Q2 2024
August 2024
Vacancy rate remains high in spite of robust demand due to major supply
Demand and Supply
Net absorption totalled 641,000 sqm in 2Q24. Demand from e-commerce and 3PL companies continued to grow, albeit at a slower pace due to higher rents. Existing facilities with affordable rent levels relative to new facilities have seen quicker absorption of vacant space and, thus, stable occupancy rates.
New supply totalled 608,000 sqm in 2Q24, increasing total stock by 3% q-o-q and 11% yo-y. Six facilities have entered the market.
The vacancy rate in Greater Tokyo stood at 9.6% for 2Q24, decreasing 40 bps q-o-q and increasing 230 bps y-o-y. The vacancy rate in the Bay area fell to 8.2%, decreasing 70 bps qo-q, while Tokyo Inland fell to 10.2%, decreasing 30 bps q-o-q.
Key Performance Indicators
※Rent for Q1 2024 was revised in Q2 2024
Physical indicators
For 2019 to 2023, take-up, completions and vacancy rate are year-end annual. Future supply reflects figures for 2024.
Source: JLL
Rent growth continues, albeit at a slower pace
Asset Performance
Gross rents in Greater Tokyo averaged JPY 4,638 per tsubo, per month in 2Q24, flat q-o-q and increasing 2.0% y-o-y. Rents in both the Bay area and the Inland area increased by 0.2% q-o-q.
Logistics facilities with prolonged periods of vacancy or areas with higher vacancy rates have seen a decline in asking rents and an increase in free-rent periods in order to attract tenants.
Investment Market
Capital values in Greater Tokyo remained flat q-o-q and increased 1.6% y-o-y in 2Q24, reflecting a stable investment yield and gradual rent growth.
Outlook
In the leasing market, vacancy rates, which have remained at high levels due to a major influx of supply, which has resulted in longer lease-up periods, are expected to decrease in the latter half of 2024 as new supply arrivals slow down. The period for new supply to reach full occupancy is expected to be around one to two years following completion.
In spite of the upward pressure on rents given the rising construction costs, there are signs that landlords are adjusting rents for properties with prolonged vacancies. As such, overall rent growth is expected to moderate, notwithstanding new completions commanding higher rents and existing facilities seeing rent increases.
In the investment market, strong interest is coming from domestic and international investors. This, combined with higher investment yields compared with the office sector, suggests room for further compression in investment yields.
Source: JLL
Global Property Clock
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Edward Liang Manager Research - Japan edwardl.liang@jll.com
Manabu Taniguchi Senior Director Research - Japan manabu.taniguchi@jll.com
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