- Although the logistics sector’s fundamentals remain sound, there are some signs of overheating.
- The cap rates for logistics facilities can now be lower than those of more established sectors with longer track records such as office and residential properties.
- Unique characteristics of the logistics sector, such as the low land value, the difficulty of tenant diversification, and chronic labour shortage may exacerbate market conditions when the market becomes strained.
- Potential increments in logistics-related costs may incentivise tenants of logistics facilities to negotiate with owners for lower rents.
- If the wave of supply in the coming years loosens the currently tight market conditions, tenants may gain more negotiation power.
- Investors should get ready to manage risks by diversifying their portfolios, making facility improvements, and strengthening relationships with tenants.
Potential weaknesses may slow growth
Graph 7 | Land Price Trends by Use in Greater Tokyo, 2009 to 2021
While the logistics market continues to demonstrate its strengths, risks are also looming larger. If these risks start to manifest, some cautious investors who were originally attracted to its stable prospects may look to exit the market.
Savills Research & Consultancy