CBRE released today a special report detailing latest trends in the global logistics market, and investor views on the current situation of the Tokyo marketplace. The report contrasts the current state of the market in Tokyo with the trends of recent years in the global logistics market detailed in the latest "Global Industrial Marketview" report released in December 2011 by CBRE Global Research. The substance of the report, which takes into account Tokyo's position within the global market as well as the relevant moves of investors, follows.
Global Logistics Market Trends
During the second half of 2011, the global logistics market largely recovered from the disruption caused by the Great East Japan Earthquake. Despite the current elements of global macroeconomic risk, including the situation in Europe, demand for logistics facilities centered in Asia continues to exist.
Since the global financial crisis, major development projects have greatly declined worldwide. Widespread shortages are emerging, particularly in the Asia-Pacific region, for properties catering to the needs of third party logistics (3PL) operators and retail distributors actively looking to operate well-located industrial facilities. Driven by this surge in demand, the CBRE Global Industrial Rent Indices began rising in 2011, and have now recovered to levels achieved in 2006, prior to the financial crisis.
Given the continuing trend toward worldwide constriction of financing due to the influence of Europe's deepening debt crisis, virtually all foreseeable new supply in major industrial countries will be limited to build-to-suit* properties, and investors are cautiously considering the timing by which to restart multi-tenant facility development.
*Logistics facility design and construction in line with tenants' wishes, resulting in a supply of specialized order-made facilities.
Interest Focuses on Tokyo's Industrial Market
In the Tokyo logistics market, the earthquake provided the occasion for a rethinking of supply chain management (SCM) operations and the surfacing of latent demand for high-performance logistics facilities – especially those with enhanced crisis-management capabilities. With multiple inquiries for the limited available supply, the shortfall in supply has intensified. Through the period shortly before and since the earthquake, rents for prime industrial logistics facilities in Tokyo have remained stable, maintaining their position as the highest-priced in the world.
In Tokyo, demand immediately after the earthquake for logistics facilities satisfying business contingency plan (BCP) requirements emerged, while the needs of 3PL operators increased in tandem. Interest in investing in development activity has thus increased, resulting in a surge in activity as the market becomes the focal point of attention for investors both domestic and foreign.
"Propelled by surging demand in Asia-Pacific, the CBRE Rent Index is expected to be subject to continued upward pressure in 2012," said CBRE Global Research Chief Economist Raymond Torto regarding prospects for the near future. "Some time may still be required, however, for logistics rents in Europe and the United States to recover from their downward cycle."
"On the demand side, a certain amount of integration relocation is still expected among firms that handle consumer goods," said Junichi Taguchi, Managing Director of Industrial Services at CBRE. "So we can look forward to some demand being generated by the new supply. Investors both domestic and foreign are watching for opportunities to invest in development, so further development activity is expected to be stimulated in the near future. There is a stronger sense now that rent levels have bottomed out. But given that new supply is currently expected to emerge, this has not immediately translated into upward pressure on rents, which should remain stable for the time being." For details on this report.
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