ESR says the project in Kawanishi City will break ground in July 2023

ESR on Thursday announced the development of a $1.5 billion logistics park in the greater Osaka area, as the builder of some of Japan’s biggest warehouses continues to secure land despite zoning-related supply constraints in the country.

The ESR Kawanishi Distribution Centre, which is being developed in two phases, will occupy a site measuring 505,647 square metres (over 5.4 million square feet) in Hyogo prefecture’s Kawanishi City, northwest of Osaka. The first phase will consist of two six-storey warehouses with 99,051 and 98,746 square metres of gross floor area and is being designed with energy-saving elements to minimise environmental footprint.

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Phase 1 is expected to break ground in July 2023 for completion in December 2024, the Hong Kong-listed industrial specialist and fund manager said in a release. The two buildings of Phase 2 will begin construction in 2025.

“Considering the scale, complexity and location of the development, ESR Kawanishi DC represents one of the largest and most significant urban rezoning projects in recent years, strategically repurposing a prime residential site for logistics and industrial use,” said ESR co-founder and co-CEO Stuart Gibson.

Zoning Challenges

ESR highlighted its land use efforts in Japan, including the formation of a dedicated rezoning team and its cooperation with local authorities and communities on redevelopment projects.

For the 151,501 square metre ESR Kuki Distribution Centre, which counts Amazon as a major tenant, the group worked with Kuki’s mayor and the Tokyo University of Science to transform the former university campus into a facility providing 1,500 full-time jobs and amenities like a children’s day care centre and a staff lounge.

Japanese sheds are always in fashion for ESR’s Stuart Gibson

The ESR Yokohama Sachiura Logistics Park brought a neglected urban forest back to life to protect the natural habitat for a diverse mix of flora and fauna, the company said. The 800,000 square metre development is set to be the largest logistics park in Japan upon completion in 2023.

For the latest project, ESR vowed that subcontractors, suppliers, plant operators and job vacancies would be filled by workers and companies from communities near the Kawanishi site, which had been looked at by many developers over the past 20 years.

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“Rezoning takes a long time and requires a very detailed understanding of every step of the lengthy process,” Gibson said. “In addition, as the planning laws may differ from prefecture to prefecture, it is essential to engage early with the authorities at local and national level.”

Hub Remains a Draw

Booming e-commerce and the automation of warehouse operations have positioned Greater Osaka as a key logistics hub in Asia’s second-biggest economy. In the second half of 2021, the area recorded its lowest vacancy since 2017 as average rent rose by 0.8 percent year-on-year, ESR said, citing research by Cushman & Wakefield.

The group’s 388,570 square metre ESR Amagasaki Distribution Centre northwest of Osaka, one of Asia’s biggest sheds, boasts a gross asset value in excess of $1 billion and is 98 percent leased to 16 tenants.

Completed in June 2020, the Amagasaki facility was one of the $2.1 billion worth of seed assets in the ESR Japan Income Fund, which achieved a $750 million first closing last October. The core logistics vehicle, whose cornerstone investor is reportedly Singapore sovereign fund GIC, is targeting a gross asset value of $10 billion by 2026.

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