APPD Market Report Article


May 26, 2024

Takeshi Akagi, Head of Research, Japan


JPY 4,641


Solid demand from 3PLs and EC retailers continues

  • The logistics sector’s economic indicators were uneven entering 1Q24. In February, the industrial production index decreased 0.1% m-o-m, a decrease for the first time in two months. The value of exports increased for the third consecutive month, and that of imports increased for the first time in 11 consecutive months, reflecting the sluggishness of private consumption and weak external demand.
  • Net absorption totalled 163,000 sqm in 1Q24, with sustained demand from 3PLs, online and non-online retailers like supermarkets and drug stores.

Overall vacancy increases for the third consecutive quarter

  • New supply totalled 631,000 sqm in 1Q24, increasing the total stock by 3% q-o-q and 12% y-o-y. Nine facilities, including Landport Kashiwa 1 (NLA 106,000 sqm), GLP Ageo (NLA 90,000 sqm) and GLP Sayama Hidaka 3 (NLA 67,000 sqm) in the Inland area, entered the market. 
  • The vacancy rate in Greater Tokyo stood at 10.0% for 1Q24, increasing 190 bps q-o-q and 190 bps y-o-y. This was mainly because of a large amount of supply. The vacancy rate in the Bay area rose to 8.9%, increasing 80 bps q-o-q, while Tokyo Inland’s rose to 10.5%, increasing 240 bps q-o-q.

Rent growth accelerates in Tokyo Inland

  • Gross rents in Greater Tokyo averaged JPY 4,641 per tsubo, per month in 1Q24, increasing 0.8% q-o-q and 2.1% y-o-y. Rent growth was driven by new completions in the Inland area with relatively high rents, as the Bay area saw an increase of 0.5% q-o-q and the Inland Area saw an increase of 1.3% q-o-q.
  • Capital values in Greater Tokyo increased 0.6% q-o-q and 4.6% y-o-y in 1Q24, reflecting a stable cap rate and rent growth. A notable sales transaction involved Daiwa House REIT acquiring DPL Urayasu 3 for JPY 30.0 billion and an NOI cap rate of 3.5%. 

Outlook: Capital values to grow, reflecting cap rate compression

  • According to Oxford Economics, industrial production is expected to rise by 0.1%, exports are likely to rise by 1.5% and imports are likely to rise by 1.7% in 2024. Downside risks include a decline in exports due to the global economic slowdown and concerns about the deterioration of the domestic economy due to rising raw material prices. 
  • The vacancy rate is expected to remain almost stable as robust demand should absorb the new supply due to come on stream in 2024 and 2025. As such, rents will likely remain stable. Capital values are expected to grow as cap rates may compress further amid continued investor interest.

Note: Tokyo Logistics & Industrial refers to the Greater Tokyo prime logistics market.

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