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(Updates with rental income outlook from 10th paragraph.)
Sept. 2 (Bloomberg) -- Global Logistic Properties Ltd., the overseas logistics unit of the Government of Singapore Investment Corp., said it plans to raise rents in Japan because of a shortage of newer storage and distribution facilities.
Global Logistic, which has 99 percent occupancy rate in the country, plans to increase rents by about 5 percent to 10 percent, said Jeffrey Schwartz, deputy chairman of the company. Only about 2 percent of 480 million square meters (5.2 billion square feet) of space are modern logistic facilities, he said, citing a report by Jones Lang LaSalle Inc.
The vacancy rate for warehouses in Tokyo fell by more than half to 7 percent in June from a peak of 20 percent in September 2009 due to a lack of new supply, according to CB Richard Ellis Group Inc. The March 11 earthquake that damaged and destroyed more than 46,000 non-residential properties highlighted the need for newer facilities such as those equipped with ramps that trucks can move freight in the building.
“It’s a horrible tragedy, but actually we have seen an increase in demand,” said Schwartz in an interview in Tokyo yesterday. “It’s a testimony of reasons why customers should be in modern space.”
Singapore-based Global Logistic yesterday said it formed a joint venture with the Canada Pension Plan Investment Board, which manages C$153.2 billion ($157 billion). The venture will invest $500 million over the next three years to develop and hold storage and distribution centers in greater Tokyo and Osaka areas, according to a statement to the Singapore stock exchange.
Japan Market Share
The venture will build as many as 12 warehouses that may be worth as much as $1.4 billion, Schwartz said.
Shares of Global Logistic rose as much as 2.9 percent and traded at S$1.765 as of 10:09 a.m. on the Singapore exchange.
Global Logistic had an 18 percent market share in terms of floor space in Japan as of March 31, according to CB Richard Ellis. Prologis Inc. and AMB Property Corp. each owned about 10 percent in the country before they merged in June.
It manages 69 warehouses throughout Japan with about 2.8 million square meters of floor area, according to the Singapore company. About half of the properties are in the greater Tokyo area including at least two facilities near Narita International Airport.
While asking rent for medium to large multitenant warehouses and logistics facilities in Tokyo fell to 5,230 yen per tsubo as of June from 5,510 yen in 2010, it may rebound because of a supply shortage, according to a report by CB Richard Ellis yesterday. One tsubo, a standard measure of property area in Japan, is 3.3 square meters or 35.5 square feet.
“It’s likely that rents could strengthen against the backdrop of a limited new supply, with only four multitenant lease premises slated to open by the end of 2012,” it said.
Global Logistic manages about $11.7 billion of facilities in Japan and China, according to the company’s annual report. Customers in the two countries include Amazon.com Inc., the world’s biggest Internet retailer; Nippon Express Co., a Tokyo- based freight company, and Deutsche Post AG’s DHL International GmbH.
--Editors: Tomoko Yamazaki, Andreea Papuc
To contact the reporters on this story: Kathleen Chu in Tokyo at Kchu2@bloomberg.net
To contact the editor responsible for this story: Andreea Papuc at email@example.com