Demand for green office spaces soars in Indonesia as ESG standards drive change. (Photo: iStock)
Despite an oversupply of office buildings in Indonesia, demand for low-carbon offices remains strong. The occupancy rate for green office spaces jumped 73.4% in the second half of last year, with rental prices also increasing, according to a recent report.
Multinational companies, focused on meeting net-zero goals, are driving the trend by favoring certified green buildings despite higher costs.
Green office rents up 4% in Indonesia
Knight Frank, a British real estate company, released a report in mid-February indicating that the rental occupancy rate for certified green office buildings in Indonesia grew significantly in the second half of last year, reaching 73.4%. Rental prices also increased notably, with a year-on-year growth of 4%.
Knight Frank data indicates the number of newly built low-carbon office buildings in Indonesia has grown 7% over the past four years. The demand surge stems from three factors: rising public awareness of sustainable development, global investors’ environmental, social, and governance (ESG) compliance requirements, and regulations promoting stronger energy efficiency and environmental management.
Another real estate consulting firm, Colliers International, found that although developers must invest more to meet the materials and energy usage standards required for low-carbon offices, companies are still willing to pay higher rents, especially multinational corporations which form the majority of tenants in these spaces.
Bagus Adikusumo, a senior official at Colliers International, explained that, under global trends, businesses adhering to ESG standards are no longer just encouraged or advised to use green buildings, but are now required to do so to fulfill their sustainability commitments.
The demand for low-carbon office spaces in Indonesia is strong, with multinational corporations as the primary tenants. (Image: iStock)
Economic slump drags down office space market
Since the outbreak of the COVID-19 pandemic, the demand for office buildings in Indonesia has continued to slow down. Rent for offices in prime central business district (CBD) locations dropped by 1.1% last year, while non-CBD office rents fell by 1.9%.
Real estate firm JLL analyzed that the country’s poor economic performance led companies to continue cost-cutting policies, combined with adjustments in workplace policies, which have impacted the market.
With an oversupply of office spaces, some development projects have been paused, and certain office buildings are undergoing renovation to secure green certifications. Currently, the most widely used green certifications include LEED (Leadership in Energy and Environmental Design) from the U.S., Green Mark from the Singapore government, and Indonesia’s local Greenship certification.
According to Colliers International, the Greater Jakarta area has 46 certified green office buildings, a number far exceeding the 10 industrial facilities, and much higher than the number of residential and retail buildings with green certifications.
In mid-February, the International Finance Corporation (IFC) announced it would provide Indonesia with its first sustainable loan, mainly targeting low-carbon retail buildings.
Source: Jakarta Post, Technode
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