Tokyo is the most expensive industrial real estate market in the world as fierce competition for modern facilities from rapidly growing e-retailers and expanding third-party logistics operators (3PLs) drives demand.
CBRE’s quarterly survey, which tracks the top 10 prime global logistics markets, reveals Tokyo is the most expensive market (US$20.02 per sq ft per annum), followed by London ($19.12 per sq ft per annum) and Singapore ($17.13 per sq ft per annum).
Rents in eight of the top 10 most expensive markets were stable during Q2 2013, with rental values growing in Tokyo and Hong Kong. Due to demand from e-retailers and expanding 3PLs, Tokyo’s rents expanded 2.2% during the quarter. Hong Kong grew by 2.6% for the quarter, due to exceptionally tight supply of available space. Third-ranked Singapore also faced a shortage of good-quality stock amid strong demand.
Prime rents in most European markets, including London, Paris, Stockholm, Moscow and Helsinki, held steady despite a challenging economic environment. However, demand for highly specified, well-situated warehouses remains robust. Occupiers looking to expand have limited options that met their specifications, prompting many to remain in their existing premises.
Dr. Raymond Torto, CBRE’s Global Chief Economist, commented:
“Retailers continue to serve as a significant source for global logistics demand in many markets, including London, Tokyo, Singapore, and Hong Kong. Meanwhile, the growth of e-commerce and international demand has benefited cities such as Tokyo and Brisbane.
“The shortage of high-quality, modern stock has also helped to support rents across many markets. While several cities have considerable supply pipelines, including Tokyo, Perth, Brisbane and Stockholm, there is little concern of oversupply due to strong demand. This was evidenced by the high level of pre-leasing commitments in Tokyo and Perth.”
The availability of modern distribution centres in Tokyo remains limited, as evidenced by the further drop in the vacancy rate to 2.7% in Q2 2013 – the lowest level since 2004. Although approximately 547,500 “tsubo” (39,700 sq m or 427,000 sq ft) of new supply will come on-line over the next 18 months, there is little concern of oversupply. In fact, around 60% of new space to be delivered in the second half of 2013 is already pre-committed.
Junichi Taguchi, Managing Director of, CBRE’s Industrial Services division in Japan, commented:
“Tokyo’s logistics market is benefitting from gradually recovering exports and corporate earnings that have increased due to the depreciating yen and a strengthening economy. We are also seeing increased inquiries from traditional retailers as well as manufacturers and consumer goods companies. The 2011 Tohoku earthquake also had a major impact on the market as firms seek modern, and more earthquake-resistant logistics spaces. Although significant new supply is scheduled to come online in the coming months, pre-leasing has gone well due to strong demand driven by e-commerce.”
London ($19.12 per sq ft per annum) saw an increase in activity for units of 100,000 sq ft or larger. Retail occupiers, followed by 3PLs, continue to be the most active users throughout the market, though the lack of supply held back take-up. As a result, London’s prime rents were stable during the quarter.
Warehouse rents in Singapore ($17.13 per sq ft per annum) are supported by the relatively tight supply of good-quality stock and healthy demand by key logistics companies. Demand was also driven by growth in the transportation and storage sector as well as a resilient retail sector. Approximately 9 million sq ft of new supply is expected through the end of 2014; this should alleviate concerns about the influx of new supply and rents are expected to maintain or see some upside in the longer term.
Despite a challenging economic environment, Helsinki ($16.58 per sq ft per annum) is a newcomer to the top ten rankings, with firms yet to reduce their real estate commitments and demand still relatively strong.
Demand for high-specification warehouse space in Stockholm ($14.22 per sq ft per annum) and Moscow ($13.01 per sq ft per annum) continues to outweigh supply as it has done in many other European cities. Moscow’s vacancy rate remains extremely low at just 1.1% and the pipeline of new supply for the remainder of 2013 is significantly less than previously expected. The majority of available stock is at least 30 kilometres from Moscow, with only 10% of available stock within 10 kilometres from the city.
Hong Kong’s ($13.65 per sq ft per annum) industrial market rents increased 2.6% from last quarter. The market is nearly fully occupied, with no new supply due until 2014. Occupiers have, however; become more cost-conscious due to the weaker business environment. As a result, rents are likely to stabilise in the coming months.