E-Commerce to Stimulate Property Industry

The economic slowdown and the decline in people’s purchasing power weakened the property sector to the end of 2015. Many forecast that the property industry will again record slow growth this year due to continued sluggish demand.

Head of Advisory of Jones Lang LaSalle (JLL) Vivin Harsanto said that the property sector might recover this year thanks to the widespread use of e-commerce websites. Growth in the e-commerce industry will have implications for the property sector in two aspects.

First, the use of office space. Until recently, there was little demand for office space from the e-commerce industry. However, according to Vivin, since the fourth quarter of last year, growth in the e-commerce industry has begun to take effect on the property sector. This is evident from the increase in the number of e-commerce companies leasing one or two floors for their offices.

Also affected by the growth in e-commerce is the use of warehouses. “They (e-commerce companies) need warehouses. This will be a potential [market],” Vivin said during a media gathering at the Indonesia Stock Exchange building, Wednesday (6/4) (Read: Foreign Investors Interested to Invest in E-Commerce, Logistics and Consumer Goods)

These digital companies need office space in major cities like Jakarta to keep pace with the growth in the e-commerce industry. Their biggest markets are in those cities, and they need warehouses near their customers that offer decent infrastructure and facilities, such as roads, to be able to provide good services to their customers.

However, Vivin was unable to predict exactly how much additional office space would be needed this year to keep pace with the growth in the e-commerce sector. E-commerce would at least reverse the trend in the property market, especially for office space and warehouses, which has weaken since last year.

Jones Lang LaSalle recorded a minus 10 percent growth in office space sales and rentals last year due to increased supply and low demand. Also, growth in e-commerce sector last year was still low to have any significant impact on the property market. “We’ll see whether next year brings a significant increase,” Vivin said. (Read: Incentives for Real Estate Investment Hampered by Yield of Return)

JLL’s head of research James Taylor said that the presence of e-commerce in Indonesia, especially in major cities, would continue to grow, which could stimulate growth in the property sector. “We expect e-commerce companies to drive the growth of the property sector,” he said.