Warehouse demand remains strong in Japan, says GLP trust

Japanese real estate investment trust GLP J-REIT, which has risen more than 20 per cent since its initial public offering in December in Tokyo, expects demand for warehouses in Japan to remain strong with a shortage of modern distribution centres.

About 1.3 million square metres (14 million square feet) will be added this year, the highest since 2008, when there was more than 1.5 million square metres of supply, according to data compiled by GLP. REIT said it was in a "favourable position" amid rising competition because it can buy properties from its sponsor Global Logistic Properties, the biggest owner of Japanese industrial real estate.

"The market is very healthy," Masato Miki, chief executive officer at GLP Japan Advisors, the REIT manager, said in a February 21 interview in Tokyo.

"There is no need to be concerned about oversupply. Having the biggest developer as sponsor, and as the largest industrial REIT, we can strengthen our position by exchanging information and managing relationships with our clients."

The growth of the logistic market, helped by a boost in e- commerce transactions, has persuaded Japan's largest developers, including Mitsui Fudosan and Mitsubishi Estate, to enter the warehouse industry. Investments in industrial space returned 6 per cent on average for the year ended October, more than double the returns from investing in office buildings, according to London-based Investment Property Databank.

Modern distribution facilities, which have bigger floor spaces that allow trucks to reach every floor via ramps, reducing the time needed to load and unload goods, only accounts for 2 per cent of the total warehouse space in Japan, according to data compiled by LaSalle Investment Management.