Member to develop Japan’s largest distribution facility

BCCJ member ESR Ltd. made Japanese real estate history on 20th March with the start of construction of the country’s largest distribution facility, in Amagasaki City, Hyogo Prefecture.

Due for completion in December 2019, the six-storey, double-ramp 388,000m² (4 million square feet) building represents an investment in the Kansai region of £800 million by the firm, part of its annual country-wide investment target of £1.2 billion.

ESR has a strong track record of developing and leasing large distribution centres in Japan, initially as the Redwood Group and, since a merger with e-Shang two years ago, as ESR. The ESR platform represents one of the largest in the Asia-Pacific region with assets under management valued at more than £8.5 billion.

The Amagasaki Distribution Facility will be the largest project undertaken by the group to date, a move that excites both ESR and its stake-holders. Local and city officials, chambers of commerce and national firms have welcomed its expected impact on the local economy. Given its location, within 20km of central Osaka, Osako Nanko Port and Kobe Port via the highway network, it is thought the facility will boost the entire Kansai region and create some 3,000 jobs.

Speaking at the groundbreaking ceremony, ESR Co-founder and CEO Stuart Gibson said: “ESR has been privileged to have the support of the Amagasaki government, community leaders and residents for this exciting project. We do not take this support lightly, and I promise to deliver a space that the community will be proud of.”

Luxury leisure areas, free childcare

Gibson’s promise alludes to ESR’s trademark human-centric design offering high-quality amenities for the staff and local community.

“Most people think a warehouse is a grey, soulless box with no windows that is a horrible place to work. We don’t get involved in that space,” said Gibson. “To attract and retain people you’ve got to cater to their pride and treat them with respect; you can’t just give them a portacabin and a smoking room.”

The Amagasaki facility will offer a high-quality common area inspired by Gibson’s idea of “executive lounge meets sports bar.” It will include indoor and outdoor dining spaces as well as chill out zones, a wet kitchen, games rooms, a health club, climbing walls and many other best-in-class facilities.

As with all ESR developments exceeding 100,000m², the new distribution centre will also be home to a children’s day care centre called a Barnklübb, which will be staffed by licensed teachers providing meals, learning and fun.

According to Gibson, the idea of creating Barnklübbs was born out of the demand from his clients for a large pool of talent. With low unemployment and nascent-level automation in Japan, he believes the way to provide that talent is to enable stay-at-home mothers to return to work.

“In one of our other Osaka facilities, which is being rented by a world-famous e-commerce company, of the 600 workforce more than half are women, with a lot of them doing part-time work. If they have to find and pay for childcare for a four-hour shift every two days, they will not make any money,” Gibson said. “That is why we make the childcare free.”

ESR’s initiative therefore not only benefits its customers by helping them appeal to employees, but also encourages workforce participation of women, he explained.

By the end of 2018, six of ESR’s facilities will have a Barnklübb in operation, providing spaces to up to 350 children at one time. Given the shift work, however, as many as five times that number might use the service. Moreover, mothers living in the community will be able to book any available spaces online on a first-come first-served basis.

Green credentials

Gibson says ESR is also committed to environmentally sensitive development and operations across its facilities. The company implements sustainable design and construction measures to minimize the environmental footprint of its buildings and to provide long-term benefits to customers and local communities.

Work on the Amagasaki facility is expected to follow the construction guidelines of the firm’s nearby Nanko Distribution Centre, which was completed in February 2018.

Materials taken from an existing building on the site were recycled to make the new building. Concrete was crushed to make roads and steel was melted and reused. Greening was carried out on extensive areas and a museum was created to exhibit artefacts of historic significance uncovered during construction.

In addition, ESR operates one of the largest solar rooftop initiatives in Japan and some 20 megawatts of solar energy are being generated and returned to the grid per year.

Gibson is therefore confident that the Amagasaki project will attract tenant firms soon after completion, as has the Nanko project.

“Normally it’s a case of charging lower rental fees to get business but when you have the edge that we have, with a high-quality building and an appreciation for CSR, that is the deciding factor for companies,” he said.

Online drives growth

In 2018, ESR estimates it will invest £2.1 billion in development starts (the point at which the ground is broken for a new distribution facility), equating to a 100% increase on both 2017 and 2016 investments.

Business is good, says Gibson, because of the rise in e-commerce. He predicts the firm will invest £2.5 billion in Japan in 2019, although admits that the dramatic business growth will “probably end up smoothing out.”

“E-commerce firms require more flat space, leading to the need for distribution centres with bigger floor plates,” he said. About 40% of ESR’s clients are e-commerce firms such as Amazon, JD.com and Askul, while 60% are third-party logistics firms such as Fedex, DHL and Nippon Express.

To meet growing demand, the firm has bought land to make two 10-storey distribution facilities exceeding 550,000m² in total in Higashi Ogishima near Haneda International Airport. On completion, this facility will be even bigger than the Amagasaki one.