Continued expansion of e-commerce and 3PL demand

• Demand from 3PLs and online retailers pushed net absorption to 221,000 sqm in Q4 2024. In full-year 2024, the figure was around 1.5 million sqm. Compared to 2023, demand has fallen in line with less supply.
• As transport costs rise, demand is strong for properties close to the city centre and with short transportation distances, while properties in fringe areas with higher transport costs to the city centre are struggling.

Overall vacancy decreases but remains above 9%

• New supply totalled 152,000 sqm in Q4 2024, increasing total stock by 0.7% q-o-q and 9.3% y-o-y. Two facilities, LogiSquare Fujimino B bldg (NLA 101,000 sqm) and Logicross Atsugi 3 (NLA 51,000 sqm), entered the market. Both are located in the Inland area.
• The vacancy rate in Greater Tokyo stood at 9.5% for Q4 2024, decreasing 40 bps q-o-q and increasing 140 bps y-o-y. The vacancy rate in the Bay area fell to 7.3%, decreasing 90 bps q-o-q, Tokyo Inland fell to 10.4%, decreasing by 20 bps q-o-q.

Average rent grows moderately

• Gross rents in Greater Tokyo averaged JPY 4,688 per tsubo per month in Q4 2024, flat q-o-q and up 1.8% y-o-y. New properties with high rents pushed the averages up, while existing properties with vacant spaces pulled them down, resulting in overall flat rents.
• Capital values in Greater Tokyo increased 0.1% q-o-q and 1.3% y-o-y in Q4 2024, reflecting stable cap rates and rent growth. A notable sales transaction involved Nippon Life Insurance, which acquired a portfolio with three properties from GLP.

Outlook: Rents to remain stable or rise; cap rates face downward trend

• As demand continues to grow and construction costs rise, overall rents are expected to grow moderately; however, given the higher vacancy rate, rents are under downward pressure in some Inland areas.
• The long-term interest rate is expected to rise over the next few years. However, there is strong investment demand, especially from core investors such as insurance companies. Capital values are expected to grow as rents grow.