Logistics demand amid COVID-19 in Greater TokyoJune 22, 2020 / By
The demand for modern logistics facilities in Greater Tokyo has been expanding over the past few years. Even amid COVID-19, the forecast is that it will not decline this year. So what has been driving this demand and what are the possible reasons for the demand to continue?
Until 1Q20, the key demand drivers for modern logistics facilities in Greater Tokyo included:
- The continuing expansion of the e-commerce market in Japan;
- The rise in popularity of modern facilities due to the aggregation of existing locations;
- Tenants’ reconsideration of the location of facilities as a result of rising delivery costs, and
- More focused attention on improving worker productivity and automation due to the lack of workers.
Although these drivers of demand will likely continue to exist for modern logistics facilities despite COVID-19, some adjustments are possible due to several reasons. The e-commerce market will continue to grow and accelerate further as civilians have been advised to refrain from heading out and to stay at home due to the state of emergency. Also, as companies consolidate and industries reorganise, there will be more pressure on them to reduce costs, which will increase the demand for modern facilities. Besides, delivery costs will continue to increase. Tenants will continue to focus on workers’ productivity due to a lack of labour force, as well as concentrate on the implementation of Business Continuity Plans. Lastly, the resurgence of domestic manufacturers once the state of emergency is over, will further increase the demand for modern logistics facilities, especially for companies such as makers of emergency equipment and the ones that house supply inventories for emergencies.
However, the impact of COVID-19 may halt investment activities since investors are unable to visit properties and execute transactions on the ground. It is unlikely that they will be able to travel globally in the short-term, and this could potentially put the brakes on investment activity.
Figure 1: Future Supply – Greater Tokyo Logistics
Source: JLL May 2020
In conclusion, due to a combination of both positive and negative developments, the increasing demand for modern logistics facilities in Greater Tokyo will not be impacted overall. We expect the demand to stay at the same level as that of 2019.
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