Prologis to Lift Japan Rents, Build Warehouses on Abenomics

Prologis Inc., the world’s biggest warehouse owner, plans to increase rents and spend as much as $600 million a year to develop warehouses in Japan as Prime Minister Shinzo Abe’s policies boost corporate confidence.

The company expects rents to rise about 3 percent annually “for a while” and will build $500 million to $600 million of warehouses a year, said Hamid Moghadam, chairman and chief executive officer of San Francisco-based Prologis. That compares with the the average annual investment of $400 million to $600 million historically, he said.

Abe’s pledge to end 15 years of deflation and the Bank of Japan’s monetary easing policy, dubbed Abenomics, have boosted sentiment, contributing to a recovery in the nation’s property market. Industrial spaces, such as warehouses, returned 7.6 percent on average for the year ended July, more than double that for office buildings, according to London-based Investment Property Databank Ltd.

“Abenomics has created a lot of confidence and that is an added bonus,” Moghadam said in an interview in Tokyo today. “Going forward, I am actually pretty optimistic about the business even more so than before.”

Nippon Prologis

Nippon Prologis REIT Inc., a real estate investment trust set up by Prologis, rose 3.3 percent to 1,017,000 yen in Tokyo trading, the highest level in eight months. The REIT has risen 85 percent from the initial offering price of 550,000 yen since its trading debut on Feb. 14. The shares of San Francisco-based Prologis have risen 5.1 percent this year on the New York Stock Exchange.

Prologis, which manges 2,942 buildings in 21 countries, had $46.9 billion of assets under management as of September 2013, according to the company’s website. Japan is Prologis’s biggest market after the U.S. with 51 properties, according to a company presentation.

The company is planning to raise rents because of higher construction costs, which rose as much as 20 percent in the last two years, as well as increasing land prices, Moghadam said.

Land Prices

“All of these things are working together to create pressure on higher rents,” he said.

A quarterly survey by Japan’s land ministry today showed that land values rose at more sites than three months earlier. Values rose at 107 locations monitored by the government in the three months to Oct. 1 from 99 in the previous quarter, according to the survey by the Ministry of Land, Infrastructure, Transport and Tourism.

Prologis customers include Seattle-based, Inc., the world’s largest online retailer, Atlanta-based Home Depot Inc. and Tokyo-based Nippon Express Co.

Confidence among Japan’s large manufacturers rose to the highest since the early stages of the global credit crisis in 2007, a quarterly Tankan survey in October showed.

Real estate deals in Japan will rise to as much as 4 trillion yen ($39 billion) this year, the most since 2008, according to Chicago-based Jones Lang LaSalle Inc.