APPD Market Report Article


September 4, 2023

Takeshi Akagi, Head of Research, Japan


JPY 4,545


Net absorption reaches more than 1.4 million sqm in 1H23

  • Economic indicators for the logistics sector were uneven entering 2Q23. In May, the industrial production index decreased 1.6% m-o-m, decreasing for the second consecutive month. The value of exports increased for the 27th consecutive month and the value of imports decreased for the second consecutive month, reflecting the sluggish global economy weighing on capital goods demand.
  • Strong demand from 3PLs and online retailers, coupled with major new supply, saw net absorption reach a robust 794,000 sqm in 2Q23. For 1H23, the figure was more than 1,415,000 sqm, surpassing the half-year record of 1,200,000 sqm in 1H20.

Overall vacancy decreases for the first time in six quarters

  • New supply totalled 683,000 sqm in 2Q23, increasing total stock by 4% q-o-q and 21% y-o-y. Eight facilities entered the Inland area, including DPL Nagareyama II (GFA 111,000 sqm), GLP ALFALINK Nagareyama VII (GFA 105,000 sqm) and SOSiLA Kashiwa (GFA 72,000 sqm). 
  • The vacancy rate in Greater Tokyo stood at 7.3% in 2Q23, decreasing 80 bps q-o-q and increasing 330 bps y-o-y. The vacancy rate in the Bay area fell to 7.2%, decreasing 260 bps q-o-q, while that of Tokyo Inland remained flat at 7.3%.

Capital values growth outpaces rents

  • Gross rents in Greater Tokyo averaged JPY 4,545 per tsubo, per month, in 2Q23, remaining flat q-o-q and increasing 1.2% y-o-y. Rents in the Bay area remained flat q-o-q while increasing 0.3% q-o-q in the Inland area, reflecting new completions in the Inland area with relatively high rents.
  • Capital values in Greater Tokyo increased 2.9% q-o-q and 6.5% y-o-y in 2Q23, reflecting cap rate compression and stable rent growth. A notable sales transaction involved Mapletree Logistics Trust acquiring CBRE IM Shiroi for JPY 16.3 billion. 

Outlook: Rents to remain stable but cap rates to compress

  • According to Oxford Economics, trade-oriented indicators are expected to be uneven in 2023. Industrial production is expected to fall 5.2%, while exports are likely to fall 0.6% and imports are likely to rise 1.8%. 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. 
  • Amid sustained strong demand, overall rents are expected to grow moderately; however, given the record volume of supply, rents are likely to be under downward pressure in some Inland areas. 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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