The construction sector in Indonesia grew at 7% in 2010 and up to 10% predicted for 2011 in real growth, fuelled by high demand for residential projects and infrastructure. Being largely labour intensive and heavily sensitive to changes in the prices of raw materials for construction and fuel has made the sector vulnerable to shocks and rising inflation. Improving levels of expertise among the private sector contractors has been a challenge in improving competition, as the state owned companies (SOEs) continue to be the main players. This makes finding a local partner to execute PPP (see Public Private Partnerships) projects as well as locating qualified human resources an obstacle for foreign companies operating in Indonesia.

Indonesia’s industrial property sector has been subject to challenges as industrial investors have hesitated and delayed their entry or expansion due to greater uncertainty in the local and global economic climate. Under the Indonesian government’s infrastructure drive (See Concrete Developments in Indonesia’s Infrastructure), industrial land and industrial estates have been given renewed attention and given the sector a boost. Supply and demand are equally rising as the Indonesian government offers more incentives to facilitate industrial property developers and companies operating factories and warehouses in Indonesia’s industrial zones.