In Japan, it has been rare for modern logistics facilities to be sold outside of the same group. Development funds and developers in Japan have often sold logistics facilities to core funds and J-REITs within their groups. Opportunities for direct investment without development pipelines have been limited, but that is changing.
Portfolio transactions of modern logistics facilities among third parties have continued in quick succession, improving the lack of investment opportunities in such facilities. Gaw Capital Partners acquired seven properties valued at approximately JPY 80 billion (approximately USD 540 million) from the Blackstone Group in December 2022. Also, Mapletree Logistics Trust acquired six properties valued at JPY 66 billion (approximately USD 500 million) from CBRE Investment Management in April 2023. In the same month, GIC acquired six properties for approximately JPY 100 billion (approximately USD 800 million) from Blackstone Group.
Figure 1: Investment Volume of Japan Logistics Facilities
Source: JLL Research, 1Q23 and 2Q23 volumes are JLL’s estimates
The background of the change is the increasing number of investors with more diversity, as well as the increase in development projects. Until the early 2010s, when few investors were investing in logistics facilities and the liquidity in the investment market was low, it was necessary to prepare exits for developed properties on their own. Both overseas investors and domestic developers formed J-REITs and core funds within their groups. As a result, deals involving completed logistics facilities were limited to in-group transactions. Since 2015, the number of investors has increased, with life insurance companies and pension funds starting to invest directly in logistics facilities. Also, when the logistics facilities investment market becomes more liquid, development funds and developers that do not have an exit within their group can now start projects. Properties developed by them have recently appeared in the investment market.
Another factor is the rapid increase in development projects. As the real estate market for logistics facilities continues to grow at an accelerated pace, the number of development projects continues to increase. In 2023, Greater Tokyo alone is scheduled to complete the construction of 3 million sqm, triple the floor area of 2015. As core funds and associated J-REITs are no longer able to own all completed properties, transactions with outside groups are increasing.
Figure 2: Supply of Japan Logistics facilities
Source: JLL Research, 1Q23
The development of logistics facilities by development funds and developers that do not have exit funds is increasing. In addition, the supply of logistics facilities is increasing investment opportunities for logistics facilities. The properties to be transacted also vary in size, area, occupancy rate, etc., which will provide various opportunistic to core investment opportunities.
Japan is the only country where a low-interest rate environment still exists. As investment opportunities that were rare until now are proliferating, investment in Japan’s logistics facilities will continue to rise.
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