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Japan Logistics - March 2021

Logistics sector going strong

  • Demand for logistics facilities in Greater Tokyo has again outpaced supply, and vacancy rates have dropped to record low levels of 0.2%.
  • Vacancy rates in Greater Osaka have remained at 2.8%, with demand catching up to the high levels of supply seen in the first half of 2020.
  • High levels of rental growth seen previously in Greater Tokyo have slowed down to 0.9% YoY. However, rents in certain areas have still shown a disproportionate increase.
  • Average rents in Greater Osaka have breached the JPY4,000 barrier, following a YoY increase of 7.5%.
  • 2020 saw the highest proportion of investment into the logistics sector, signifying the increased interest with somewhat overheated valuation that the sector has gained during the pandemic.
  • Modernised logistics facilities with increased automation capabilities and employee amenities that can attract both workers and high-profile tenants are expected to remain popular in the logistics sector as it had been facing a labour crunch.
  • The inequality of the financial capabilities between burgeoning e-commerce tenants and the struggling retail tenants can be expected to grow, which will likely shape the growth of the sector.
Graph1: Supply, Take-up And Vacancy In Greater Tokyo, 2010 to 1H/2020

Graph 1 | Supply, Net Absorption And Vacancy In Greater Tokyo, 2010 to 2020

2020 was another milestone year for the logistics sector, with rent and occupancy levels both improving further, and many parties increasingly eager to gain exposure to the growing sector. While the interest pouring into the logistics sector appears to have skewed some valuations upward, its fundamentals remain sturdy.

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