Here's how Tokyo's logistics sector fared in Q2

Vacancy rate was at sub-1% for the seventh consecutive quarter.

A recent report by JLL reveals Tokyo's industrial net absorption totalled 555,000 sqm in 2Q21. This is a significant increase from the previous quarter, thanks to promising demand from e-commerce and 3PLs. For 1H21, the figure totalled 789,000 sqm.

Here's more from JLL:

Vacancy reflects sub-1% for the seventh consecutive quarter.

New supply totalled 549,000 sqm in 2Q21, increasing total stock 4% q-o-q and 12% y-o-y. Six facilities, including MFLP Funabashi 3 (GFA 225,000 sqm) in the Bay Area, and Landport Ome 3 (GFA 74,000 sqm) in the Inland Area, entered the market.

The vacancy rate in Greater Tokyo stood at 0.9% for 2Q21, decreasing 10 bps q-o-q and increasing 20 bps y-o-y. The vacancy rate in the Bay Area remained flat at 0.0%, while Tokyo Inland fell to 1.3%, decreasing 10 bps q-o-q.

Average rents continue a growth trend

Gross rents in Greater Tokyo averaged JPY 4,403 per tsubo per month in 2Q21, increasing 0.2% q-o-q and 1.1% y-o-y. Growth was driven by new completions in the Bay Area, which asked for higher rents. Rents in the Bay Area increased 0.2% q-o-q and remained flat q-o-q in the Inland Area.

Capital values in Greater Tokyo increased 3.2% q-o-q and 10.2% y-o-y in 2Q21, reflecting cap rate compression and moderate rent growth. A notable sales transaction involved GLP J-REIT acquiring 70% of GLP Zama for JPY 29.7 billion or at an NOI cap rate of 4.0%.

Outlook: Capital values to grow, reflecting cap rate compression

According to Oxford Economics, trade-oriented indicators are expected to be patchy in 2021. Industrial production is expected to fall 0.6%, while exports and imports are likely to rise 14.0% and 7.9%, respectively. The economy is expected to pick up as socioeconomic activities resume with support policies and recovery of overseas economies. Risks include further impacts of COVID-19 on economies.

Amid sustained strong demand, overall rents are expected to grow moderately; however, given the record volume of supply, rents are likely to come under downward pressure in some parts of the Inland Area. Capital values are expected to grow as cap rates may compress further amid continued investor interest.