These hurdles hinder the near-term growth of Tokyo’s logistics market 

The recent influx of supply loosened the market.

While logistics fundamentals remain strong, a Savills report said that various hurdles are impeding the growth of Tokyo’s logistics sector in the near term. 

“Firstly, large supply in recent years significantly loosened the market. This has been exacerbated by challenges from the broader market environment, such as heightened global uncertainty and Japan’s interest rate hikes, which are dampening investors’ appetite. The strategic shift from office to logistics facilities over the past few years is cooling off to more sustainable levels,” the report said.

Here’s more from Savills:

Additionally, some developers have altered their development plans due to increasing construction costs, evidenced by the correction in supply forecast, especially, in 2025 in Osaka, compared to a year ago.

The “2024 problem” has made a significant impact on the logistics industry as long working hours are a norm, particularly for truck drivers in rural areas. This has prompted business owners to devise strategic solutions to address the reduced availability of drivers due to implementation of stricter regulations that were realised in April this year. Interestingly, competing convenience stores FamilyMart and Lawson began partnering on deliveries in the same month the regulations took effect, using the same trucks to deliver frozen food in Tohoku regions. 

Additionally, as transporting goods over long distances becomes more challenging due to shorter driver hours, regional cities, particularly those that are situated between major urban cities, are emerging as key relay hubs. Consequently, logistics facilities in regional areas such as Okayama and Shizuoka are likely to gain renewed attention. 

As the “2024 problem” continues to unfold, the logistics industry will also evolve, with emerging innovative solutions and a growing demand for logistics facilities in strategic regions to enhance supply chain efficiency and overcome truck driver shortages. 

Despite the prevalence of short-term challenges, the outlook of Japan’s logistics sector remains positive from a longer-term perspective. E-commerce during the pandemic seems to have satisfied some demand in advance, but the e-commerce penetration rate in Japan is still relatively low. Given the ageing population, demand is expected to increase steadily. 

Overall, the logistics sector is in the midst of an adaptation phase to address short-term challenges, though the longer-term outlook remains bright, supported by growing demand from various industries such as e-commerce, retail, wholesale, and manufacturing.