Demand for modern, large-scale, leasing logistics facilities in Japan has been steadily increasing since 2000. This rise has been driven by the outsourcing of logistics operations, the off-balance of real estate by companies, and aggregate relocation from multiple aging warehouses. More recently demand has dramatically accelerated due to e-commerce.
There are 2 major trends:
- Rising demand for large scale, modern warehouses with automated equipment
- Increased demand for leasing premises rather than purchasing due to high land costs
Demand for large-scale, modern warehouses
The unemployment rate in Japan has been at a low level recently, and the shortage of truck drivers and workers in logistics facilities is now the most important issue in the logistics industry. Logistics facilities with fewer trucks lead to higher driver costs due to increased truck waiting in loading and unloading times. In warehouses with low building specifications, work procedures cannot be automated, which causes an increase in the cost of workers. Therefore, by relocating to modern large logistics facilities and introducing automating systems, companies are increasingly trying to cope with fewer truck drivers and warehouse workers. As a result, the demand for modern large-scale logistics facilities has been increasing and is expanding in recent years. In the Greater Tokyo, the share of large-scale warehouses of more than 10,000 sqm was around 50% of the entire warehouse stock as the end of 2012, but it increased to about 80% in the new supply in 2018.
Demand for leased facilities
As the number of logistics facility developers has increased and the competition for purchasing logistics sites is intensifying, increasing land prices for large-scale logistics facilities have led to an overall increase in the price of industrial land. The number of development players in logistics facilities, including major Japanese compared to the 2000-year level. Since, manufacturers compared with logistics facilities developer, have inferior price competitiveness and decision-making, it has become difficult for them to purchase land for warehouse development. Consequently, manufactures are more likely to lease a facility from a developer rather than own and develop the facility themselves. In fact, the percentage of leasing warehouses in logistics facilities supplied in Greater Tokyo was approximately 50% in 2012, exceeded by 70% in 2018, and the number of facilities being developed by an owner occupier is decreasing.
These trends are set to continue. Based on the shortage of labour, such as the lack of drivers that is becoming more severe, as well as land prices continuing to rise due to the increasing number of logistics facilities developers (with the ratio of logistics facilities completed before 2000 compared to entire logistics facilities stocks areat about 60%), the demand for relocation from these logistics facilities is unlikely to decrease in the foreseeable future.
Figure 1 – Total leased stock for large logistics
Source: JLL Research
https://www.jll.com.sg/en/trends-and-insights/research/logistics-beyond-warehousing
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