Tokyo’s logistics market has been experiencing major changes, arising from the boom of e-commerce and transportation companies. Over the last few years, e-commerce has expanded rapidly. The rising demand by customers, expecting same-day or next-day delivery, has led to negotiations around increasing shipping fees.

The underlying driver behind these changes is Japan’s ageing society, which causes a tight labour force and unemployment level as low as 2.8%. As a result, many e-commerce companies form alliances with other corporations to offer joint delivery, such as shipping products to the same area, saving significantly on time and labour costs.

Some e-commerce companies also use the railway system for long-distance deliveries. This eliminates long driving hours but increases transport costs, as trucks drivers need to pick up goods at the station to deliver to customers. Although some companies outsource this pick up to third party logistics, still it results in an increased transport cost.

While the transportation cost continues to increase, e-commerce companies will have to find other avenues to cut expenses. One way is to reduce their facility costs, for example, consolidation of warehouses or relocation to more inexpensive facilities. Other options include relocating to areas that better suit their needs.

Figure 1: Physical Indicators – Greater Tokyo Logistics

Source: JLL Research, 4Q21

With more modern logistics facilities underway, e-commerce companies will have more options over the coming years. And with more choices in hand, tenants will have leeway to negotiate rents with landlords. While rising transport costs are inevitable, there are many solutions and possibilities for e-commerce companies.

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