According to CBRE, vacancy rates for large multi-tenant logistics facilities (LMTs) in the Greater Tokyo area remained low in Q3, 2015, declining a further 0.1 points q-o-q to 3.5%.
There was just one facility completed during the quarter, which was not fully let on completion. However, a substantial volume of space taken up in new buildings completed in previous quarters contributed to the decline in the vacancy rate.
Vacancy rates in Greater Tokyo displayed considerable variation across different areas. Gaikando reported no vacancies for the second consecutive quarter, while Route 16 vacancies stood at 3.1%. Gaikando was also the only of the four areas that saw an effective rent index increase. Vacancy rates in central Tokyo Bay and the outermost Ken-O-do area rose to 8.4% and 7.4% respectively.
"Asking rents for facilities yet to be completed are rising due to inflation in construction costs," said Maro Kobayashi, senior director of CBRE's Industrial Services group in Japan. "While this is making it more difficult for tenants to justify relocating, there is plentiful supply of properties, implying that the choice for tenants is widening. Ken-O Expressway connecting the Tomei and Tohoku Expressways at the end of October, may induce them to become more active."
In the Greater Osaka area, one facility was completed during the quarter, with around 70% occupancy. Vacant space in other new properties was also taken up, and the vacancy rate fell to 4.5%. More tenants are likely to sign leases towards the end of the year, and it is already hard to find large spaces for rent.
"Although there is some variation in the length of leases, the supply of new facilities is helping to bring tenant demand to the surface," said Kenji Kitamura, senior director of CBRE's Kansai Industrial Services group in Japan.
"Demand in the Greater Osaka Region is strong, with numerous medium to large-scale requirements from tenants across a wide variety of industries looking to expand or consolidate their logistics operations."
In other regional cities, tight markets are showing some signs of activity, as tenants relocating to their own new developments give rise to vacancies in the leasing market, and new development plans are announced. However, there is still a shortage of good quality facilities for rent, and more new supply is needed.