Indonesia Investment Authority (INA), Hong Kong-listed real estate firm ESR Group, and MC Urban Development Indonesia (MCUDI), a 100 percent subsidiary of Mitsubishi Corporation engaged in real estate development, have on Monday announced a strategic partnership to invest in modern warehouse in Indonesia.
The trio said in a statement that that the partnership marks the first milestone towards a broader long-term collaboration aimed at unlocking the vast potential of investing in the development of modern warehouse facilities in Indonesia.
The venture is investing in three strategically located modern logistics parks, developed, and managed by ESR and the partners are exploring committing to additional joint investments in the sector.
This venture signifies INA’s first investment in the real estate asset class and MCUDI’s first logistics development in Indonesia, illustrating the appeal of Indonesia’s burgeoning real estate and logistics market and its future growth prospects.
According to the statement, the demand for modern warehouse facilities in Indonesia is driven by key sectors, including e-commerce, third-party logistics (3PL), and the automotive industries.
These sectors contribute significantly to the market’s growth, each with unique requirements and demands for storage and distribution spaces.
At present, the Indonesian warehouse market, stands at around 29 million sqm, with modern warehouses only accounting for approximately 8 percent of the total market.
Currently, the supply of modern warehouses in Indonesia is 2.7 million sqm, with a healthy absorption rate and an estimated annual growth of 300k sqm.
This collaboration aims to seize this opportunity to invest in modern warehouse assets and secure a substantial share of this expanding market.
The three assets that the partnership is investing in have strategic locations in Cikarang and Karawang.
The Cikarang assets (Cikarang I Logistics Park and Cikarang II Logistics Park) are situated in key industrial zones: Greenland International Industrial Center (GIIC) and Kawasan Industri Terpadu Indonesia China (KITIC), with expected completion in May and June 2023 respectively.
These industrial and business hubs offer excellent connectivity.
Additionally, the Karawang asset (Karawang I Logistics Park) is located in the Suryacipta Industrial Estate, an expanding industrial area in Jakarta’s Eastern Corridor.
Its prime location, near Jakarta and major transportation networks, positions it well to meet the storage and distribution needs of businesses. Construction is set to begin in June 2023.
With nearly 70 affiliated companies in Indonesia, MCUDI brings a wealth of experience in warehouse development business from Japan, the United States, and other regions.
The collaboration intends to utilize MCUDI’s extensive network and expertise to further develop the warehouse market in Indonesia.
INA Chief Executive Officer Ridha Wirakusumah said the firm recognizes the immense potential of the logistics market, spurred by the robust growth of the ecommerce, 3PL, and automotive industries in our region.
He said the strategic partnership with ESR and MCUDI not only aims to meet the evolving needs of the logistics industry but also reflects INA’s commitment to sustainable development and economic growth.
Building on this strategic partnership, INA, ESR and its subsidiary LOGOS are set to deepen their collaboration.
Both parties have expressed enthusiasm to explore the establishment of additional joint mandates for Indonesian development assets and other mutually strategic initiatives.
Recognizing the immense potential and dynamism of Indonesia, INA, ESR and LOGOS estimate that a joint initiative could potentially create over $1 billion of modern logistics warehouses in the archipelago over the next five years.
INA will leverage the expertise of ESR and LOGOS which have been successfully integrated under a unified platform in Indonesia, and other partners to create innovative and environmentally conscious real estate solutions, further amplifying the impact of this collaboration on a regional scale.
ESR Co-Founder and Co-Chief Executive Officer Stuart Gibson said the partnership marks ESR’s commitment to Indonesia, a key market in its expansion strategy for the fast-growing Southeast Asia region.
Underpinned by a surging consumer class, the exponential growth of e-commerce, and the Indonesian government’s push for electric vehicles, he said there is robust demand for high-quality logistics and industrial spaces in the country from both multi-national and domestic customers.
ESR’s Country Co-Head of Indonesia, Loh Meow Chong, said the partnership with INA and MCUDI is in line with ESR’s focus on accelerating its asset-light strategy which enables the firm to recycle capital into attractive opportunities to further build long-term sustainable growth.
With a total asset under management (AUM) of $861 million and gross floor area (GFA) of 795,000 sqm and the integrated strategic expertise of ESR and LOGOS in Indonesia, he said the firm is well-poised to drive best-in-class performance for its capital partners and tenants, deliver its pipeline and seize the many opportunities in the market.
“We see strong potential to expand our portfolio of modern logistics and industrial assets in Indonesia,
“Demand is set to grow and will mainly be driven by Indonesia’s burgeoning e-commerce sales which is forecasted to almost double from $48 billion in 2021 to $95 billion in 2025,” he said.
MCUDI’s President Directo Kenji Ono said this partnership marks MCUDI’s diversification from its portfolio of residential projects since Mitsubishi Corporation group first entered the Indonesian real estate market in 2015.
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