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  • Vacancy rate for large logistics facilities in Greater Tokyo Area rises to 6.1% but decline expected towards end-2014

Vacancy rate for large logistics facilities in Greater Tokyo Area rises to 6.1% but decline expected towards end-2014

July 24, 2014
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New supply in Greater Tokyo and Osaka should further stimulate demand

Hot Topics

  • The vacancy rate for large logistics facilities in the Greater Tokyo Area increased to 6.1% in Q2 2014; however this is expected to fall towards the end of 2014
  • The large volume of new supply scheduled to be completed in H2 2015 should further stimulate demand but this may not be enough to prevent vacancies from rising slightly
  • New facilities in the Greater Osaka region and Fukuoka reported strong demand in Q2 2014

Q2 2014 saw the completion of just one new logistics facility in the Greater Tokyo Area, marking a pause in the high volume of new supply witnessed over the previous three quarters. The vacancy rate stood at 6.1%, up 1.6 points from 4.5% in Q1 2014. Despite rising vacancies, overall demand remains healthy. The vacancy rate for properties completed more than one year ago is still low at 1.7%. Companies requiring medium to large spaces continue to seek spaces in newly built facilities or facilities currently under construction. The apparent softening in demand shown by this quarter’s figures is therefore likely to be temporary.

Contracted rents displayed an upward trend this quarter in major areas in Saitama (Yashio and Misato) and Chiba (Kashiwa, Nagareyama and Noda) and also farther up north in Saitama around the Kuki interchange of the Tohoku Expressway. This area has seen the completion of several new logistics facilities and is emerging as an attractive location for tenants due to its relatively cheaper rents and good connectivity to the Ken-O Expressway.

While suburban parts of the Greater Tokyo Area remain popular, locations closer to central Tokyo are beginning to see stronger occupier demand. Challenges such as rising fuel prices and a fall in the number of drivers means tenants are increasingly reevaluating the area as it offers the shortest transport distance to demand centers. Consequently there are signs that rents are rising further in waterfront areas of Tokyo from already high levels.

Three more new logistics facilities will be completed in the Greater Tokyo Area before the end of 2014, two of which are reported to have been almost fully let as of the end of Q2 2014. The vacancy rate is therefore expected to remain low at sub-5.0% over the remainder of the year.

There has been an increase in the number of new development projects on the eastern side of the Greater Tokyo Area, particularly along Route 16 in Chiba. This makes it more likely that the vacancy rate will increase slightly in H2 2015 when the bulk of new supply comes online. Therefore, although a further increase in overall demand is anticipated, the rental outlook for some areas could weaken.

Other highlights from the quarter included the June opening of the Ken-O Expressway between the Sagamihara/Aikawa and Takao-san interchanges. The resulting reduction in travel times between Kanagawa, Tokyo and Saitama is likely to encourage logistics companies to establish wider distribution networks.

"This quarter saw strong demand from companies seeking to aggressively grow their businesses,” said Junichi Taguchi, managing director of CBRE’s Industrial Services division. “Third-party logistics companies leased an entire facility and major home delivery companies developed large-scale facilities both at their own and at leased properties. The period also saw instances of tenants committing to properties that will be completed in 2015.”

During the period, two large multi-tenant facilities were completed in the Greater Osaka Region, the first such supply in the area for two years. Both new facilities successfully absorbed demand, with one fully let six months prior to completion. Although vacancies rose to 0.8%, the supply/demand balance remains tight and demand for large spaces is focused on properties still under construction. A total of eight large facilities, including the two completed this quarter, are due for completion in the Greater Osaka Region in the three years from 2014 to 2016.

Fukuoka also saw the completion of two large logistics facilities during the quarter, with one fully let and the other reporting steady leasing activity. Demand for quality logistics facilities in the city continues to expand in terms of both the scale and number of deals.

For further details of market trends and forecasts as well as detailed market data by area, please refer to the Q2 2014 Japan Industrial and Logistics MarketView scheduled for release on July 31.

About CBRE Gro​up, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.​

Official Twitter account for Japan: @cbrejapan

Disclaimer

Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.

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