CBRE IM to Develop Greater Tokyo Warehouse Through $1.7B Fund

CBRE Investment Management is ramping up its presence in Japan’s logistics market, with plans to develop a multi-tenant warehouse in the Tokyo area on behalf of the investment giant’s $1.74 billion shed-focused fund.

Completion of the 47,300 square metre (509,133 square foot) facility in the city of Hanyu in Saitama Prefecture is scheduled for December 2024. CBRE IM acquired and amalgamated the 26,000 square metre land parcel from several individual landowners last November, according to Adrian Baker, president and chief investment officer of Asia Pacific Direct Real Estate with CBRE IM.

Confirming an account of the deal by Nikkei Real Estate Market Report, Baker noted that CBRE IM will develop the project with capital in its CBRE Asia Value Partners VI fund, a logistics-oriented strategy that closed in October 2021. The company plans to invest up to 60 percent of the fund’s total capital in Japan.

The Greater Tokyo area is undergoing a surge of new logistics supply, driving up vacancy rates, but rental growth continued as of the third quarter of 2022 due to new completions asking for higher rents, according to a market report by CBRE.

Building to Core

Composed of roughly 80 parcels at and around 362-1 Kuwasaki, CBRE IM’s new site is strategically located 9.5 kilometres (5.9 miles) west of Hanyu IC, a major interchange on the north-south Tohoku Expressway, and offers access to Tokyo’s central business district via National Route 122 which runs along the plot.

The site is also located less than a kilometre from Hanyu Station, a railway station serving the Tōbu Isesaki Line and Chichibu Main Line. The four-storey warehouse, which will be known as CBRE IM Hanyu, will feature ramp access to the second floor, 5.5 metres of clear ceiling height, and a 120-unit parking lot.

New York-based CBRE IM, the investment management affiliate of the Dallas-headquartered property services firm, has around $143.9 billion in assets under management, with operations in 20 countries. Formerly known as CBRE Global Investors, the company announced the close of its Asia Value Partners VI fund in late 2021 with total capital commitments of $1.74 billion, exceeding the initial target of $1.2 billion.

Like its predecessor vehicles, the fund seeks build- and reposition-to-core opportunities within Asia Pacific’s most developed and liquid markets, with at least 80 percent of equity commitments to be deployed towards logistics investments.

A regional team of about 100 people covering the fund’s target markets was assembled to execute the strategy, CBRE IM said in a statement following the closing. The company’s previous edition of the Asia Value Partners fund series held a final closing in February 2020 with commitments of $900 million.

Just over a year later, CBRE IM announced the closing of a co-investment vehicle as part of the Asia Value Partners V fund after raising $265 million in equity for the add-on venture.

The company said it had approved four logistics development projects for investment through the vehicle, all of which are located within the Greater Tokyo area or in Fukuoka and have vacancy rates lower than 1 percent.

Robust Demand

A number of rival fund managers are also tapping into Japan’s logistics market, as warehouse investments in the world’s third-largest economy are seen as a safe haven amid geopolitical and macroeconomic turbulence.

In December of last year, Hong Kong’s Gaw Capital Partners announced it had completed the purchase of seven Japanese logistics assets from Blackstone, spanning 253,200 square metres of net rentable area across Greater Tokyo.

That deal came after M&G Real Estate Asia in August launched a long-term partnership with industrial heavyweight ESR to develop a Japanese logistics portfolio, with the British asset manager planning to deploy up to $350 million in equity.

Just over a year ago, GLP announced the final closing of its flagship logistics development strategy in the country, GLP Japan Development Partners IV, with JPY 412 billion ($3.7 billion) in total commitments, adding to the largest-ever private fund targeting Japanese real estate.

The company’s GLP J-REIT sold a fully occupied warehouse in Fukaya, a city in Saitama Prefecture, at a price 25 percent higher than the asset’s appraised value, a gap that the real estate investment trust attributed to the “robust demand” for logistics properties.

Rental Growth

The average vacancy rate for large multi-tenant logistics properties in Greater Tokyo rose by 0.8 percentage points quarter-on-quarter to 5.2 percent in the third quarter of 2022, topping the 5 percent threshold for the first time in four years, according to CBRE’s most recent market report.

The vacancy increase was driven by a large increase in supply totalling 199,000 tsubo (657,851 square metres), but effective rents rose by 0.7 percent given that the new properties were concentrated in relatively high-rent areas.

In its own report on the Greater Tokyo prime logistics market, JLL observed that rents increased 0.9 percent from the previous quarter and 3 percent year-over-year in the third quarter of 2022. The brokerage said that capital values in the area jumped 3.9 percent quarter-on-quarter and 9.2 percent compared to the previous year on the back of moderate rental growth and cap rate compression.