- In Greater Tokyo, demand has been sound, but is being outpaced by the growing amount of new supply. As such, vacancy rates rose by 3.0 percentage points (ppts) year-on-year (YoY) to 6.2%.
- In Greater Osaka, vacancy saw a slight increase of 0.3ppts YoY, reaching 2.6%. The market exhibited a relatively tight balance between supply and demand due to the comparatively limited number of completions in 2022. This may change with the large supply forecast in 2024.
- Rents in Greater Tokyo rose marginally by 0.2% half-year-on-half-year (HoH), but contracted by 3.4% YoY, reaching JPY4,520 per tsubo.
- Rents in Greater Osaka experienced a contraction of 0.9% HoH and 5.4% YoY, and now stands at JPY4,180 per tsubo.
- Investment levels in 1H/2023 were larger than those of 1H/2022. Logistics facilities are currently popular among foreign investors, especially those who would aim for larger exposures to the Japanese market.
- New supply in 2023 is set to surpass 2022 levels in both the Greater Tokyo and Greater Osaka markets, with Greater Tokyo reaching record highs. The influx of new supply is expected to increase the competition for tenants, meaning that poorly located and older facilities in particular may struggle.
- The pandemic has expedited digital transformation in Japan, and both hyperscale and local data centre markets are expected to see considerable growth going forward.
Large supply likely to continue exceeding demand
The resilient fundamentals and growth potential of the e-commerce industry offer a long-term positive outlook for the logistics market, which has led to the large upcoming supply. However, even sound demand is struggling to keep pace with the elevated supply in the market, and the industry also faces headwinds such as labour shortages and inflation. Although fundamentals remain strong, the market is likely to undergo a phase of adjustments for the time being.
Savills Research & Consultancy