The property sector of Indonesia has been sluggish ever since the nation's property boom ended in late 2013. The same goes for the office space segment. Stagnant economic growth around 5 percent (y/y) since 2014 has led to limited growth of demand for office space in Indonesia. But for some this is a positive context. Coworking space - a shared working environment - is becoming increasingly popular.
Based on data from property consultant Cushman & Wakefield Indonesia, a total of 50,000 square meters (m2) of office space has been added in Jakarta since 2014. Hence, Jakarta now contains almost 5 million m2 of office space. However, the occupancy rate only reached 80 percent in the third quarter of 2017, implying 20 percent (or one million m2 of office space) is empty. Analysts actually believe that the occupancy rate in Jakarta will have fallen to 77 percent by the year-end.
Despite plenty of supply and limited demand, most office space (especially in the office towers of Central Jakarta) is expensive. Many newly established local companies cannot afford such office space (whether buy or rent) and therefore coworking space or shared office space is a solution.
The new generation of young Indonesian businessmen, who have limited capital at their disposal, show increasing demand for coworking space. The conventional office space (where a company rents a physical space for a long period) is becoming old-fashioned. But it is also because there is a rising group of work-at-home professionals and independent contractors in Indonesia who do not need conventional office space.
Coworking is not only about different companies working in one physical place but it is also about establishing a coworking community where multiple companies can work together more closely (with good interaction and communication) in each others proximity.
Ferry Salanto, Senior Associate Director of Research at Colliers Indonesia, said coworking space is particularly popular in Central Jakarta. Salanto said there are also several Asian players that have started to invest in coworking space in Jakarta as this type of office space is booming in Indonesia as well as in several parts of Asia where space is becoming increasingly limited in the business districts of the bigger cities.
But domestic investors are the biggest players in Indonesia's coworking space segment and several big companies are eager to penetrate this segment. For example Sinar Mas Land set aside up to IDR 4.5 trillion (approx. USD $333 million) to rent office space and turn it into coworking units over the next three years.