Greater Tokyo industrial asking rents up 4.7% in Q2 

The vacancy rate also rose to 3.1% in the same period.

As e-commerce flourished recently, the supply of logistics facilities has accelerated. However, Savills says the Greater Tokyo market has not been able to fully absorb the new large supply as quickly and vacancy has risen 1.8 percentage points (ppts) to 3.1% YoY in Q2/2022. 

“Indeed, pre-leasing activity has also reportedly been weaker than in previous quarters, suggesting that further increments in vacancy are probable. That said, vacancy remains low and demand from logistics operators is stable, which provides some comfort to the market,” added Savills.

Here’s more from Savills:

In Greater Tokyo, asking rents have continued to rise to a new high of JPY4,680 per tsubo, an increment of 4.7% YoY. However, the steady rental growth may begin to waver with the large supply forecast for the market. Some inland logistics facilities in Greater Tokyo are struggling to find tenants and even a few facilities in the bay area have vacancies. Going forward, competition for tenants is likely to intensify, and some facilities may have to resort to lowering rents in order to attract tenants.

In Greater Osaka, the market has seen relatively limited new supply in recent times. The market has performed well this quarter relative to Greater Tokyo, and the balance between supply and demand has remained tight. Built-to-suit (BTS) type facilities comprised a large proportion of new supply, many of which were fully occupied upon completion, and the pre-leasing for multi-tenant facilities has been encouraging. That said, vacancy rates in Greater Osaka also experienced a slight increment, rising 0.3ppts YoY to 2.2%. This can be partially attributed to tenants moving out of existing properties in the Osaka bay area.

Average asking rents in Greater Osaka have increased by 9.4% YoY to JPY4,420 per tsubo, indicating that demand for logistics space is still strong in the region. However, there are concerns that rental growth might slow down as a wave of supply is expected to enter the market with the extension of the expressway. Indeed, the Shin-Meishin Expressway will be expanded in FY2024 and FY2027 between Otsu and Takatsuki, which will open up more areas for developing new facilities. The large supply expected in tandem with this expansion may lead to increased competition for tenants, possibly forcing some owners to consider adjusting rents.