Warehouse space in China and Japan continues to appeal to institutional investors despite concerns over the impact of China's slowing economic growth. Leading the investment charge in the sector are such powerful institutions as the Canadian Pension Plan Investment Board (CPPIB), Dutch pension fund Stichting Pensioenfunds APG, and Global Logistics Properties, the Singapore-based warehouse operator backed by Singapore sovereign wealth fund GIC Private. Asia has some of the most expensive warehouse property in the world; Hong Kong (at US$21.80 per square foot per year), Singapore (US$21), and Tokyo (US$20.60), rank behind only London Heathrow (US$22), in terms of cost, according to Colliers International. Mainland China is substantially cheaper, with Beijing rents at just US$6 per square foot per year. The lower cost of land, though, compared to those other cities leads to a high capitalisation rate, a measure of the profitability of real estate; it is 6.9 per cent in the Chinese capital. Tokyo comes close, with a cap rate of 6.2 per cent. That explains why investors currently favour those markets over Hong Kong, where the very high development cost for warehouses leads to a cap rate of only 4.1 per cent. Singapore's cap rate is similar, at 4.5 per cent. Both Hong Kong and Singapore have also expanded property-purchase curbs to include warehouse space. Those kind of rates have drawn CPPIB, the Canadian pension plan, to raise the size of its joint venture with the Australian warehouse developer Goodman Group by US$500 million, bringing the total size of Goodman China Logistics Holdings to US$1.5 billion. The Canadian fund is investing US$400 million in equity, with Goodman contributing the other US$100 million, at the same 80-20 ratio of the initial stake. Philip Pearce, managing director for greater China at Goodman, explained that the joint venture is looking to shift new investment to provincial capitals including Chongqing, Chengdu, Hefei, Wuhan, and Xian, as manufacturing expands away from the crowded east coast region. The bulk of the original US$1 billion has already been invested, all in and around Shanghai and the Beijing-Tianjin corridor. Rents in Chongqing and Chengdu have risen to around 1 yuan per square metre per day, Pearce said, up from 0.7 yuan three years ago - a 43 per cent increase. A CPPIB joint venture with GLP, the GLP Japan Development Venture, is also stepping up its presence in Japan. In mid-July, GLP announced the partnership would start developing GLP Naruohama, a 1.2 million square foot warehouse in metro Osaka. It's the fifth development for the venture, which is looking to put US$2.2 billion to work and has committed US$590 million to those five projects. LaSalle Investment Management on July 23 announced it had closed its third warehouse fund in Japan, having raised US$431 million. The 2013 final round of financing for the LaSalle Japan Logistics Fund III follows previous funds in 2004 and 2007. The first fund raised US$400 million, but the second, raised just before the global financial crisis, came in at 90 billion yen, or around US$920 million. Fuelled by the optimism over Prime Minister Shinzo Abe's economic policy, real estate transactions have surged in Japan. Property agency Jones Lang LaSalle, the parent of the investment management company, says sales of warehouse, office, and retail space have surged 70 per cent in the first five months of the year, compared with the same period in 2012, to 1.5 trillion yen. Abe's appointment of Bank of Japan Governor Haruhiko Kuroda has helped sustain a decline in the yen, down around 20 per cent from its 2012 average since Abe's election last October. That should boost exports and increase demand for warehousing. But holding Japanese assets is not without risk for overseas investors who have deployed foreign currency in Japan, since a weaker yen devalues their holdings if sold and repatriated. Axioma, a company that sells risk-management investment tools, calculates that currency volatility has shot up from 6.5 per cent to 15 per cent under Abe. The Mexican peso is the next-riskiest currency, with volatility of 10 per cent. The latest of LaSalle's warehouse funds in the increasingly popular club-style structure sees LaSalle partner with a small group of investors including the 338 billion euro APG, which has committed at least US$244 million. The fund will invest in multi-tenant warehouses in greater Tokyo and Osaka. Yasuo Nakashima, the CEO of LaSalle in Japan, said the company favours the warehouse industry because of a large gap in supply and demand, as well as the company's ability to secure leverage thanks to its 10-year track record in that sector. Japan accounts for more than half LaSalle's Asia property assets.