GLP J-REIT (3281), which has risen more than 20 percent since its initial public offering in December in Tokyo, expects demand for warehouses in Japan to remain strong with a shortage of modern distribution centers.
About 1.3 million square meters (14 million square feet) will be added this year, the highest since 2008, when there was more than 1.5 million square meters of supply, according to data compiled by GLP. The REIT said it’s in a “favorable position” amid rising competition because it can buy properties from its sponsor Global Logistic Properties Ltd. (GLP), the biggest owner of Japan industrial real estate.
“The market is very healthy,” Masato Miki, chief executive officer at GLP Japan Advisors Inc., the REIT manager, said in a Feb. 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 relationship with our clients.”
The growth of the logistic market, helped by a boost in e- commerce transactions, has attracted Japan’s largest developers including Mitsui Fudosan Co. (8801) and Mitsubishi Estate Co. (8802) to enter the warehouse industry. Investments in industrial space returned 6 percent on average for the year ended October, more than double the returns investing in office buildings, according to London-based Investment Property Databank Ltd.
Modern distribution facilities, which has bigger floor space that allows trucks to reach every floor via ramps, reducing time needed to load and unload goods, only accounts for 2 percent of the total warehouse space in Japan, according to data compiled by LaSalle Investment Management Ltd.
GLP J-REIT has the first right to buy 35 properties, or an equivalent of 350 billion yen ($3.8 billion), before Global Logistic is able to offer to other investors, Miki said. The REIT has a 99.9 percent occupancy rate for the 33 logistic facilities it currently manages, according to the company.
The vacancy rate in warehouses in Tokyo has declined to 3.7 percent in the fourth quarter of 2012 from a peak of 20 percent in September 2009, according to CBRE Group Inc. The asking rents for logistic properties rose to 6,140 yen per tsubo in the second half of last year, the highest since at least 2005, CBRE said. One tsubo, a standard measure of property in Japan, is 3.3 square meters, or 35.5 square feet.
Total revenue of online sales exceeded those at department stores for the first time in 2010, and rose to 8.46 trillion yen in 2011, according to the latest data by Japan’s Ministry of Economy, Trade and Industry.
GLP J-REIT rose 1.1 percent to 80,900 yen, the highest since Feb. 1 at the close of trading in Tokyo. The REIT has advanced 27 percent since its IPO on Dec. 21, compared with a 16 percent gain by the Tokyo Stock Exchange (1345) REIT index, which tracks 37 trusts in Japan, in the same period.
GLP J-REIT is the first Japanese real estate investment trust to divert some of the deprecation to its dividend.
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