APPD Market Report Article


February 28, 2023

Takeshi Akagi, Head of Research, Japan


JPY 4,541


Net absorption reaches over 2 million sqm for full-year 2022

  • Economic indicators for the logistics sector were patchy entering 4Q22. In November, the industrial production index decreased 0.1% m-o-m, decreasing for the third consecutive month. The value of exports increased for the 21st consecutive month and the value of imports increased for the 22nd consecutive month, reflecting the Japanese yen depreciation and the recovery of the domestic economy.
  • Net absorption totalled a strong 694,000 sqm in 4Q22, with strong, sustained demand from 3PLs and online retailers. For full-year 2022, the figure was more than 2,048,000 sqm, almost in line with the 2,104,000 sqm recorded in 2019.

Overall vacancy hovers at 5% for the second consecutive quarter

  • New supply totalled 765,000 sqm (NLA) in 4Q22, increasing total stock by 4% q-o-q. Eight facilities, including DPL Urayasu 3 (GFA 31,000 sqm) in the Bay area and GLP ALFALINK Sagamihara 4 (GFA 152,000 sqm) in the Inland area, entered the market. For full-year 2022, new supply totalled 2,710,000 sqm (NLA), increasing stock by 18% y-o-y; this exceeded the historical high of 2,232,000 sqm in 2021.
  • The vacancy rate in Greater Tokyo stood at 5.2% for 4Q22, increasing 20 bps q-o-q and 340 bps y-o-y. The vacancy rate in the Bay area fell to 2.8%, decreasing 180 bps q-o-q, while Tokyo Inland rose to 6.2%, increasing 100 bps q-o-q, driven by new completions entering the market.

Average rents and capital values grow moderately

  • Gross rents in Greater Tokyo averaged JPY 4,541 per tsubo per month in 4Q22, increasing 0.2% q-o-q and 2.8% y-o-y. Growth continued to be driven by new completions that asked for higher rents. Rents increased 0.1% q-o-q in the Bay area and 0.3% q-o-q in the Inland area.
  • Capital values in Greater Tokyo increased 0.1% q-o-q and 8.8% y-o-y in 4Q22, reflecting moderate rent growth and cap rate compression. A notable sales transaction involved Gaw Capital Partners acquiring Chiba New Town Logistics Center (GFA 51,000 sqm) for an undisclosed price. 

Outlook: Cap rates to compress further

  • According to Oxford Economics, the recovery of trade-oriented indicators is expected to continue in 2023. Industrial production should increase by 1.5%, while exports and imports should rise by 0.9% and 1.7%, respectively. 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. 
  • Average rents are likely to be on an upward trend, as rising land prices and construction costs pressure landlords to raise rents. This will likely be somewhat offset by downward pressure from major new completions that enter the market. Cap rates are expected to compress further with continued investors’ interest.

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

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