Investors double down on Jakarta despite Nusantara’s political rise

The new capital may redefine Indonesia’s political map, but density, demand, and capital flows continue to anchor real estate momentum in Greater Jakarta

In 2025, Jakarta surpassed Tokyo as the world’s largest urban area, with nearly 42 million residents, according to the United Nations—underscoring the growing pressure on housing, offices, and infrastructure, even as Indonesia presses ahead with plans to relocate its capital to Nusantara on the island of Borneo.

As government functions begin shifting northward, property markets are offering the first measurable signal of change: whether Jakarta’s dominance is being diluted or reinforced. So far, the data points to continuity. Industrial space across Greater Jakarta is operating close to full capacity, with occupancy at roughly 96%, while residential price growth remains modest at 0.5%–2% annually, according to research from PT Leads Property Services Indonesia.

“Greater Jakarta still holds the highest potential as Indonesia’s hub for business activity,” says Hendra Hartono, founder and CEO of PT Leads Property Services Indonesia. Investors, he adds, are unlikely to commit at scale elsewhere without a mass population with sustained purchasing power.

That dominance has not translated into broad pricing acceleration. In the vertical residential market, competition and existing inventory are containing upward pressure, and recent years have not seen a huge jump in pricing, Hartono notes, particularly in the condominium segment. “The market is competitive, and buyers are selective,” he adds, noting that buyer profiles have shifted more decisively toward end users rather than speculative investors.

Value is being recalibrated along clear income lines. At the mass-market level, households are weighing space against proximity. For the price of a two-bedroom apartment in central Jakarta, buyers can often secure a three-bedroom landed house in Bogor, Depok, Tangerang, or Bekasi, according to Hartono. He adds that higher-income buyers are less inclined to make that trade. Upscale projects continue to transact, supported by demand for access to the CBD and South Jakarta, particularly in areas served by MRT infrastructure. Mainstream condominium demand typically clusters around 70 to 150 square metres, while luxury units range from roughly 250 to 400 square metres.

Investors are unlikely to commit at scale elsewhere without a mass population with sustained purchasing power

Those trade-offs reflect the physical constraints bearing down on a metropolitan area that has expanded faster than its infrastructure can comfortably support. Flooding also remains a recurring reality in Jakarta. The city sits on a low-lying basin, and estimates suggest that about 40% of North Jakarta is below sea level, worsened by decades of subsidence. Geodetic surveys conducted by Indonesian research institutions show that parts of the city continue to sink at an average rate of around 3–6 centimetres per year, with some localised districts historically recording higher rates. Excessive groundwater extraction and soil compression from rapid urban development remain the primary drivers.

Even so, flood exposure and subsidence have not materially altered transaction behaviour. Primary pricing remains anchored to infrastructure access, and developer quality, while discounts in the secondary market reflect competitive positioning rather than systematic climate repricing. “Flooding is still an issue in Jakarta,” Hartono says. “But pricing, accessibility, facilities, and the developer’s ability to deliver are what drive transactions.”

In industrial and logistics real estate, access to toll roads, ports, MRT links, and established supply-chain ecosystems continues to outweigh climate exposure in underwriting decisions. “Connectivity and accessibility remain the primary factors when choosing locations,” says Farazia Basarah, country head at JLL Indonesia. “Rental rates are determined more by location and infrastructure than by natural disaster probability.”

That emphasis on infrastructure is reinforced by scale. With nearly 42 million residents across the metropolitan area, daily consumption generates sustained demand for distribution and storage. “More people means the need for more electric vehicles, more consumer goods and more e-commerce activity—and all of this requires manufacturing and warehouse facilities,” Basarah explains. Site selection then becomes activity-specific, she adds. E-commerce operators prioritise proximity to dense consumer markets, while automotive distributors gravitate toward manufacturing clusters. Firms less dependent on immediate population access are more inclined to consider lower-cost provinces such as Central Java.

Related: 6 ways Bekasi is driving sustainable growth in Indonesia

Industrial occupancy across Greater Jakarta has reached roughly 96%, one of the highest levels among major Southeast Asian logistics markets in JLL’s comparative tracking. The regional comparison suggests Jakarta is not merely active but operating under clear supply pressure. Among major ASEAN markets, the metropolitan region now faces some of the most pronounced land availability constraints, increasing competition for modern logistics stock. While Indonesia ranks below more mature regional markets in regulatory transparency, Jakarta’s established logistics ecosystem and economic fundamentals continue to attract foreign institutional capital, especially for Grade A assets developed by established players. According to Basarah, the market is becoming “more constrained rather than competitive” compared with the rest of the region.

Meanwhile, the relocation of Indonesia’s capital has yet to meaningfully shift private real estate dynamics. Outside state-linked facilities and select hospitality projects, large-scale office and retail absorption has yet to materialise. Hartono notes that commercial development in Nusantara remains limited. Activity is largely concentrated in state-linked facilities, hotels, and restaurants, rather than office or retail schemes of scale. Without a deep private-sector employment base, residential, and commercial absorption remains demand-dependent. Designation alone does not create demand. Residential absorption, retail performance, and office take-up depend on household formation, employment density, and ecosystem maturity. Until those fundamentals are established, capital allocation remains cautious.

A similar dynamic is visible in logistics and industrial markets. Basarah notes that stakeholders remain focused on traditional hubs such as Greater Jakarta, as well as emerging locations supported by Special Economic Zone (SEZ) status across the country. These policy-backed corridors, rather than Nusantara itself, are currently attracting industrial occupiers and investors seeking cost advantages without sacrificing infrastructure depth.

The relocation of government functions may gradually alter Indonesia’s institutional geography. But real estate markets adjust to density, employment concentration, and income formation. For now, investment flows and industrial absorption remain centred on Greater Jakarta. Indonesia may operate two capitals in administrative terms. In market terms, the centre of gravity remains in Jakarta.

The original version of this article appeared in PropertyGuru Property Report Magazine Issue No. 195 on issuu and Magzter. Write to our editors at [email protected].