Greater Osaka Area LMT Market - Vacancy Rate to Verge on 15% in H2 2017; Effective Rents to Decline Gradually

Tokyo, July 11, 2016 - CBRE today released the “Greater Osaka Logistics Market Outlook” ViewPoint which discusses the changes in the Greater Osaka market for large multi-tenant (LMT) logistics facilities and forecasts the vacancy rates and the effective rent index for this sector.

Summary:

• While the first LMT in the Greater Osaka Area was completed in 2004, the market stagnated thereafter until 2011, with the Global Financial Crisis in 2008 factoring greatly to this downturn. The completion of Prologis Park Osaka 4 in 2012 helped revive both supply and demand, and the market has since remained tight despite a record volume of new supply in 2014.
• First, despite the Greater Osaka Area being 40-50% of that of the Greater Tokyo Area, it only has 25% of the LMT space. Second, LMT properties in the Greater Osaka Area represent between 2% and 3% of all the region's warehouses, less than half the figure of the Greater Tokyo Area (5%). These two points illustrate the great potential the Greater Osaka Area has for increased LMT demand.
• For 2016-2017, the majority of the 430,000 tsubo of new supply is represented by inland areas. This will transform the market which had previously been confined to the waterfront areas, and will likely stimulate new demand.
• The vacancy rate is forecast to rise from 3.4% in Q1 2016 to approximately 10% in H2 2016, and to 15% in H2 2017. Although there is plenty of untapped demand for LMT properties in the Greater Osaka Area, the fact that supply will be concentrated in a relatively short period of two years makes it likely that there will be vacant space that the market cannot immediately absorb.
• The effective rent index is projected to be flat y-o-y throughout 2016. This is because while the higher vacancy rate will exert downward pressure on rents, new supply in inland area, where rents are higher than waterfront area, will raise the overall average. Nevertheless, the index is forecast to show a gradual downward trend from 2017 onwards.

Chart 1: Supply/Demand Balance: Greater Osaka Area

Source: CBRE

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Press Release
Greater Osaka Logistics Market Outlook ViewPoint

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