APPD Market Report Article

Tokyo

February 28, 2022

1.6%

JPY 4,419

Growth
Slowing

Net absorption reaches almost 2 million for full-year 2021

  • Logistics sector economic indicators strengthened entering 4Q21. In November, the industrial production index increased 7.2% m-o-m, increasing for the second consecutive month and showing signs of picking up. Exports increased for the ninth consecutive month and imports increased for the tenth consecutive month.
  • Net absorption totalled a robust 771,000 sqm in 4Q21, with strong, sustained demand from 3PLs and online retailers. For full-year 2021, the figure was more than 1,984,000 sqm, almost in line with the 2,104,000 sqm recorded in 2019.

Overall vacancy decreases to 1% levels

  • New supply totalled 661,000 sqm in 4Q21, increasing total stock 5% q-o-q. Six facilities entered the Inland area including Goodman Business Park West (GFA 130,000 sqm), DPL Urawa Misono (GFA 67,000 sqm), and Landport Ageo 1 (GFA 50,000 sqm). For full-year 2021, new supply totalled 2,232,000 sqm, increasing stock by 17% y-o-y; this exceeded the historical high of 1,815,000 sqm in 2019.
  • The vacancy rate in Greater Tokyo stood at 1.8% for 4Q21, decreasing 80 bps q-o-q and increasing 160 bps y-o-y. The vacancy rate in the Bay area fell to 0.6%, decreasing 10 bps q-o-q, and Tokyo Inland fell to 2.3%, decreasing 120 bps q-o-q.

Rents and capital value grow moderately

  • Gross rents in Greater Tokyo averaged JPY 4,419 per tsubo, per month, in 4Q21, increasing 0.4% q-o-q and 1.6% y-o-y. Growth continued to be driven by new completions that asked for higher rents. Rents in the Bay area increased 0.1% q-o-q and 1.0% q-o-q in the Inland area.
  • Capital values in Greater Tokyo increased 0.5% q-o-q and 10.2% y-o-y in 4Q21, reflecting rent growth and stable cap rates. A notable sales transaction involved SOSiLA Logistics REIT acquiring 38% of SOSiLA Ebina for JPY 9.5 billion and an NOI cap rate of 4.1%.

Outlook: Cap rates to compress further

  • According to Oxford Economics, trade-oriented indicators are expected to recover in 2022. Industrial production is expected to rise 0.2%, while exports and imports are likely to rise 8.1% and 6.4%, respectively. The economy is expected to pick up as domestic activities and overseas economies resume. Downside risks include the impact of supply-side constraints and raw material price surges.
  • The vacancy rate is expected to remain almost flat despite record new supply. This will support rent growth, as new supply is expected to stimulate new demand. Cap rates are expected to compress further with continued investor interest.

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

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