Logistics real estateThe logistics real estate sector is a dynamic segment of the real estate industry. Its development is driven by changes in consumer behavior, supply chains, and technological advancements. Because of the changing and diversifying needs of shippers and consumers, logistics real estate has continued to evolve over the past few decades.
In the past, warehouses were commonly privately owned and operated by a single company, and their function was limited to providing space for the storage of goods and products. This has changed in the wake of globalization and the emergence of complex global supply chains. Today, supply chain management and warehousing are often outsourced to third-party logistics (3PL) providers that help companies handle larger volumes of goods in a more cost- and time-effective manner. The emergence of third-party logistics operators has driven demand for large-scale multi-tenant logistics facilities that not only provide rental space for warehousing but also function as distribution centers. Modern logistics properties can be equipped with advanced technology that facilitates distribution processing and reduces labor costs.
Recent developments in Japan’s logistics property marketThe Japanese logistics real estate market has experienced an upward trend in recent years driven by the expansion of the e-commerce market. During the pandemic, more consumers have opted to make their purchases online, which led to an increase in the volume of goods shipped and thus increased demand for logistics space.
Over the course of 2020, vacancy rates fell below one percent in Greater Tokyo, which was accompanied by an increase in rents. A similar trend could be observed in the Kansai region. Heightened demand for logistics space was also reflected in the rising property price index for warehouses, growing industrial land prices, and an increase in the floor area of warehouse construction starts. The upward trend has attracted real estate developers and investors who have increasingly entered the logistics property market. Investment in logistics facilities reached a record 662 billion yen in 2020.
In 2021, high levels of new logistics properties supplied to the market caused vacancy rates to rise while rents continued to increase. Supply was expected to remain high in the coming years, creating the potential for increased competition in the sector.