APPD Market Report Article


February 22, 2024

Takeshi Akagi, Head of Research, Japan


JPY 4,605


Net absorption reaches over 2 million sqm for full year 2023

  • Logistics sector economic indicators were uneven entering 4Q23. In November, the industrial production index decreased 0.9% m-o-m, a decrease for the first time in three months. The value of exports decreased for the first time in five months and the value of imports decreased for the eighth consecutive month, reflecting the sluggish global economy weighing on capital goods demand.
  • Net absorption totalled a solid 289,000 sqm in 4Q23, with sustained demand from 3PLs and online retailers. For full-year 2023, the figure was more than 2,109,000 sqm, surpassing the 2,104,000 sqm recorded in 2019.

Overall vacancy increases for the second consecutive quarter

  • New supply totalled 428,000 sqm in 4Q23, increasing total stock by 2% q-o-q and 16% y-o-y. Three facilities, including MFLP Zama (GFA 134,000 sqm) and Logicross Sagamihara (GFA 171,000) in the Inland area, entered the market.
  • The vacancy rate in Greater Tokyo stood at 8.1% for 4Q23, increasing 50 bps q-o-q and 290 bps y-o-y. The vacancy rate in the Bay area fell to 8.0%, decreasing 80 bps q-o-q, while Tokyo Inland rose to 8.1%, increasing 110 bps q-o-q.

Rent growth accelerates in Tokyo Inland

  • Gross rents in Greater Tokyo averaged JPY 4,605 per tsubo per month in 4Q23, increasing 0.5% q-o-q and 1.4% y-o-y. Rents in the Bay area decreased 0.1% q-o-q, while the Inland area saw an increase of 1.1% q-o-q, reflecting new completions with relatively high rents.
  • Capital values in Greater Tokyo increased 0.3% q-o-q and 3.6% y-o-y in 4Q23, reflecting stable cap rate and rent growth. A notable sales transaction involved LaSalle Logiport REIT disposing of Logiport Nagareyama B for JPY 13.1 billion. 

Outlook: Cap rates to compress further

  • According to Oxford Economics, industrial production is expected to rise 3.8% in 2023 and 5.4% in 2024; exports are likely to rise 2.1% in 2023 and 1.0% in 2024, and imports to fall 1.4% in 2023 and rise 1.7% in 2024. Downside risks include a decline in exports due to the global economic slowdown and concerns about the domestic economy’s deterioration 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 should be somewhat offset by downward pressure from major new completions entering the market. 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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