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Major real estate firms barge into rental warehouse market

Posted by: | Posted on: December 11, 2020

Major real estate firms are stepping up efforts to develop logistics facilities that can be leased out, as the growth in online shopping due to the novel coronavirus drives demand for distribution services.

A shortage of manpower has long been a problem at distribution warehouses and companies are fiercely competing in terms of service and quality, such as introducing robots to reduce manpower.

Automated operation

In February, Mitsui Fudosan Co. – owner of about 40 warehouses in the Tokyo metropolitan and Kansai areas – opened a fully automated warehouse showroom in Funabashi, Chiba Prefecture, that demonstrates machines that can handle the entire process from the arrival and inspection to the sorting and shipping of goods.

Mitsui Fudosan recommends sorting machines based on the characteristics of its tenants’ products.

From April to September, about 120 companies visited the showroom and there are still many requests for reservations.

Nomura Real Estate Development Co. leases about 30 warehouses and is examining the population around their locations to suggest how many applications tenants are likely to receive when hiring employees. “All of our warehouses have been reserved, including those to be completed next year,” said Joji Yamada, an executive officer at the company.

In the past, companies owned distribution warehouses or leased them on 10-year agreements, but with many internet shopping companies being small, facilities that offer short-term agreements with limited areas have become popular. According to K.K. Ichigo Real Estate Service, a research firm, the vacancy rate at large-scale rental distribution warehouses in the Tokyo metropolitan area is at a record low 0.4%, which proves supply is not keeping up with demand.

The spread of the virus has forced major real estate companies to shorten business hours at commercial facilities. The rental warehouse business is gaining popularity as a way for these firms to supplement profits, and with the facilities being located in industrial areas, which makes it unlikely for nearby residents to complain, an increase in the number of companies entering the market is on the rise.

Daiwa House Industry Co., the largest company in Japan that leases distribution warehouses, decided in June to increase its 2019-2021 investment from 350 billion yen to 650 billion yen. It plans to increase the number of its facilities because companies, which do not want to miss out on a best-selling product’s commercial opportunities, tend to want to sign up fast.

The increase in facilities will inevitably intensify competition among the real estate giants. Tasuku Yoshida, a senior researcher at NLI Research Institute who is familiar with logistics facilities, said, “As the number of logistics facilities increases, the ability to design services that respond to detailed customer requests will be important.”

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