The rapidly growing demand for Tokyo logistics

June 22, 2018 / By  

Greater Tokyo is projected to have new supply of over 4,200,000 sqm of logistics space for 2018 and 2019. As 50% of the distribution at the end of 2017 was in existing stock of modern, large logistics facilities, there were concerns that the supply and demand of modern logistics facilities may soften. However, these concerns have remained unfounded, as of 1Q18, the vacancy rate of logistics facilities in Greater Tokyo continue to be at an extremely low level of 4.1%. While there have been cases where it has taken significant time to lease multi-tenant logistics facilities located in the Tokyo inland area, the continuing trend of steady tenant enquiries for the entire Greater Tokyo area indicates that this is a situation that is unlikely to occur.

The demand for logistics facilities, is driven from two key sources: the transfer demand from existing facilities to the latest logistics facilities and expansion demand for logistics facilities by e-commerce companies.

With unemployment rates in Japan at a very low 2.5%, and a declining labour population due to the ageing society, there is a manpower shortage throughout the economy. This has translated into a a lack of drivers and a shortage of workers in the warehouses and a corresponding increase in transportation and labour costs.

In response, companies have started examining and re-organising existing logistics bases considering additional countermeasures to rising costs. These include the introduction of material handling equipment, automatic robots, larger trailers to reduce the labour force and improve efficiency.  As there are many cases where older facilities cannot incorporate this kind of equipment, many companies have started relocating from existing facilities to the more modern, larger facilities.

The growth of the e-commerce market at 10% annum is also driving the demand for modern logistics facilities. E-commerce businesses need to be geographically dispersed for efficient logistics flow and sophisticated functions such as distribution processing which cannot always be handled by conventional warehouses.

Against this backdrop of low levels of unemployment, increasing labour and transportation costs and the rapidly growing E-commerce sector, the concern of oversupply in logistics facilitites will contrinue to remain unfounded.

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