Property Futures

Real Estate News, Reviews and Investment

Resurgence in The Commercial Property Market in Japan

Article: signs of life in the office property market in Japan.

The Cabinet office in Japan cut its estimate of growth for the second quarter of 2012 to an annualized rate of 0.45%, in line with indications that the Japanese economy is continuing to cool.

Japanese real estate market analysis

Japanese property market analysis

The September Tankan survey and other indicators suggest that businesses are likely to see continuing deterioration in the business environment and in private investment growth.

  • Growth is likely to come in at 1.2% in 2013 indicating a growing chance of recession.
  • Japanese real GDP is expected to decline to 1.2% in 2013, from 1.5% in 2012, as the country faces weakening demand at home and in the world.

Commercial real estate

Major companies in Japan are selling prime real-estate assets to strengthen balance sheets and stoke resurgence in the property market. Some of them are acquiring new offices to take advantage of the relatively lower rentals.

Major downtown office space is being put up for sale as the Tokyo commercial property market is showing signs of life for the first time in nearly 5 years, with plenty of buying interest, especially from Japan’s public real-estate trusts.

Says Andy Hurfurt, executive director at the Japanese unit of CBRE Group, a global real estate services company, “Market sentiment is more positive now than at any time since the Lehman crisis. This reflects a widely held view that the market has bottomed and will move to an upside cycle.”

  • Sony has sold its 25-floor Sony City Osaki building for JPY 111 billion (USD $1.12 billion) the biggest deal in 4 years.
  • Panasonic, based in Osaka, is selling a central Tokyo office it uses as its city headquarters and expects to generate JPY 130 billion yen from asset sales to strengthen cash flow.
  • Sharp has sold a 9-storey building in Tokyo and is looking to sell more in the city.

Japan’s real-estate market collapsed as a result of the global financial crisis, and rents in Tokyo have been declining ever since.

Last year, vacancy rates in the city’s quality buildings declined for 3 consecutive quarters, according to CBRE.  And monthly rentals were almost flat in 2012.

Market sentiment has strengthened by the economic policies of the new administration of Prime Minister Shinzo Abe, who came to power in December 2012.

The benchmark Nikkei average hit a 4-year high and has been rising since mid-November.

Residential real estate

Housing prices in Japan have continued to fall on the back of the fading economic recovery, caused by:

  • Weakening exports
  • Strengthening yen
  • Economic deflation

In the first 7 months of 2012, the number of new housing starts was up 2.5% to 490,781 year on year according to the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) because of the reconstruction activity in the wake of the Great Tohoku Earthquake.

In Tokyo the number of condominiums sold grew by 10.6% to 21,039, while sales of detached houses grew by 9.5% during the first 8 months of 2012 in comparison to the same period last year, according to data from LIJ.

The bottom line

The data suggests that it is unlikely to be a recovery in residential housing prices in the short-term future.  However, the growing optimism and improving sentiment in the commercial real-estate market suggests that investment opportunities could be around the corner.

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