169.84 226.45 203.81 0.06 0.08 0.07 Serang 141.53 162.76 152.15 0.03 0.05 0.05 Note: USD1.00 = IDR14,131 (average during Q3 2019) Source: Colliers International Primary Authors: For further information, please contact: Ferry Salanto Senior Associate Director| Research | Indonesia +62 21 3043 6730 Ferry.salanto@colliers.com Ferry Salanto Senior Associate Director| Research | Indonesia +62 21 3043 6730 Ferry.salanto@colliers.com About Colliers International Group Inc. Colliers International Group Inc. 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