New Large Multi-tenant Logistics Facilities in Greater Tokyo Report Very Low Vacancies on Completion

Development Pipeline Increases in Greater Osaka

Key highlights

• In the Greater Tokyo Area, three logistics properties were completed during Q1 2015. Two came online at full occupancy, while the third was 70% leased at completion, reflecting robust tenant demand. The vacancy rate was up 0.2 points q-o-q to 4.0%.
  
• In the Greater Osaka Area, two logistics properties came online with some vacant space still remaining. This contributed to the vacancy rate for the area rising 5.6 points to 6.0%. Investors and developers continue to display a strong appetite for new projects, with some additional large development projects recently being announced.
  
• The Greater Nagoya Area remains undersupplied but there are currently four facilities being developed in convenient locations, which should attract strong demand from tenants.
  

Three large multi-tenant logistics properties were completed in the Greater Tokyo Area in Q1 2015, providing a total of 69,000 tsubo of new space to the market, matching the average level for the past eight quarters. Two of the new facilities opened at full occupancy, while the third was 70% leased at completion. Although the vacancy rate rose slightly, up from 3.8% to 4.0%, the high occupancy rate in the new facilities completed this quarter demonstrates the current strength of occupier demand.

CBRE’s analysis of effective rents index shows that the vacancy rate for the Tokyo Bay Area and the Route 16 Area rose to 4.4% and 4.5% respectively. The Gaikan Expressway Area fell slightly to 2.1% and the Ken-O-do Area fell significantly to 6.1%. Due to the improvement in the supply/demand balance, effective rents rose by 0.5% q-o-q in the Route 16 Area, and 0.3% q-o-q in the Ken-O-do Area.

In the Greater Osaka Area, the rate of take-up slowed somewhat compared to 2014, when three large multi-tenant logistics properties were completed and operated at high occupancy rates. This can be taken as an indication that leasing activity is returning to a more normal pace. Two properties completed in Q1 2015 came online with vacant space remaining, causing the vacancy rate to rise from 0.4% last quarter to 6.0%. However, investors and developers continue to show interest in developing new projects in the Greater Osaka Area, with the period seeing the announcement of several major new large-scale developments.

The Greater Nagoya Area continues to suffer from a shortage of logistics space but the development pipeline is substantial with four projects currently underway. All of these will provide convenient access to the city center and should attract considerable interest from tenants.

“The Greater Tokyo and Greater Osaka areas both have a limited number of existing properties that can accommodate the continuing high levels of demand,” said Maro Kobayashi, senior director of CBRE’s Industrial Services group.  “But given the tight labor market, tenants are also becoming a bit more cautious when considering factors such as the ease of securing part-time workers.”

For further details of market trends and forecasts as well as detailed market data by area, please refer to the Q1 2015 Japan Logistics MarketView, scheduled for release on April 30. The MarketView will be published on the CBRE Japan website at http://www.cbre.co.jp/EN/research/Pages/MarketViews.aspx.

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