Japan’s expanding logistics investment market

Japan’s real estate transaction volume fell, but logistics investments increased and continue to draw investors’ interest.

November 18, 2020

In 3Q20, Japan’s real estate transaction volumes fell 19% y-o-y and 9% q-o-q to JPY 832 billion, due to the continued impact of COVID-19. And the first quarter to third-quarter volumes fell 2% y-o-y to JPY 3,450 billion.

Among the most notable trends is the logistics investment. The percentage of total logistics investment volume was 70% in 3Q20, of which 30% was in the first three quarters of 2020. It is well above 19%, recorded for the full year in 2019.

Compared to retail, which was affected by sluggish sales due to COVID-19 restrictions and office where work-from-home measures are causing concerns due to declining demand, investors are highly interested in the logistics sector. It is showing strong, long-term stable cash flow, thanks to the expansion of e-commerce. Long-term core fund investors, such as pension funds that are looking for stable cash flow, are also interested in investing in logistics facilities.

As a result, a considerable number of large-scale logistics facilities have been transacted since the beginning of the third quarter. Both domestic and overseas investors are bullish on prices. Some activity was also seen in listed REITs, where only logistics J-REITs are actively acquiring properties through public offerings.

In conclusion, the demand from domestic and foreign investors to invest in Japanese real estate remains strong. The trend to expand investment targets into logistics facilities, where COVID-19 has little effect, is expected to continue.