Warburg Pincus-backed warehouse developer and fund manager ESR has unveiled plans for a new logistics facility in the Greater Tokyo Bay Area with an expected investment of JPY 24 billion ($215 million), according to a company announcement.
The Hong Kong-listed warehouse developer said on Tuesday that the ESR Ukishima Distribution Centre would expand ESR’s network in Japan, where growth in e-commerce is driving demand for logistics space.
The company is developing the four-storey facility through its Japan Logistics Fund III (RJLF3), which was set up with Dutch pension fund APG and an Asia-based sovereign wealth fund last year with an initial investment capacity of JPY 200 billion.
“ESR Ukishima DC, with its strategic location and high specifications, is well positioned to capitalise on the robust distribution needs within the Greater Tokyo Area, which has witnessed extremely low vacancy rates and strong potential for rental growth, said Stuart Gibson, co-founder and co-CEO of ESR ”
Breaking Ground in March 2021
ESR’s latest new shed, which will be developed on a 32,227 square metre (346,888 square foot) site in Kawasaki, will add a further 66,930 square metres of gross floor area to the company’s Japan portfolio.
The company indicated that construction will begin in March 2021, with the earthquake-proof facility set to serve the Tokyo and Yokohama central business districts, as well as surrounding areas.
Gibson noted that the investor appetite that drove the establishment of the ESR Japan Logistics Fund III continued to be strong, with demand for new warehouse space being driven by a severe shortage of new supply.
Expanding Amid a Pandemic
In announcing its latest development project, ESR reiterated comments made during the company’s full-year results presentation last week when chairman Jeffrey Perlman reassured investors that the firm’s business model was robust despite the disruptions caused by the COVID-19.
With online shopping soaring as a result of stay-at-home orders, ESR said in its announcement today that the logistics sector is seeing benefits as retailers are pushed to modernise facilities to cope with supply chain challenges brought on by surging online orders.
“Logistics real estate remains a highly resilient sector despite the recent headwinds facing many asset classes,” Gibson said.
Doubling Down on Japan
ESR is keeping up the momentum of its expansion in Japan just a week after revealing that the company’s total assets under management in the country grew by 47.7 percent last year to more than $7.7 billion.
Over the same 12 months the firm’s portfolio increased by 33.7 percent to 3 million square metres, while its revenue jumped 27.8 percent to $82.2 million.
Last year’s growth, along with ESR’s planned expansion in Japan, is being fueled by an arsenal of funds and joint ventures the firm has built with institutional partners.
Four months before the close of Japan Logistcs Fund III in May last year, ESR announced that it had formed a new joint venture with France’s AXA Investment Managers and an unnamed sovereign wealth fund. That JV is aimed at acquiring core logistics properties in Japan, starting with a $1 billion purchase of six of ESR’s existing assets in Tokyo and Osaka.
Tapping into this dry powder, the company announced last month the development of the ESR Yatomi Kisosaki Distribution Centre – set to be the largest modern logistics facility in Greater Nagoya.
ESR has also continued to sign major leases this year, with e-commerce giant Amazon taking on a lease for 72,392 square metres at ESR’s project in Kuki City.