Daiwa House Logistics Trust has reported an "improvement" in its core portfolio of warehouses in Japan for its 9MFY2024 ended Sept, lifted by contributions from new acquisitions.
DHLT adds that all leases that expired in 3QFY2024 were renewed except for one which was partially renewed, the manager says in its 3QFY2024 business update.
A space that was vacated in 2Q FY2024 was also leased in 3Q FY2024 at higher rent.
In October 2024, the remaining expiring lease for FY2024 was renewed, concluding the lease renewals for FY2024.
Thus far in FY2024, the weighted average rent uplift achieved was approximately 5%.
The manager says it has secured higher rent for two leases which will only expire in 2025 and 2034, respectively.
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Including the new lease for the vacated space, the renewal rate for FY2024 was approximately 90%.
The healthy renewal rate helped hold the occupancy rate at 97.5% for the Japan portfolio as at Sept 30, contributing to weighted average lease expiry for the overall portfolio remained relatively long at 6.6 years.
DHLT notes that there has been "substantial" new supply in the Japan logistics market in 2024. Nonetheless, the total
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for the year is expected to be lower than the peak in 2023. The increase in supply poses near-term challenges, especially for older and less accessible properties.
While supply in 2025 is forecasted to be higher than 2024, supply beyond 2026 is expected to be limited, due to higher costs.
"From a longer-term perspective, the market fundamentals are expected to remain healthy, supported by growing demand from various industries such as e-commerce and manufacturing.
"Further, due to restrictions imposed on the working hours of truck drivers, regional cities are emerging as key relay hubs.
Over in Vietnam, where DHLT has made its maiden acquisition outside Japan, the logistics market is seen to be supported by the flow of foreign direct investment and domestic consumption.
Vietnam is seen to be "buoyed" by diverted investment flow as part of the China+1 strategy of large manufacturers.
"With this acquisition, DHLT’s portfolio has grown from 14 properties at listing, to 18 properties currently," says Jun Yamamura, CEO of the manager, referring to the recently acquired D Project Tan Duc 2 in Vietnam.
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"While certain leases in the Japan portfolio are not expected to be renewed in 1QFY2025 following their expiry, the manager is working closely with the property manager on these leases as well as the current vacant space within the portfolio," he adds.
Yamamura says DHLT is "on track" to refinance the loan by its maturity on Nov 26. He is also planning to unsecure the onshore borrowings of JPY36.5 billion which is expected to be beneficial for DHLT, allowing for greater financing flexibility.
DHLT closed at 56 cents on Nov 7, down 4.24%.
