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Online retailers trigger global logistics demand
Published in The Saudi Gazette on 23 - 02 - 2013

JEDDAH – Tokyo is the world's most expensive prime logistics market as multichannel retailers seeking new facilities and requiring larger spaces drive demand in the world's leading cities, the new research from global property advisor CBRE Group, Inc. (CBRE) revealed.
CBRE's quarterly survey, which tracks the top 10 most expensive prime global logistics markets, showed that rents were stable during the fourth quarter of 2012 (Q4 2012).
Leasing activity was predominantly driven by e-commerce retailers and third party logistic operators building international capacity. Despite weakening consumer sentiment, the industrial market remains stable as low levels of development has counterbalanced subdued demand.
This trend, combined with occupiers' preferences for prime logistic facility space, has maintained prime rent levels in most global markets. Tokyo is firmly established at the top of the rankings with demand from online retailers and third-party logistics operators driving demand.
Rents grew by 1.9 percent during Q4 2012 as the market witnessed an increasing number of cases in which landlords succeeded in raising renewal rents of existing tenants, though the rental increases remain small. “The pace of growth, especially, for e-commerce has gained significant momentum, becoming a tremendous driver of logistics demand,” said Junichi Taguchi, managing director of CBRE's Industrial Services division in Japan. “With growth in online retailer delivery networks expected to grow significantly in the future, we forecast a solid leasing market for logistics properties through 2013.”
Ray Torto, Global Chief Economist, CBRE, said: “While development pipelines remained constrained in the majority of Asia Pacific markets, Greater Tokyo has a large amount of new supply coming onto the market in the next two years. However, demand for logistics space is strong and keeping pace with supply, so concerns of oversupply are minimal. Tokyo's prime rents will likely continue to remain strong as multichannel retailers, in particular the fashion industry, seek new and larger facilities and the optimization of their logistics platform and networks become increasingly important.”
Similar to many Asia Pacific markets, London (and Stockholm) has experienced cautious tenant demand amid an environment of uncertainty, weak short-term economic outlooks and low levels of consumer/corporate spending and capital investment. Despite this, limited availabilities for prime space bolstered prime rent levels in Q4 2012. Singapore also anticipates a strong development pipeline in 2013, with demand stemming primarily from technology, pharmaceuticals, chemical and energy sectors.
Meanwhile, in Hong Kong most projects are scheduled for completion in 2014; as a result, Hong Kong's rents remain firm, growing by a slight 1.8 percent in Q4 2012 driven by cautious but steady demand from logistics and data center operators willing and able to pay high rents for prime space. Occupier demand in Sydney also remains cautious; however, a strong preference still exists for good quality, well-placed logistics space. With vacancy levels low for such stock, pre-commitment activity has been prevalent, helping to boost prime rents slightly during Q4 2012.
“While trade performance is expected to remain soft in many markets, the overall global industrial logistics market will remain positive due to tight vacancy levels and constrained levels of new supply. Consumer expectation for faster, more secure, and cheaper delivery is gathering momentum and retailers and distributors will need to keep up with this demand.” — SG


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