- In Greater Tokyo, the market has continued to loosen slightly as elevated new supply exceeds demand, with vacancy rates increasing by 1.6 percentage points (ppts) year-on-year (YoY) to 7.7%.
- Conversely, demand in Greater Osaka this year so far has been greater than new supply, with vacancy rates improving half-year-on-half-year (HoH) but still loosening marginally by 0.1ppts YoY to 2.7%.
- Rents in Greater Tokyo increased to JPY4,820 per tsubo, climbing by 4.3% HoH and 6.6% YoY.
- Rents in Greater Osaka contracted by 1.4% HoH, while remaining flat YoY at JPY4,180 per tsubo.
- Though demand has been strong overall, investment levels in the industrial sector in 1H/2024 were slightly lower than in the same period of the previous year. Indeed, rising vacancies, construction costs, and interest rates have led to increased caution in development and acquisition plans.
- Although supply levels in 2024 are expected to be lower than the peak from the previous year, 2025 is projected to witness an increase in new supply, with Greater Osaka reaching record-high levels.
- Overall, the logistics sector has loosened due to high levels of supply. Nevertheless, the fundamentals of the sector are solid, and investors who are able to brace the current storm of challenges should be rewarded once the market has calmed.
Temporary challenges persist, but the mid-term fundamentals remain sound
Overall demand in the logistics sector remains sound, but high levels of new supply in recent years have kept vacancies on a rising trend. In addition, many challenges, including global uncertainties, labour shortages, interest rates, and construction costs, have kept many players on their toes. That said, the logistics market is evolving, with strong fundamentals in a longer-term timeframe. In the interim, prime logistics facilities with modern amenities in accessible areas should continue to perform well, although older facilities in less convenient areas are likely to face challenges.
Savills Research & Consultancy