• Despite supply continuing to grow in Greater Tokyo, thanks to solid pre-leasing activity and substantial demand, vacancy rates have dropped to a historic low of 0.4%.
• The vacancy rate in Greater Osaka experienced a slight uptick following the completion of the huge ESR Amagasaki Distribution Center. Even so, a recent stabilisation of market fundamentals should mean that this trend is fleeting.
• Given the airtight conditions, rental growth in Greater Tokyo was close to 7% over the year. Facilities along the bay still attract the highest rents and this is unlikely to change going forward.
• Rents in Greater Osaka experienced historical growth of over 10% YoY, and now surpass the highs set before the financial crisis.
• Competition for assets has become even more fierce, leading to valuations appearing more stretched, including in the J-REIT market.
• Facilities in subsectors such as those catering for lastmile delivery services and cold storage capabilities have garnered further attention of late. Even so, these remain a small segment within the broader market.

Even amid a global pandemic, the logistics sector appears to be in good shape. Indeed, with demand supported by the proliferation of e-commerce during the outbreak, the sizeable supply expected over the next few years has done little to deter the market. Yet, whilst some turbulence could emerge over the short-term as the financial resilience of some tenants starts to be tested, the long-term prospects of the sector continue to be driven by the structural changes that e-commerce presents, and as such, rents should follow suit.