Greater Tokyo Logistics Market Records Third Highest Quarterly Net Absorption Since 2012

Key highlights

• Net absorption in the Greater Tokyo area for Large Multi-Tenant (LMT) logistics facilities was 85,000 tsubo, the third highest since 2012; new supply was 120,000 tsubo, the second highest quarterly figure on record after Q4 2015
• The vacancy rate for the Greater Tokyo area as a whole was 8.3%, up 1.4 percentage points q-o-q
• The vacancy rate was largely unchanged in the three inner areas (the Tokyo Bay, Gaikando, and Route 16 areas), but rose by 8 percentage points q-o-q in the Ken-O-do area; the gap between areas in terms of the supply/demand balance widened

Greater Tokyo saw the completion of six new LMT facilities, providing 120,000 tsubo of new supply in Q1 2016. This was the second highest quarterly volume of new supply since CBRE Research’s surveys began in 2004, only falling behind Q4 2015. Net absorption also recorded its third highest level since the surge in demand began in 2012, and two out of the six  new facilities reached completion being fully let. However, it proved difficult for the market to absorb all of the new supply at once. Some facilities were completed with space still available, meaning that the vacancy rate increased by 1.4 percentage points q-o-q to 8.3%. However, the vacancy rate for existing facilities more than one year old remained low at 1.7% (up 0.5 percentage points q-o-q).

The disparity in the supply/demand balance between the four areas of Greater Tokyo widened this quarter. The vacancy rate was largely unchanged q-o-q in the three inner areas (the Tokyo Bay, Gaikando, and Route 16 areas). However, in the Ken-O-do area it rose even further from the previous quarter’s figure of 10.3% to 18.3% in Q1 2016. This was largely in line with expectations, as there has been a succession of properties completed beyond the Ken-O Expressway and in new locations that do not have many logistics facilities.

"During Q1 2016, a large number of tenants relocated - for expansion or consolidation reasons - or opened additional facilities. Retail and online shopping companies, which are enjoying strong earnings, were particularly active," commented Maro Kobayashi, executive director of CBRE Industrial Services. "Many tenants looking for large floor space have found units in the Route 16 area or the Ken-O-do area, where there is an ample supply of large new facilities."

In the Greater Osaka area, the vacancy rate remained low at 3.4%, down 0.1 percentage points, as newly completed properties were fully let amid buoyant demand. There are a number of companies with requirements for large spaces, but there are only a limited number of units available in existing buildings. As such, leasing activity has already begun in earnest for large development projects not due for completion until Q3 2016 or thereafter.

"We are beginning to see some companies securing space in facilities not due for completion for another 12 months or more," commented Kenji Kitamura, senior director of CBRE Kansai Industrial Services. "Companies with large requirements in particular have started to act even earlier."

Development projects for multi-tenant properties have also recently gone underway in the Hiroshima and Iwate prefectures. Development of such facilities in regional cities is a new trend.  It is being driven by the severe shortage of properties and the fact that logistics companies are trying to improve their network of distribution centers in order to save drivers from travelling long distances.

For further details of market trends and forecasts as well as detailed market data by area, please refer to the Q1 2016 Japan Logistics MarketView, scheduled for release on April 28. The MarketView will be published on the CBRE Japan website at http://www.cbre.co.jp/EN/research/Pages/MarketViews.aspx.

Chart 1: Greater Tokyo LMT Market: Supply/Demand Balance

 

Chart 2: Greater Osaka LMT Market: Supply/Demand Balance

 

 

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