Expanding logistics real estate in FukuokaAugust 19, 2022 / By
Fukuoka is Japan’s fourth largest city after Tokyo, Osaka and Nagoya. In Japan, where the population is ageing, Fukuoka is attracting attention as a vibrant city with a considerable young population. Due to its proximity to South Korea and China, Fukuoka is believed to benefit from the growth of Asian countries as they experience increased tourism and the expansion of corporations.
Many large-scale real estate redevelopment projects are underway in Fukuoka City’s CBD. The increase in high-grade office buildings and luxury-brand hotels is expected to increase the city’s attractiveness. With its low vacancy rate and high rental increases attracting attention, several domestic and foreign developers can be seen developing logistics facilities in Fukuoka.
Development of logistics facilities in Fukuoka began in the late 2000s. But due to the economic downturn, many projects came to a halt. Full-scale development of logistics facilities resumed in 2012, with foreign developers such as Prologis and domestic developers such as Daiwa House Industry developing logistics facilities. However, the number of developers in Fukuoka was still limited, and the supply was small compared to Greater Tokyo and Greater Osaka. The leasing market was immature, taking more than a year for multi-tenant properties to be fully leased. Therefore, many developers preferred the Build-to-Suit type, developed for specific tenants, to avoid the leasing risks.
From around 2018, demand increased due to the expansion of e-commerce and supply hike in Greater Tokyo and Greater Osaka, although Fukuoka property supply continued to be low. As a result, Fukuoka’s logistics market remained at full occupancy from 2019 onwards. Since then, although new properties, including multi-tenant types, have been supplied, all of them were fully pre-committed at the time of completion. Even in 2Q22, the market continued to have excess demand and a supply shortage.
In 2018, the average rent for the entire area was around JPY 2,800 per tsubo per month. In 2Q22, it increased by 15% to JPY 3,200 per tsubo per month, and some areas observed an increase of more than 30%.
Foreign developers such as GLP, ESR and Mapletree are also paying attention to Fukuoka’s logistics market, with a tight supply-demand balance and rising rents. They are developing logistics facilities, one after another. However, considering the size of the city and the stock of logistics facilities, Fukuoka still has insufficient supply and will likely continue drawing developers’ interest.
Figure 1: Fukuoka Logistics Rent & Vacancy Rate
Source: JLL Research, 2Q22
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