Japanese Real Estate Investment Market 2011p
Nomura Research Institute
January, 2011
Nomura Research InstituteConsulting Division
Marunouchi-Kitaguchi Bldg.1-6-5 Marunouchi, Chiyoda-kuTokyo 100-0005, Japan
To create a transparent real estate investment market in JapanTo create a transparent real estate investment market in Japan
This report has been produced by Nomura Research Institute solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. No warranty for representation, express or implied is made as to the accuracy or completeness of any of the information herein and Nomura Research Institute shall not be liable to any reader of this report or any third party in any way whatsoever.
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 1
Nomura Research Institute (NRI) Viewpointsfor Real Estate Investment Market
Macro FundamentalsGDP growth, Business performance, Demographic movement…
Financial and Capital MarketPolicy interest rates, Financial policy, Stock market…
Rental market
②Supply
How many spaces will be provided?
①Demand
What is the key driver of demand?h b l d h k
Trading Market
⑥Renders ⑦Sell side⑤Buy side
What kind of appetite do What is the condition Who would sell?Are there demolitions?
…What business lead the market?
Which areas have strong demand?…
③Vacancy
What kind of appetite do Investors have?
What are the strategy of investors?
⑧Liquidity
What is the condition of renders for loan?How much gearing
is possible?
Who would sell?Why investors sell?
When the fire sale begin?
④Rent and NOI
Increase? or Decrease?
Increase? or Decrease?
⑨Cap RateIncrease? or Decrease?
Whether transactions come off or not?
Times New Roman size 8 color: Dark Gray
Asset Value go up or down?
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 2
Times New Roman, size 8, color: Dark Gray
Ex) Source: NRI based on IMFAsset Price Estimation
1 Macro fundamentals of Japan
2 Overview of Japanese real estate market
3 Office market
4 Residential market
5 Retail property market5 Retail property market
6 Logistics property market
7 Hotel market
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 3
8 J-REIT market
1 Macro fundamentals of Japan
2 Overview of Japanese real estate market
3 Office market
4 Residential market
5 Retail property market5 Retail property market
6 Logistics property market
7 Hotel market
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 4
8 J-REIT market
1 Macro fundamentals of Japan
Japan’s population is aging and shrinking due to fewer children.
Total population peaked out in 2005. Number of households is increasing for now, but it is projected to decrease after 2015.Total population peaked out in 2005. Number of households is increasing for now, but it is projected to decrease after 2015.
Population and Households in Japan
FA lPopulation(thousand)
Households(thousand)
60,000
70,000
120,000
140,000
Forecast →← Actual(thousand) (thousand)
40,000
50,000
80,000
100,000
20,000
30,000
40,000
60,000
0
10,000
0
20,000
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved.
65歳以上人口 15~64歳人口 0~14歳人口 世帯数
5
15-64 YRS Households
Source: NRI based on National Institution of Population and Social Security Research
Over 65 YRS 0-14 YRS
1 Macro fundamentals of Japan
Economic growth is weak and is expected to remain so for the foreseeable future.
15 0(%)
Real GDP growth rate of major countries
10.0
15.0
China
Forecast →←Result
5.0 Japan
United States
India
UKUS
0.0
United Kingdom
China
India
Japan
‐5.0
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved.
‐10.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
6
Source: NRI based on IMF
1 Macro fundamentals of Japan
Despite the weak growth, Japan remains one of the largest economies in the world.
While Japan has fallen to third place after the US and China, it is expected to remain ahead of high-growth countries including India, Brazil and While Japan has fallen to third place after the US and China, it is expected to remain ahead of high growth countries including India, Brazil and Russia up to at least 2020.
Nominal GDP of major countries(Billion USD)
20,000
25,000
USForecast →←Result
15,000 Japan
U it d St t
China
10,000
United States
United Kingdom
China
IndiaJapan
5,000 UK
IndiaNote:
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved.
0
2005 2010 2015 2020
7
Figures up to 2015 are IMF forecasts and those up to 2020 are calculated with the assumption that the CAGR from 2015 to 2020 will be maintained.
Source: NRI based on IMF
1 Macro fundamentals of Japan
Japanese companies have noticeably improved their business performance.
Listed companies’ ordinary profits returned to positive growth in fiscal 2009. Their sales are also expected to return to positive growth in fiscal 2010.Ordinary profits in the first quarter of fiscal 2010 rebounded to about 90 percent of the pre-Lehman shock level (first quarter of fiscal 2008).Corporate performance may weaken again if the yen remains persistently high.
Ordinary income of listed companiesSales and ordinary income growth
60
売上高増減率(前期比) 経常損益増減率(前期比)
120.0
Ordinary income of listed companies
(Index:1Q08=100)(%)
Growth rate of sales(YoY)
Growth rate of ordinary income (YoY)
of listed companies
Forcast →←Result
20
40
60.0
80.0
100.0
‐20
0
0.0
20.0
40.0
‐60
‐40
60 0
‐40.0
‐20.0
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved.
‐80
FY2007 FY2008 FY2009 FY2010e
‐60.0
1Q FY08
2Q FY08
3Q FY08
4Q FY08
1Q FY09
2Q FY09
3Q FY09
4Q FY09
1Q FY10
8
Note: 767 companies chosen from listed companies by NikkeiSource: NRI based on Nikkei
Note: 559 companies chosen from listed companies by NikkeiSource: NRI based on Nikkei
There are concerns about Japan’s huge fiscal deficit, which may drive up interest rates 1 Macro fundamentals of Japan
in the future.
Currently Japan keeps its interest rates at a lower level than that of countries rated higher than Japan. If the irrational gap between the interest rate Currently Japan keeps its interest rates at a lower level than that of countries rated higher than Japan. If the irrational gap between the interest rate level and sovereign ratings is closed, Japan’s interest rates may jump to the level of AAA rated countries or the higher level of other developed countries.
Ratio of government debt to GDP Long term interest rates and sovereign ratings
250
300(%) (%)Forecast →←Result
6.00
7.00
UK
200
Japan
4.00
5.00 AAA/Negative/A-1+
100
150
US
UK2.00
3.00 USAAA/Stable/A-1+
GermanyAAA/Stable/A-1+
0
50
Germany
0.00
1.00 JapanAA/Negative/A-1+
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Source: NRI based on IMF Note: Ratings are as of Sep. 2010.Source: NRI based on IMF and S&P
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Financial collapse is unlikely as long as domestic capital remains in Japan and 1 Macro fundamentals of Japan
continues to circulate.
Personal financial assets, which had been decreasing since 2006, posted an increase in 2009 for the first time in three years.Personal financial assets, which had been decreasing since 2006, posted an increase in 2009 for the first time in three years.Japan has enjoyed a current account surplus for many years, and its foreign currency reserves have expanded enormously since the early 2000s owing to currency market interventions.While the entire amount of this capital is not invested in government bonds, financial collapse will not result from any withdrawal of capital by foreign investors.
1,200
gJapan’s current account and foreign currency reserves
(Billion dollar)2,000
(Ten Billion dollar)
Personal financial assets in Japan
800
1,000
1,500
400
6001,000
0
200
0
500
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
経常収支 外貨準備高
10
Source: NRI based MOF and IMFSource: NRI based BOJ
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Current Account Foreign Currency Reserves
1 Macro fundamentals of Japan
Tokyo will remain the world’s top metropolis in terms of population and GDP.
Population and GDP in 2020 by city
GDP size in 2020(Billion USD) Tokyo
1,800
TokyoNew York
1,400
1,600
Los Angeles1,000
1,200
London
Chicago ParisMexico City
Osaka/KobeBuenos Aires
Sao Paulo400
600
800
Population in 2020
Buenos AiresShanghai
Mumbai
0
200
400
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Source: NRI based on PricewaterhouseCoopers and UN
Population in 2020 (thousand)0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
1 Macro fundamentals of Japan
Tokyo is the most popular headquarters location for Fortune Global 500 companies.
Number of Fortune Global 500 companies by city (2010) Fortune Global 500 Companies in Tokyo ranking among the top 200
Japan Post Group 6
Tokyo, 49
Beijing, 30
NTT Group 31Hitachi 47Honda 51Sony 69Toshiba 89
Paris, 25
New York, 19
Toshiba 89Dai-Ichi Life 119SEVEN & I Holdings 124Mitsubishi UFJ Financial Group 126Tokyo Electric Power Company 128JX Holdings 136,
London, 18
Seoul, 9Osaka, 8T 7
JX Holdings 136Fujitsu 138Mitsubishi Corporation 146Meiji Yasuda Life 158MITSUI & CO 164
Toronto, 7Others, 335 NEC 185
Tokyo Marine Holdings 186Nippon Steel Corporation 191KDDI 193
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Note: Numbers indicate Global 500 ranks.
Source: NRI based on Fortune Global 500 2010
1 Macro fundamentals of Japan
Population continues to increase in Greater Tokyo while declining in Japan overall.
The growth of Tokyo’s population and households is expected to continue over the long term on the strength of both natural and social increases. The growth of Tokyo s population and households is expected to continue over the long term on the strength of both natural and social increases.
Net population inflow into Greater Tokyo
150,000
200,000 Kanagawa Tokyo Chiba Saitama total
50,000
100,000
Inflow
‐50,000
0
O tfl
‐100,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Outflow
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Source: NRI based on Basic Resident Register Population Migration Report
1 Macro fundamentals of Japan
2 Overview of Japanese real estate market
3 Office market
4 Residential market
5 Retail property market5 Retail property market
6 Logistics property market
7 Hotel market
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 14
8 J-REIT market
2 Overview of Japanese real estate market
The Japanese market, of which Tokyo represents 70%, is the third largest in the world.
The value of the Japanese real estate investment market is the third largest in the world after the US and China. Compared to the US and China, h J hi h h i t bl ti th th USD 2 t illi h h ll l d Th f t f th tihowever, Japan, which has investable properties worth more than USD 2 trillion, has a much smaller land area. Therefore, most of the properties are concentrated in a few cities. In fact, the Tokyo region alone accounts for 70% of the total value of investable properties in Japan.
Capital Value of Real Estate Market in the World and JapanUS billion $
5 000
6,000
7,000
6,9003,000
4,000
5,000
4,255
1,662 1,390 1,221 1,1952,195
964
724349
158
1,000
2,000
0
USA
China
Germany
India
UK
France
Japan
Tokyo CB
D
yo Satellite
and Nagoya
Other Cities
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Toky
Osaka a O
15
Source: NRI based on DTZ, EPRA, JPMorgan Asset Management
2 Overview of Japanese real estate market
Total return has recovered since 2009.
Capital return in Japan headed sharply downwards in early 2008 . However, it reversed trends upwards in the second quarter of 2009 and has Capital return in Japan headed sharply downwards in early 2008 . However, it reversed trends upwards in the second quarter of 2009 and has followed a recovery path since then. On the other hand, the income return in Japan keeps the stable level.
Performance Trend in JapanPerformance Trend in Japan
15.0
20.0
Total Return
Income Return
%
5.0
10.0
Income Return
Capital Return
‐5.0
0.0
‐15.0
‐10.0
r‐05 ‐05
‐05
c‐05
r‐06 ‐06
‐06
c‐06
r‐07 ‐07
‐07
c‐07
r‐08 ‐08
‐08
c‐08
r‐09 ‐09
‐09
c‐09
r‐10
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Source: NRI based on IPD
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
2 Overview of Japanese real estate market
Cap rates have returned to the 2005 level.
By the end of the second quarter of 2008, the cap rate had decreased sharply. However, after the 2008 financial crisis, it increased approximately By the end of the second quarter of 2008, the cap rate had decreased sharply. However, after the 2008 financial crisis, it increased approximately 100~150 basis points. At present, it maintains a stable movement, and this trend is expected to continue for a while. The biggest factor that can affect the stable trend is the fire sales by major Japanese banks seeking to dispose of their non-performing assets. The spread among regions and asset classes are also stable in Japan. While the cap rate of residential properties in Tokyo decreased recently, this was due to investing by numerous small investors who had been waiting for an increase in the cap rate.
Cap Rate Trend in Japan
8.0%
6.0%
7.0%
Office Tokyo CBD
Office Osaka CBD
5.0%
Retail Tokyo
Residential Tokyo
3.0%
4.0%
03 04 04 04 05 05 05 06 06 06 07 07 07 08 08 08 09 09 09 10Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 17
Oct‐0
Feb‐0
Jun‐0
Oct‐0
Feb‐0
Jun‐0
Oct‐0
Feb‐0
Jun‐0
Oct‐0
Feb‐0
Jun‐0
Oct‐0
Feb‐0
Jun‐0
Oct‐0
Feb‐0
Jun‐0
Oct‐0
Feb‐1
Source: NRI based JREI
2 Overview of Japanese real estate market
The presence of US and European players has declined.
Until 2008, most of the major property acquisitions in Japan were made by US or European investors. Since then, however, only La Salle Investment and a few German open-ended funds have shown strong appetite for investing in Japanese properties Big spenders in 2003-2008 such asInvestment and a few German open-ended funds have shown strong appetite for investing in Japanese properties. Big spenders in 2003-2008 such as Morgan Stanley and Goldman Sachs are likely to switch to sell-side activity in the near future.
Major Acquisitions by US or European Investors
2007 2008
Pacific Century Place Building1.4 billion USD
S C
Nasu Garden Outlet MoleNA
S
2009 2010
13 ANA Hotel buildings 2.8 billion USD
S
Tennozu Citi Group Center 480 million USD C G S Da Vinci→Secured Capital Japan Domestic owner→LaSalle Investment
Grass City ShibuyaNADa Vinci→LaSalle Investment
Logi-Port NagareyamaNADomestic owner→LaSalle Investment
All Nippon Airways → Morgan Stanley
Hotel Nikko Naha & others NAJapan Airlines → Lone Star
Citi Group → Morgan Stanley
Shinsei Bank HQ building 1.18 billion USD Shinsei Bank → Morgan Stanley
Yanagi-Bashi First BuildingNADomestic owner→CLSA
Tiffany Ginza HQ building 380 million USD Tiffany → Goldman Sachs
Da Vinci Kamiyacho170 million USDDA Office Investment → CommerzReal
Simplex Investment Advisors5 billion USDNikko Cordial → Goldman Sachs, AETOS
Shibuya Duplex Tower160 million USDDomestic owner → Union Investment
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 18Source: NRI based on various sources
Mansion QizHiroo100 million USDMorimoto →GE Real Estate
2 Overview of Japanese real estate market
On the other hand, Asian investors are rushing into Japan.
Before the 2008 financial crisis, GIC of Singapore was the only institutional investor purchasing Japan properties. Since the crisis, many institutional investors from other Asian countries such as Korea, Taiwan, Malaysia and Kuwait, have entered the Japanese market.institutional investors from other Asian countries such as Korea, Taiwan, Malaysia and Kuwait, have entered the Japanese market.So far, the investment amount of Asian investors is smaller than that of US or European investors who had invested heavily a few years ago. Therefore, it is not sure at present whether Asian investors’ will push down Japan’s cap rate hereafter.
Major Acquititions by Asian Investors
Westin Hotel Tokyo 770 illi USD
KDX Toyosu Grand Square350 illi
Head Quarter Building of Ezai100 illi USD
Hawks Town1 billi USD
j q y
2007 2008 2009 2010
770 million USDMorgan Stanley → GIC Real Estate
350 million yen Kennedix → NPS(Korea Pension)
100 million USDNA→NPS and other Korean Pensions
LIETOCOURT ARX TOWER130 million USD
Logi Partners Kashiwa Center43 million USD
1 billion USD Colony Capital → GIC Real Estate
Da Vinci →Martins(Kuwait) NA→Mapletree(Singapore)
Logistics Centers in Chiba and Saitama130 million USDNA→Mapletree(Singapore)
Care house for seniors30 million USDKenedix→Parkway Life REIT(Singapore)
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Niseco Villege (Hotel)60 million USDNA→YTL Corporation(Malaysia)
Source: NRI based on various sources
2 Overview of Japanese real estate market
Japanese institutional investors remain cautious.
Traditionally, Japanese pension funds have been passive about investing in real estate. Generally, their allocation to real estate is less than 1 percent of their overall investment portfolio. One of the biggest issues to invest in real estate for Japanese pension funds is the size of funds. Most of of their overall investment portfolio. One of the biggest issues to invest in real estate for Japanese pension funds is the size of funds. Most of pension funds in Japan manage hundreds of millions of USD. Japanese pension funds changed their attitude at one time in 2007 due to a bullish market, but they have become reluctant again since the 2008 financial crisis.Financial institutions such as major banks, regional banks and small banks have preferred investment in J-REIT. At present, they are not active in j , g p p , yreal estate investment market.
Appetite of Japanese Institutional Investors for Real Estate Investment
100%
6 5% 4 8%
58.0%64.8%
55.0%63.9%
71 8%
33.1% 35.5%
70%
80%
90%
No Plan of Investment
60.4% 59.7%25.2%23.6%
12.8%
6.5% 4.8%71.8%
30%
40%
50%
60%
Planning
Investing
16.8% 17.0% 21.4% 23.3% 19.4%
59.7%25.2%18.2%
12.8%8.7%
0%
10%
20%
2005 Pension 2006 Pension 2007 Pension 2008 Pension 2009 Pension 2008 Financial 2009 Financial
Investing
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Source: NRI based on Daiwa Fund Consulting
2005 Pension 2006 Pension 2007 Pension 2008 Pension 2009 Pension 2008 Financial Institution
2009 Financial Institution
2 Overview of Japanese real estate market
Lenders’ attitude has improved but remains weak.
Real estate players are feeling that financial institutions are changing attitude for real estate roan. In fact, there are many condominium developers Real estate players are feeling that financial institutions are changing attitude for real estate roan. In fact, there are many condominium developers which procure new loans and acquired new land for development.However, foreign based financial institutions, which provided mezzanine financing prior to the 2008 financial crisis. and enabled real estates’ players high gearing such as 90 percent, have withdrawn the financial crisis withdrew from Japan. There is no easy money any more to finance opportunistic investment.
Financial institutions’ loan extending attitude toward real estate industry
30
40
0
10
20
30
LooseLarge Enterprises
Small Enterprises
Total
‐30
‐20
‐10
0
Tight
Small Enterprises
‐40
2006
.1Q
2006
.2Q
2006
.3Q
2006
.4Q
2007
.1Q
2007
.2Q
2007
.3Q
2007
.4Q
2008
.1Q
2008
.2Q
2008
.3Q
2008
.4Q
2009
.1Q
2009
.2Q
2009
.3Q
2009
.4Q
2010
.1Q
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 21
Source: NRI based on Bank of Japan
Total Large enterprises Small enterprises
2 Overview of Japanese real estate market
Smaller equity and tightened lending prevent cap rates from dropping.
The Significant Gap Between Before and After Crisis Conditions in Japan
2009~2011
L d S ll idB id
2003~2007
L d S ll idB id
The Significant Gap Between Before and After Crisis Conditions in Japan
Lenders Sell sideBuy sideLenders Sell sideBuy side
Major domestic banks were not so strict about providing loans.
R i l b k j i d
There were lots of companies and financial institutions which had to dispose non performing assets for restructuring
Domestic PlayersJ-REITs acquire only the properties of sponsors.
Major domestic banks are passive about lending.
R i l b k d
There were few investors just after the financial crisis.
Aft th 3 d t f
Number of Domestic PlayersJ-REITs 40Major developers 8Middle size players 50Boutique AM firms 10 Regional banks joined
loan syndicates aggressively.
Foreign institutions provided mezzanine fi i i l
assets for restructuring until 2004.
After 2005, Real estate players sold their asset to realize capital return.
Major developers are forced to focus sorely on existing investments.
Foreign Players
Regional banks and foreign banks have withdrawn from the real estate market.
The CMBS market is at f ll d ill
After the 3rd quarter of 2010, financial institutions may start fire sales.
In addition, investors h d
Boutique AM firms 10
Number of Foreign PlayersInvestment banks 5US AM firms 50European AM firms 20A i I 5
LiquidityLiquidity
financing actively.
Many CMBS were issued .
However, there were not enough sell-side players.
Only Asian investors and a few US investors such as LaSalle and Elliott are active.
a full standstill.
Maximum LTV has dropped to 60%.
such as MESREF and MS P2 Value Fund will dispose of their assets as well.
Asian Investors 5Foreign REITs 5
Cap RateThe cap rate has risen by about 100~150BP and can increases further more
q yIn most case, there is enough liquidity, and there are some deals.
However, the failure of JT’s 3 Shinagawa offices disposition, the biggest deal in 2010,indicate that there is a significant gap between sell side and buy side
Cap RateThe cap rate fell quickly from 2003 to 2007
q yFinding investors and dealing was easy for all parties.
After 2005, it became difficult to find sell-side players in major cities.
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved.
The cap rate has risen by about 100 150BP and can increases further more.Especially, hundreds of million of USD big properties.
22
Source: NRI
The cap rate fell quickly from 2003 to 2007
1 Macro fundamentals of Japan
2 Overview of Japanese real estate market
3 Office market
4 Residential market
5 Retail property market5 Retail property market
6 Logistics property market
7 Hotel market
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 23
8 J-REIT market
3 Office market
There are five sub sectors in Tokyo’s CBD area.
Tokyo’s office markets are mainly located in the five central wards: Chiyoda, Minato, Chuo, Shinjuku and Shibuya. This small area contains most f th S l d A l b ildi d th 33 illi l h li i T k d it t llit iti th t thi CBD C f t blof the S class and A class buildings, and the 33 million people who live in Tokyo and its satellite cities gather to this CBD area. Comfortable
residential areas in the suburbs and highly developed transportation systems enable the Tokyo Metropolitan Area to function as a single mega city.
ItabashiKita
Adachi
KatsushikaArakawa
Edogawa
Koto
SumidaTaito
ToshimaBunkyo
ShinjukuChiyoda
NakanoTokyo13.0
Kanagawa
Saitama7.1 million
people
Chiba6.2
SetagayaMInato
KotoShibuya Chuo
Meguro
30 km
Kanagawa9.0
Shinagawa
Ohta
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 24
30 km
3 Office market
Tokyo accounts for 56% of Japan’s office market.
There are approximately 88 million square meters of rentable office floor space in Japan. In addition, there are countless small buildings that are not There are approximately 88 million square meters of rentable office floor space in Japan. In addition, there are countless small buildings that are not suitable for leasing.Tokyo has approximately 49 million square meters of office floor space, which represents 56 percent of the overall Japanese market. Rent in Tokyo is much higher than in other cities. Accordingly, Tokyo accounts for 64 percent of overall office rents in Japan
Office Floor Space Shares by Major City
1.2% 2.1% 1.9% 3.9%2.8% 2.4%
80 0%
90.0%
100.0%
1 7 il ㎡3.5 mil ㎡
2.43 mil ㎡2.1 mil ㎡
5.0% 1.2% 2.2%5.9%
15.3%
50 0%
60.0%
70.0%
80.0%
Grater Osaka18.6%
4 4 il ㎡1.0 mil ㎡
1.9 mil ㎡5.1 mil ㎡
13.4 mil ㎡
1.0 mil ㎡ 1.8 mil ㎡1.7 mil ㎡
56.1%20.0%
30.0%
40.0%
50.0%
Grater Tokyo64.5%
49 46 mil ㎡
4.4 mil ㎡ Total of 12 major cities
88 mil ㎡
0.0%
10.0%
Tokyo Yokohama Saitama Chiba Nagoya Osaka Kyoto Kobe Hiroshima Fukuoka Sapporo Sendai
49.46 mil ㎡
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 25
Source: NRI based on JREIAs of Dec .2009The investigation focus on central area of each city.In Tokyo, Osaka and Nagoya buildings which are smaller than 5000 square meter are excludedIn other nine cities buildings which are smaller than 3000 square meter are excluded
3 Office market
Office vacancy rates in Tokyo are at a 20-year high.
The so-called “Year 2003 Problem” of offices in Tokyo, i.e. that the market will be hit by excess supply in 2003, turned out to be a false scare, and The so called Year 2003 Problem of offices in Tokyo, i.e. that the market will be hit by excess supply in 2003, turned out to be a false scare, and office vacancy in Tokyo decreased significantly from 2005 to 2007. However, the financial crisis in 2008 changed the circumstance absolutely. At present, office vacancy rates in Tokyo are at the highest level in 20 years.
Office Vacancy in Tokyo CBD
10.0%
12.0%
10.0%
12.0%
Office Vacancy in Tokyo CBD
MinatoShibuya Minato
Shinjuku
6.0%
8.0%
6.0%
8.0%
Shibuya
Chuo
Chiyoda
Shinjuku ShibuyaChuo
Chiyoda
2.0%
4.0%
2.0%
4.0%
0.0%
Dec‐09 Jan‐10 Feb‐10 Mar‐10 Apr‐10 May‐10 Jun‐10 Jul‐10 Aug‐10 Sep‐10
0.0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: NRI based on Miki Shoji
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 26
3 Office market
Rent has declined gradually due to the high vacancy rates.
Office rents are at the lowest level in ten years, and there are no signs that the decrease will stop anytime soon.Office rents are at the lowest level in ten years, and there are no signs that the decrease will stop anytime soon.
Office Rents in Tokyo CBD
70 0
75.0
80.0
70 0
75.0
80.0
Office Rents in Tokyo CBD
55.0
60.0
65.0
70.0
55.0
60.0
65.0
70.0
MinatoShibuya
Chuo
ChiyodaMinatoShibuya
Chuo
Chiyoda
35.0
40.0
45.0
50.0
35.0
40.0
45.0
50.0 Chuo
Shinjuku
Shinjuku
30.0
Dec‐09 Jan‐10 Feb‐10 Mar‐10 Apr‐10 May‐10 Jun‐10 Jul‐10 Aug‐10 Sep‐10
30.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: NRI based on Miki Shoji
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 27
3 Office market
Huge supply in the CBD will worsen market conditions.
There are 126 large-scale office buildings (total floor space of 10,000 square meters or larger) slated for completion between 2010 and 2015. The There are 126 large scale office buildings (total floor space of 10,000 square meters or larger) slated for completion between 2010 and 2015. The buildings will provide 7.6 million square meters of new office space combined. This means that new supply will be equivalent to more than 10 percent of Tokyo’s current office stock.In 2012, when new supply will be at peak, there will be 28 completed buildings and 2.4 million square meters of new office space in Marunouchi, Otemachi, Nakano, Odaiba and so on.
Office Space Supply in Tokyo
703,000
(1000 ㎡)
2,160
1,620
2,440
40
50
60
2,000
2,500Office supply area
Number of building supplied
1,0801,030
570
890870
10
20
30
500
1,000
1,500
0
10
0
500
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
~
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 28
Source: NRI based on Mori Building and Nikkei BP
3 Office market
At present 40% of top-tier Japanese companies still use B-class or C-class offices.
A factor that may absorb the huge supply of office space in the future is relocations by top-tier companies housed in B-class or C-class buildings at A factor that may absorb the huge supply of office space in the future is relocations by top tier companies housed in B class or C class buildings at present. Many companies in Tokyo are concerned about the risk of earthquakes, poor security and inferior IT infrastructure. New office buildings that resolve these issues may attract such companies.The chart below shows that companies in blue zones are housed in B-class or C-class buildings.
200~ personin one floor
100~200 personin one floor
50~100 personin one floor
~50 personin one floor
Breakdown of Office buildings used by Listed Companies in Tokyo
21~ floors building 14.8% 6.8% 2.8% 0.0%
11~20 floors building 4.9% 8.8% 6.8% 1.7%
6~10 floors building 5.3% 6.2% 11.3% 5.3%g 5.3% 6.2% 11.3% 5.3%
~5 floors building 4.5% 4.7% 6.0% 10.2%
39.1%
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 29
Source: NRI
3 Office market
Cap rates have risen but still remains below 5%
Cap rates of office buildings in Tokyo fell steeply from 2000. The drop was driven by the participation of many foreign and domestic investors in Cap rates of office buildings in Tokyo fell steeply from 2000. The drop was driven by the participation of many foreign and domestic investors in the Tokyo market and the ease with which investors could procure cheap loans and high LTV. From 2006 to 2008, the cap rate in Marunouchi ran at less than 4 percent. This means that there were not enough investable buildings. Cap rates rose approximately 100 basis points after the financial crisis. However, they remain at less than 5 percent, which is not very attractive for investors.
8.0%
Cap Rate Trend of Tokyo Office Market
6.0%
7.0%
Marunouchi
Nihonbashi
R i
4.0%
5.0%
Roppongi
Shinagawa
Shinjuku
3.0%
ct‐03
eb‐04
un‐04
ct‐04
eb‐05
un‐05
ct‐05
eb‐06
un‐06
ct‐06
eb‐07
un‐07
ct‐07
eb‐08
un‐08
ct‐08
eb‐09
un‐09
ct‐09
eb‐10
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved.
O Fe Ju O Fe Ju O F e Ju O Fe Ju O Fe Ju O Fe Ju O Fe30
Source: NRI based on JREI
Haneda Airport’s expansion will contribute to the competitiveness of southern 3 Office market
Tokyo.
⑨U①Ik b k N
Fundamentals in each subsector
Toshima⑩AkihabaraMay be negatively affected if vacancy and rent
⑨UenoThere is no significant factor for change.
②ShinjukuMitsubishi’s mega project will increase the office stock
①IkebukuroNThere is no significant factor for change. GoodBad Intermediate
SumidaTaito
Toshima
BunkyoNakano
May be negatively affected if vacancy and rent conditions worsen in Marunouchi and Otemachi.
③Akasaka / ToranomonForeign companies, the main tenants of this subsector, are experiencing weakened business performance.
Mitsubishi s mega project will increase the office stock significantly.
⑪Marunouchi / OtemachiThere will be a huge supply from 2001 to 2013.Vacancy is likely to increase significantly.Shinjuku
Koto④RoppongiThe function of Tokyo as a business location for foreign companies has declined.
⑫NihonbashiMitsui’s projects may contribute to this area’s competitiveness. However, too much supply may depress the market.
Shibuya
Chiyoda
Chuo
Meguro⑭Toyosu / Ariake / HarumiPoor transportation system causes low
⑬Yurakucho / ShinbashiMay be negatively affected if vacancy and rent conditions worsen in Marunouchi and Otemachi.
⑥OsakiMitsui’s big supply in 2013 may affect vacancy rates
⑤ShibuyaIT and retail firms, the main tenants of this subsector. still struggle with their businesses.
MInato
Shinagawa
⑮Hamamatsucho / TamachiThis area will be the gateway to Haneda.
Poor transportation system causes low competitiveness.
⑦Shinagawa / TennouzuAlthough vacancy was quite high for the last 3 years, Haneda’s expansion will have a positive impact.
Mitsui s big supply in 2013 may affect vacancy rates.
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 31
⑧KamataIn terms of transportation, Kamata is a key zone for access to Haneda.
⑯OdaibaPoor transportation system causes low competitiveness.
Haneda Airport
Since October. 2010, Haneda increased access to Asian markets significantly.
3 Office market
Osaka struggles with constitutional weakness.
Huge supplies in 2008 and 2009 have boosted vacancy to over 10 percent. Supply may remain large in the coming years, causing vacancy to rise Huge supplies in 2008 and 2009 have boosted vacancy to over 10 percent. Supply may remain large in the coming years, causing vacancy to rise still further.Office workers and sales workers in Osaka have decreased since 1996. This movement is different from other cities in Japan. Market observers predict that the increase of vacancy and decrease of rent will continue over the medium to long term.
15.0%400
Office Space Supply and Vacancy in Osaka Number of Office Workers and Sales Workers by Major CityVacancy
Total Area of office supply
(1000 ㎡)1600
1000 people
241
343
9.0%
11.0%
13.0%
250
300
350
10.3%
1000
1200
1400
1986
1991
1996
83
135
182
76 3.0%
5.0%
7.0%
100
150
200
400
600
8001996
2001
2006
201176
‐1.0%
1.0%
0
50
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0
200
Sapporo Sendai Yokohama Nagoya Osaka Fukuoka
2016
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 32
Source:NLI ResearchSource:NLI Research
Forecast
3 Office market
Outside of Tokyo, large supply pulls down the office market.
The considerable inflow of money from 2004 to 2007 resulted in many buildings being planned in regional metropolises such as Sapporo, Sendai The considerable inflow of money from 2004 to 2007 resulted in many buildings being planned in regional metropolises such as Sapporo, Sendai and Fukuoka.The large gap between demand and supply has pulled down office rents sharply.
Office Stock and Flow in Major Cities
19.36.3%
Total Area of New Office Supply→
Ratio of Supply→
(2009~2011)pp y
Total Area of New Office Stock→
307
9 119 4%
9.2%
41.0 31.064.0
99.055
2.1 4.5
12.4
9.1
5.25.1%
14.5%
19.4%9.4%
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 33
Source: NRI based on NLI Research
Sappro Sendai Yokohama Nagoya Osaka Fukuoka
3 Office market
Cap rates in regional cities continue to rise.
In Tokyo, cap rates have remained at the same level since 2009. By contrast, cap rates in regional cities such as Sapporo, Nagoya and Osaka have In Tokyo, cap rates have remained at the same level since 2009. By contrast, cap rates in regional cities such as Sapporo, Nagoya and Osaka have risen continuously. The regional economies’ weak fundamentals are inhibiting investors’ buying appetite.
7 0%
8.0%
Office Cap Rates in Major Regional Cities
6.0%
7.0%
Sapporo
Sendai
Nagoya
4.0%
5.0%Osaka
Fukuoka
3.0%
Oct‐03
eb‐04
un‐04
Oct‐04
eb‐05
un‐05
Oct‐05
eb‐06
un‐06
Oct‐06
eb‐07
un‐07
Oct‐07
eb‐08
un‐08
Oct‐08
eb‐09
un‐09
Oct‐09
eb‐10
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved.
O Fe J O Fe J O Fe J O Fe J O Fe J O Fe J O Fe34
Source: NRI based on JREI
1 Macro fundamentals of Japan
2 Overview of Japanese real estate market
3 Office market
4 Residential market
5 Retail property market5 Retail property market
6 Logistics property market
7 Hotel market
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 35
8 J-REIT market
Vacancy rates of rental housing are trending downwards in local cities Residential Market
but it’s still rising in Tokyo.
In Tokyo, the vacancy rate had been running at a moderate 6% or so up to the Lehman shock but has subsequently risen to 8-10%.In Tokyo, the vacancy rate had been running at a moderate 6% or so up to the Lehman shock but has subsequently risen to 8 10%.Before the Lehman Shock, the vacancy rate in local cities was generally higher than in Tokyo. The situation has reversed since the start of 2010, with Tokyo having a higher vacancy rate than local cities.
Vacancy Rates of Residential REITs (By Region)
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 36
Source: NRI based on ARES
※Definite value:-Dec,2009 Quasi-definite value:Jan,2010, Quick Estimation:Feb-May,2010
Even among REITs with many quality assets, Residential Market
some are suffering from a higher vacancy rate.
Vacancy Rates of Leading Residential REITs
※Japan Residential Investment Corporation※Japan Residential Investment Corporation and Advance Residence Investment Corporation were merged in March of 2010 .
Source: NRI based on each corporation’s documents
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 37
The rental housing market is doing fairly well compared to the highly sluggish Residential Market
market for condominiums.
Condominium Sales and Rental Housing Starts in Tokyo Metropolitan Area
(units)
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 38
Source: NRI based on Real Estate Economic Institute Co., Ltd.
and Ministry of Land, Infrastructure , Transport and Tourism
Rental housing starts
The recent decline in personal incomes has boosted demand for rental housing Residential Market
while suppressing consumers’ home purchases.
Average Monthly Real Income Per Household Construction
首都圏における分譲マンションの供給数推移2000~2008
Average Monthly Real Income Per Household and Annual Rental Housing StartsReal income
(yen)
Construction starts
(number)
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 39
Source: NRI based on Statistics Bureau, Director-General for Policy Planning and Statistical Research and Training Institute
and Ministry of Land, Infrastructure , Transport and Tourism
Many Japanese still strongly think it ideal to be a homeowner, Residential Market
y p g ybut an increasing number are opting for rented accommodations.
There is a gap between ideal and reality.There is a gap between ideal and reality.
Ideal (Owned) vs. Realistic (Rented)(%)
A major reason why rented accommodations are viewed favorably is the lower cost burden (home ownership entails
t t i iti l t t ti l l d tmortgage payments, initial costs, potential losses due to natural disasters, etc.)
Another reason is that relocating is easier, allowing flexible responses to troubles with neighbors, changes in family
Notes:
p g , g ycomposition, job changes, and the like.
The data for “Ideal Home” was extracted from a questionnaire survey asking respondents to choose their ideal home from multiple choices (single answer). Those who responded “others” were disregarded.
The data for “Realistic Home” was extracted from a questionnaire survey targeting people planning to relocate. The respondents were asked to choose the home they thought they were likely to move to from multiple choices (single answer).. Those who responded “others” were Ideal Home(N=1,866) Realistic Home (N=851)
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 4040
disregarded.
Source: NRI “Questionnaire research about the choice of houses”(Jun,2009)
Residential Market
Housing starts in all local cities have trended downwards since 2006.
While Tokyo, Japan’s most densely populated city, surpasses all other cities by far in terms of the absolute number of housing starts, it has While Tokyo, Japan s most densely populated city, surpasses all other cities by far in terms of the absolute number of housing starts, it has experienced the same trends as all other cities in terms of the rise and fall of housing starts.
Number of New House Starts by Prefecture(units)
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 41
Source: NRI based on Ministry of Land,
Infrastructure , Transport and Tourism
The transaction market is relatively active, and high liquidity is one of its Residential Market
characteristics.
Regardless of other conditions, investors will join the market if the cap rate rises and there is a broad investor base.Regardless of other conditions, investors will join the market if the cap rate rises and there is a broad investor base.
Number of Transactions(Number)
(Trading Volume)
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 42
Source: NRI based on various sources
Residential Market
Cap rates have fluctuated moderately within the 4.5% - 7% range.
Residential Cap Rates in Tokyo
8 0%
6.5%
7.0%
7.5%
8.0%
1ルーム(城南)Tokyo South Studio
5.0%
5.5%
6.0%1ルーム(城東)
ファミリー(城南)
Studio
Tokyo East Studio
Tokyo South N St di
3.5%
4.0%
4.5%ァミリ (城南)
ファミリー向け(城東)
Non-Studio
Tokyo East Non-Studio
3.0%
Oct‐03
Jan‐04
Apr‐04
Jul‐0
4
Oct‐04
Jan‐05
Apr‐05
Jul‐0
5
Oct‐05
Jan‐06
Apr‐06
Jul‐0
6
Oct‐06
Jan‐07
Apr‐07
Jul‐0
7
Oct‐07
Jan‐08
Apr‐08
Jul‐0
8
Oct‐08
Jan‐09
Apr‐09
Jul‐0
9
Oct‐09
Jan‐10
Apr‐10
Source: NRI based on JREI
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 43
Source: NRI based on JREI
1 Macro fundamentals of Japan
2 Overview of Japanese real estate market
3 Office market
5 Retail property market
4 Residential market
5 Retail property market
6 Logistics property market
7 Hotel market
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 44
8 J-REIT market
Retail Property Market
The retail market has been mired in the doldrums since the Lehman shock.
Department store sales have declined steadily in recent years. The drop has been particularly severe after the Lehman shock.
(十億円)
Annual Sales of Department StoresSales
(billion yen)YOY change
(%)
(十億円)
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 45
Source: NRI based on Japan Department Stores Association
Retail Property Market
Consumer sentiment remains persistently low.
The consumer confidence index which indicates the degree of optimism consumers feel about the future including their livelihood has worsenedThe consumer confidence index, which indicates the degree of optimism consumers feel about the future including their livelihood, has worsened significantly since 2007.The index has been following a recovery path since the spring of 2010, but the rise since summer has been very sluggish, indicating that consumer confidence remains persistently weak.
C C fid I dConsumer Confidence Index
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 46
Source: NRI based on Cabinet Office, Government of Japan
Consumers are concentrating their spending on a few selected areas rather than Retail Property Market
suppressing spending altogether.
While the overall trend of personal consumption is unfavorable, there appears to be an emerging tendency for consumers to spend money in those While the overall trend of personal consumption is unfavorable, there appears to be an emerging tendency for consumers to spend money in those areas that are important to their lifestyles or offer superior functions/performance, rather than opting for cheap goods and services across the board.
Basic Sense of Values about Consumption
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 47
(%)Source: NRI Questionnaire Research to 10,000 Consumers (2000,2003,2006,2009)
Japan is considered to be in a structural deflation, caused primarily by the decline of Retail Property Market
durable goods
No deflationary trends can be seen in goods for daily consumption and other non-durables.No deflationary trends can be seen in goods for daily consumption and other non durables.
CPI (100 = 2005)
Source: NRI based on Statistics Bureau, Director-General for Policy Planning and Statistical Research and Training Institute
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 48
and Ministry of Land, Infrastructure , Transport and Tourism
The sharp rise in tourists from China is anticipated to help reactivate Japan’s retailRetail Property Market
The sharp rise in tourists from China is anticipated to help reactivate Japan s retail market.
Tourists from China have increased steeply in recent years. They general spend more money in Japan than visitors from other countries, and the t th d h i i
Tourists from China(persons) (thousandyen)
Per-Capita Spending by Overseas Visitors to Japan
amount they spend on shopping is enormous.
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 49
Source: NRI based on JNTO Source: NRI based on Japan Tourism Agency
• Spending in component sectors was calculated by multiplying purchase rate by purchase price. The total obtained by adding the sector averages is marginally different from the overall average for overseas visitor spending due to differences in computation methods.
Tokyo has the highest level of rent nationwide, with large differences from district to Retail Property Market
district inside the metropolis.
Within Tokyo, rent is especially high in three districts: Ginza, Omotesando and Shinjuku. Outside of Tokyo, rent is conspicuously high in the Shi ib hi di t i t f O k hi h i J ’ d l t i l h bShinsaibashi district of Osaka, which is Japan’s second largest commercial hub.
250,000
Market Rates of Rent for Space in Prime Buildings in 2008(Including 1st floor and 2nd or 3rd floors)
Note: Vertical bars represent range between highest and lowest rent
(Yen per tsubo*)*tsubo≒3.31 ㎡
200,000
Note: Vertical bars represent range between highest and lowest rent.
150,000
50,000
100,000
0
50,000
Ginza Omotesando Shinjuku Shibuya Ikebukuro Umeda Shinsaibashi Kyoto Kobe
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 50
j y yHarajyuku Aoyama
Tokyo Osaka Kyoto, KobeSource: NRI based on CBRE
Retail Property Market
The cap rate continues to rise.
The cap rate is higher for suburban shopping centers than for inner-city specialized stores. Of Japan’s three largest cities, Nagoya has the highest The cap rate is higher for suburban shopping centers than for inner city specialized stores. Of Japan s three largest cities, Nagoya has the highest cap rate and Tokyo the lowest.
Cap Rates for Suburban Shopping CentersCap Rates for Inner-City Specialty Stores
7.0%
8.0%
東京7.0%
8.0%
東京(銀座、Tokyo (GinzaTokyo
5 0%
6.0%
名古屋
5 0%
6.0%
(
高級専門店)
名古屋
Tokyo (Ginza, upscale specialty store)
NagoyaNagoya
4.0%
5.0%
大阪4.0%
5.0%
大阪OsakaOsaka
3.0%
Oct‐03
May‐04
Dec‐04
Jul‐0
5
Feb‐06
Sep‐06
Apr‐07
Nov
‐07
Jun‐08
Jan‐09
Aug
‐09
Mar‐10
3.0%
Oct‐03
May‐04
Dec‐04
Jul‐0
5
Feb‐06
Sep‐06
Apr‐07
Nov
‐07
Jun‐08
Jan‐09
Aug
‐09
Mar‐10
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 51
Source: NRI based on JREI
Retail Property Market
Vacancy rates have risen since the beginning of 2010 but is still low at 1%.
The overall vacancy rate for Retail Property REITs is low thanks to long-term contracts with such core tenants as AEON and Ito-Yokado. The rate The overall vacancy rate for Retail Property REITs is low thanks to long term contracts with such core tenants as AEON and Ito Yokado. The rate requires closing watching, however, as market withdrawals by large supermarkets and lease terminations by small tenants have been increasing recently.
Vacancy Rate for Retail Property REITs(%)
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 52
Source: NRI based on ARES
The transaction market still sees big deals from time to time although at a lower Retail Property Market
frequency than before, and liquidity remains intact.
Transactions Worth 10 Billion Yen or More
PropertyTransaction valueSeller
Ginza Toshiba Building16 1 billi
Over 100 billion
YEBISU GARDEN PLACE50 billi
50 – 100 billion
Tiffany Ginza Building38 billi
BIC CAMERA Ikebukuro29 billi
10 – 50 billionTransaction Value (Yen)
Year
Transactions Worth 10 Billion Yen or More Buyer
2007Hawks Town100 billionColony Capital (US)
16.1 billionToshibaTokyu Land Corporation
50 billionYEBISU GARDEN PLACEMorgan Stanley Group
Diamond City Leafa29.9 billionCampania Flore Ltd
Diamond City Terrace20.3 billioneyecity
38 billionTiffanyGoldman Sachs
29 billionSPC composed by BIC CAMERABIC CAMERA
Colony Capital (US)GIC Real Estate
Mitsukoshi Ikebukuro75 billionMitsukoshiSimplex REIT Partners
Campania Flore Ltd.Japan Retail Fund Investment Corp.
eyecityJapan Retail Fund Investment Corp.
Shibuya DUPLEX to16 billionSky Line Ltd.Union Investment
Kids park21.6 billionOsaka CityKansai Telecasting Corp
2008Simplex REIT PartnersUnion Investment
Ario19 billionIto-YokadoJapan Retail Fund Investment Corp. .
Kansai Telecasting Corp.
2009Ito-Yokado Higashiyamato City11.6 billionMikanohara Beta Three Ltd.Frontier Real Estate Investment Corp.
LaForet Harajyuku LaLaport IWATA
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved.53
2010(Jan-Sep)
LaForet Harajyuku21.8 billionMori BuildingMori Hills REIT Investment Corp.
LaLaport IWATA15.2 billionMitsui FudosanFrontier Real Estate Investment Corp.
Source: NRI based on Nikkei Real Estate Market Report
1 Macro fundamentals of Japan
2 Overview of Japanese real estate market
3 Office market
5 Retail property market
4 Residential market
6 Logistics property market
5 Retail property market
7 Hotel market
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 54
8 J-REIT market
The volume of motor freight has peaked out, and the domestic transportation market 6 Logistics property market
is shrinking.
The volume of motor freight transportation is on a declining trend, especially private motor freight in recent years.The volume of motor freight transportation is on a declining trend, especially private motor freight in recent years.Commercial motor freight had increased steadily until it reached a peak in around 2000.
Volume of motor freight transportation in Japan(Million Ton)
6,000
7,000
Private Commercial
(Million Ton)
4,000
5,000
2,000
3,000
0
1,000
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 55
0
FY50
FY55
FY60
FY65
FY70
FY75
FY80
FY83
FY84
FY85
FY86
FY87
FY88
FY89
FY90
FY91
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
Source: NRI based Ministry of Land, Infrastructure, Transport and Tourism
New supply is smaller, while the size of individual properties is larger due a rising 6 Logistics property market
tendency for companies to consolidate their logistics functions.
While the number of newly developed warehouses has decreased in recent years, gross floor area per warehouse has expanded.While the number of newly developed warehouses has decreased in recent years, gross floor area per warehouse has expanded.The increasing size of warehouses is due to manufacturers’ requirement for larger, more high-performance warehouses in conjunction with their adoption of supply chain management and consolidation measures to reduce costs.As very few new warehouses have been supplied since the Lehman shock, there is currently a sense of shortage in new and large warehouses.
Number of warehouses and gross floor area per warehouse
60060,000
(Units) (Sq. meters)
400
500
40,000
50,000
200
300
20,000
30,000
0
100
0
10,000
Y88
Y89
Y90
Y91
Y92
Y93
Y94
Y95
Y96
Y97
Y98
Y99
Y00
Y01
Y02
Y03
Y04
Y05
Y06
Y07
Y08
Y09
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 56
FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY
Warehouse Gross floor space per sq. mtGross floor area per a warehouse Number Source: NRI based Ministry of Land, Infrastructure, Transport and Tourism
The overall vacancy rate remains stalled at a high level, but newly-developed large-6 Logistics property market
scale warehouses are enjoying higher occupancy rates.
Vacancy rates have been stalled at a high level since the first half of 2008, when a large number of new facilities became available in the Tokyo Vacancy rates have been stalled at a high level since the first half of 2008, when a large number of new facilities became available in the Tokyo Bay area.On the other hand, newly-developed warehouses have achieved comparatively high occupancy due to manufacturers’ demand for high-spec, large-scale facilities in conjunction with their adoption of consolidation and supply chain management measures.
Average vacancy rate of warehouses in Greater Tokyo
25.0%
15.0%
20.0%
10.0%
Notes:0 0%
5.0%
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 57
Notes:Area: Greater Tokyo including Tokyo, Kanagawa, Saitama and Chiba.Asset: Large multi-tenant properties whose total floor area is over 33,000 sq. meters
Source: NRI based on CBRE
0.0%
Mar‐04
Jun‐04
Sep‐04
Dec
‐04
Mar‐05
Jun‐05
Sep‐05
Dec
‐05
Mar‐06
Jun‐06
Sep‐06
Dec
‐06
Mar‐07
Jun‐07
Sep‐07
Dec
‐07
Mar‐08
Jun‐08
Sep‐08
Dec
‐08
Mar‐09
Jun‐09
Sep‐09
Dec
‐09
Mar‐10
Jun‐10
Asking rent for warehouses other than large properties has been decreasing since 6 Logistics property market
2008, when vacancy soared.
Rents in Chiba reversed trends upwards recently. Asking rent in the overall market remains low, however, and a full-scale recovery in rent levels Rents in Chiba reversed trends upwards recently. Asking rent in the overall market remains low, however, and a full scale recovery in rent levels has yet to be realized.Rents for new and large warehouses have held steady thanks to strong demand.
Asking monthly rents for warehouses in Greater TokyoAsking monthly rents for warehouses in Greater Tokyo(USD/sq. meter)
6,000
4,000
5,000
東京都
2,000
3,000東京都
神奈川県
埼玉県
千葉県
Tokyo
Kanagawa
Saitama
Chiba
0
1,000
Notes:
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 58
Notes:Area: Greater Tokyo including Tokyo, Kanagawa, Saitama and Chiba.Asset: Total floor area of over 3,300 sq. meters
Source: NRI based on CBRE
Transactions are recovering, especially acquisitions and development by foreign 6 Logistics property market
investors.
Logistics property transactions fell after the Lehman shock but rebounded in the first half of 2009. Acquisitions by foreign investors have shown particularly steep increases since the start of 2010.particularly steep increases since the start of 2010.Among investors from abroad, Asian investors such as Mapletree Investment have increased their presence, joining the ranks of the long-active European and US investors such as LaSalle.Prologis is concentrating on development rather than acquisitions in Japan. The investor has doubled the number of development projects in 2010 compared to 2009, and 50% of its global development budget is allocated to Japan. p , g p g p
Acquisitions by foreign investors in 2010
18
20
Transactions in logistics properties by buyer category
Mapletree InvestmentKashiwa II logistics center 44.6 Million USDSendai logistics center 14.9 Million USDIwatsuki logistics center 48.0 Million USD12
14
16
18
Iwatsuki logistics center 48.0 Million USDIruma logistics center 34.0 Million USDNoda logistics center 48.0 Million USD
LaSalle Investment Management6
8
10
12
LaSalle Investment ManagementThree warehouses in Tokyo Bay area N.A.
0
2
4
6
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 59
2008_1H 2008_2H 2009_1H 2009_2H 2010_1H 2010_2H
外資系 国内
(As of Aug.)
Foreign Investors
Domestic Investors Source: NRI based on NilleiBP
Cap rates, which had been rising steadily since mid-2008, has leveled off since the 6 Logistics property market
start of 2010.
8 00%
Cap rates for logistics properties
6 00%
7.00%
8.00%
4 00%
5.00%
6.00%東京・シングルテナント
東京・マルチテナント
Single-tenant warehouses in Tokyo
Multi-tenant warehouses in Tokyo
2 00%
3.00%
4.00%
千葉・シングルテナント
千葉・マルチテナント
Single-tenant warehouses in Chiba
Multi-tenant warehouses in Chiba
0 00%
1.00%
2.00%
Notes:
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 60
0.00%
Source: NRI based on JREI
Notes:Single-tenant warehouses: Total floor area of approx. 10,000 sq. meters with two or three floors.Multi-tenant warehouses: Total floor area of 30,000 sq. meters with three or four floors.
1 Macro fundamentals of Japan
2 Overview of Japanese real estate market
3 Office market
5 Retail property market
4 Residential market
5 Retail property market
6 Logistics property market
7 Hotel market
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved.
8 J-REIT market
7 Hotel market
Hotel demand shrinks only slightly despite financial crisis and new influenza virus.
In 2009, guest nights in Japanese hotels decreased only 2.7 percent from 2008 despite a sharp decline in business activity (fewer business trips) following the 2008 financial crisis and the new influenza virus. Demand from overseas visitors decreased a steep 17.8 percent, while demand from domestic travelers decreased a small 1.5 percent.
350
Hotel Guests in Japan (Guest-Nights)
309 310 301+0.1% -2.7%
(millions)
23 22 18
200
250
300 309 310 301
-1.8% -17.8%
287 287 283
100
150
200
系列1
系列2Domestic guest nights
Overseas guest nights+0.3% -1.5%
0
50
2007年 2008年 2009年2007 2008 2009
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved.
年 年 年
62
Source: NRI based on Japan Tourism Agency
7 Hotel market
Hotel demand is currently set to recover to the 2007 level.
Hotel demand from domestic guests has remained stable even after the financial crisis. Overseas guests, which decreased from the third quarter of 2008 to the fourth quarter of 2009, recovered to the pre-crisis level in the first quarter of 2010.
Domestic Guest Nights in Japanese Hotels Overseas Guest Nights in Japanese Hotels
80
90
6
7
(millions) (million s)
40
50
60
70
2007
20083
4
5
2007
2008
10
20
302009
2010
1
2
32009
2010
Impacts of financial crisis and new influenza virus
0
1Q 2Q 3Q 4Q
0
1Q 2Q 3Q 4Q
Source: NRI based on Japan Tourism Agency
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 63
The Japanese government is promoting travel to Japan, and visitors from abroad 7 Hotel market
are anticipated to increase hereafter.
The Japanese government sees the tourism industry as a strategic driver of economic growth and has initiated a program to promote Japan as a The Japanese government sees the tourism industry as a strategic driver of economic growth and has initiated a program to promote Japan as a travel destination. The government target is 25 million visitors from abroad by 2020, up three times from 2010.
Visitors from Abroad
2,5002 500
3,000
Gov’t Target(2010~)Results(~2009)(thousand persons)
30,000
25 000
25,000
1,500
2,000
1 500
2,000
2,50025,000
20,000
15 000
20,000
15,000
679
1,0001,000
1,50015,000
10,00010,000
679
0
500
90 95 000
005
010
013
016
019
50,000
0
6,790
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 64
19 19 20 20 20 20 20 20
Source: NRI based on Japan Tourism Agency
7 Hotel market
There is enormous potential to increase visitors from China.
More than 12.7 million Chinese travelers visited Japan in 2009, surpassing the number of visitors from South Korea (12.0 million) and Taiwan (8.5 million). There is still considerable room for growth, as the ratio of outbound travelers to total population in China is only about 1 percent, which is much lower than that of other countries.
Outbound Travelers by Major Country
140%
160%
70,000
80,000 系列2 系列1Number of outbound travelers (left scale)
Ratio of outbound travelers to national population(right scale) (thousand persons)
80%
100%
120%
40,000
50,000
60,000
,
20%
40%
60%
10,000
20,000
30,000
0%0
Ger
man
y
ed K
ingd
om
nite
d S
tate
s
Rus
sia
Italy
Can
ada
Fran
ce
Net
herla
nd
Japa
n
Mex
ico
Chi
na
Sout
h K
orea
Spa
in
Indi
a
Taiw
an
Sing
apor
e
Hon
g K
ong
Aus
tralia
Indo
nesi
a
Thai
land
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 65
Uni
te Un S
Source: NRI based on JNTO
7 Hotel market
Visitors from China has risen consistently both before and after the financial crisis.
Travelers from South Korea and the United States decreased significantly over the past three years, while visitors from ChinaTravelers from South Korea and the United States decreased significantly over the past three years, while visitors from Chinacontinued to increase in the same period.
Overseas Visitors to Japan by Country of Origin(million persons)
4
5
2
3系列1
系列2
系列3
South Korea
China
1
2 系列3
系列4
系列5
Hong Kong
Taiwan
United States
0
2007年 2008年 2009年2007 2008 2009
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 66
Source: NRI based on Japan Tourism Agency
A key factor boosting travel from China is the Japanese government’s easing of visa 7 Hotel market
restrictions.
In July 2010 the Japanese government eased restrictions on travel from China, deciding to grant visas to middle-income single travelers in addition
Japanese Governments Policy on Travelers from China
to group and family travelers and affluent single travelers. Soon after, visitors from China increased sharply. Chinese travelers arriving in Narita airport, the biggest international airport in and around Tokyo, increased 80 percent year-on-year in July-August 2010.
p y
Sep. 2000 Started granting travel visas to group travelers from the 3 highest developed regions
Sep. 2004 Started granting travel visas to group travelers from 4 other developed regions
July 2005 Started granting travel visas to group travelers from all regions
Mar. 2008 Started granting travel visas to family members traveling together
July 2009Started granting travel visas to affluent single travelers
( l i f th 35 000 USD)
Less than100 million
(annual income of more than 35,000 USD)
July 2010Started granting travel visas to middle-income single
travelers (annual income of more than 8 000 USD)
400million
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 67Source: NRI based on various sources
travelers (annual income of more than 8,000 USD) people
7 Hotel market
In addition, the Haneda Airport expanded its international access significantly.
Haneda Airport, the closest airport to the Tokyo metropolitan area, was originally primarily a domestic airport with limited international service. Haneda Airport, the closest airport to the Tokyo metropolitan area, was originally primarily a domestic airport with limited international service. There are currently plans to expand Haneda’s international access by nine times compared to 2009. The airport opened a new international terminal and a runway in October 2010. Haneda will eventually rank second in Japan in terms of the number of international flights processed. In addition, access from Haneda to the Tokyo metropolitan area has improved greatly.
17
15
20 200
150
170
(1000 flights)
Number of Inbound and Outbound International Flights Haneda’s International Network
BeijingSeoul
ShanghaiHong Kong
Haneda
LondonParis
VancouverSan Francisco
LA
NY
9 7
6
3 2
5
10
15 150
100
50
90
70 60
30 20 Hong KongBangkok
Kuala LumpurSingapore
Kota Kinabalu
TaipeiHonolulu
2 1
0
国際
空港
年度
~)
国際
空港
年度
~)
国際
空港
福岡
空港
10年
度)
0
2010
kyo
Nar
ita
eda
2014
Osa
ka
eda
2011
Nag
oya
Fuku
oka
eda
2010
Black : Current International LinerBlue: New International routes launched in 2010
成田
国
羽田
空港
(2014
年
関西
国
羽田
空港
(2011
年
中部
国 福
羽田
空港(~
201
Tok
Toky
o H
ane
Toky
o H
ane
Toky
o H
ane
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 68
羽 羽
Source: NRI based on various sources
7 Hotel market
Tokyo is anticipated to benefit the most from increased international tourists.
Tokyo is one of Japan’s most popular travel destinations for international travelers. There are many places to visit such as ancient temples, huge
Travel Destinations of Visitors from Abroad by Country of Origin (2009)
Tokyo is one of Japan s most popular travel destinations for international travelers. There are many places to visit such as ancient temples, huge shopping centers and diverse fancy restaurants. Kanagawa and Chiba are located next to Tokyo. Kanagawa is the location of Japan’s second largest city: Yokohama. Chiba has the biggest international airport: Narita. Kyoto is the ancient capital of Japan and boasts numerous cultural properties and historical sites. Osaka is the biggest city in western Japan.
Region to go
Country From 1st 2nd 3rd 4th 5th
y y g ( )
South Korea(N=3,716)
Tokyo(45.0%)
Osaka(21.6%)
Fukuoka(20.3%)
Kyoto(11.1%)
Kanagawa(9.7%)
Taiwan(N=2,286)
Tokyo(44.3%)
Osaka(23.7%)
Kyoto(15.8%)
Chiba(15.8%)
Kanagawa(15.0%)
China(N=2,068)
Tokyo(70.8%)
Osaka(41.6%)
Kanagawa(30.1%)
Kyoto(29.4%)
Chiba(23.1%)
Hong Kong(N 1 100)
Tokyo(53 7%)
Osaka(19 6% )
Hokkaido(17 3%)
Chiba(13 9%)
Kyoto(10 2%)(N=1,100) (53.7%) (19.6% ) (17.3%) (13.9%) (10.2%)
United States(N=1,516)
Tokyo(66.5%)
Kyoto(20.4%)
Kanagawa(20.3%)
Osaka(17.2%)
Chiba(11.2%)
Foreign Travelers Total Tokyo Osaka Kyoto Kanagawa Chiba
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved.
Foreign Travelers Total(N=15,355)
Tokyo(58.8%)
Osaka(24.4%)
Kyoto(20.6%)
Kanagawa(16.7%)
Chiba(12.7%)
69
Source: NRI based on JNTO
7 Hotel market
Occupancy rates have recovered to the pre-crisis level.
Hotel occupancy rates in 2010 have been running at a higher level than in 2009, although not as high as in 2007 and 2008. A look at hotel
Hotel Occupancy Rates Hotel Occupancy Rates in Tokyo and Osaka
Hotel occupancy rates in 2010 have been running at a higher level than in 2009, although not as high as in 2007 and 2008. A look at hotel occupancy rates by region shows that Tokyo has the highest rate. The rate of improvement in occupancy rates is also the highest in Tokyo.
(%) Hotel Occupancy Rates Hotel Occupancy Rates in Tokyo and Osaka
80
100Area July 2010 July 2009 Rise and Fall
T k 80 7% 76 2% 4 5% t
(%)
40
60 2007年
2008年
2009年
Tokyo 80.7% 76.2% 4.5%pt
Osaka 56.1% 59.7% -3.6%pt2009
2007
2008
0
202010年
Japan 65.0% 60.8% 4.2%pt
2010
1月 2月 3月 4月 5月 6月 7月 8月 9月 10月11月12月 Source: NRI based on Zen Nihon City Hotel Renemei Jan Feb Mar Apr May Jun Jul Aug SepOct Nov Dec
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 70
7 Hotel market
Hotel development has slackened since the financial crisis.
Hotel construction or expansion plans decreased sharply from over 40,000 rooms in June 2006 to 30,000 rooms in June 2010. Hotel construction or expansion plans decreased sharply from over 40,000 rooms in June 2006 to 30,000 rooms in June 2010. Hotel development activity is concentrated mostly in Tokyo, Kinki (including Osaka and Kobe), and Okinawa.
43,242
37 502
50,000
5,662 90%
100%
Hotel Construction and Expansion Plans by Region(number of rooms planned in June 2010; total 31,357 rooms)
Hotel Construction or Expansion Plans(number of rooms)(rooms)
23,467
37,502
31,357
20 000
30,000
40,000
4,696
1,755 568
2,594
5,66
60%
70%
80%
90%
15,194
0
10,000
20,000
6,389
1,727 3,286
20%
30%
40%
50%
0
02/06
04/06
06/06
08/06
10/06
601 1,273 2,806
0%
10%
okka
ido
Toho
ku
Kan
to
Toky
o
Chu
bu
kina
wa
hine
tsu
Kin
ki
Chi
na
Shik
oku
Kyus
yu
June2002
June2004
June2006
June2008
June2002
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 71
Ho T
Toka
i Ok
Kos
h S K
Source: NRI based on HOTERES
7 Hotel market
If the government goal is realized, Tokyo will require a considerable volume of new supply.
(1000 t )
Comparison of Available Supply and New Demand(All Japan)
Comparison of Available Supply and New Demand(Tokyo)
(1000 t )
17,000
100 000
150,000
15,000
20,000
Newly Supplied Rooms in 2010
(1000 stays) (1000 stays)
123,000 50,000
100,000
14,400
3,500 10,000 Vacant Rooms
44,000
0
1 2
9,000
0
5,000
1 2New Supply New Demand New Supply New Demande Supp y& Vacant
Source: NRI based on Japan Tourism Agency HOTERES
2010~2019e Supp y& Vacant 2010~2019
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 72
Source: NRI based on Japan Tourism Agency, HOTERES
7 Hotel market
After the Financial Crisis, there have been no major hotel deals.
The hotel sector is one of the asset classes that have increased liquidity over the last ten years. There were several big deals including Morgan
Major Hotel Transactions in Japan in Recent Years
The hotel sector is one of the asset classes that have increased liquidity over the last ten years. There were several big deals including Morgan Stanley’s 2.8 billion acquisition of 13 ANA Hotels. However, not many people have been investing in hotels recently.
Date Hotel Properties Asset Price Sell Side Buy Side
Apr. 2002 Hotel Okura Kobe 165 million USD Hotel Okura AIG
Feb. 2004 Shin-Kobe Oriental Hotel 125 million USD Daiei Morgan Stanley
Nov. 2004 Westin Hotel Tokyo 500 million USD Sapporo Holdings Morgan Stanley
Jan, 2006 Hotel Nikko Aribira 197 million USD Frank Forton Investment Japan Hotel and Resort Inc
Feb. 2006 Makuhari Prince Hotel 132 million USD Seibu Railway APA group
Apr; 2006 Royal Hotel 150 million USD Royal Hotel Mori Trust
Sep. 2006 Hotel Okura Kobe 190 million USD Rumda Properties Japan Inc Mori Trust REIT
Feb. 2007 Roppongi Prince Hotel 407 million USD Seibu Railway Sumitomo Fudosan
Mar. 2007 Hotel President Aoyama 164 million USD Chuo Bussan Da Vinci Advisers
Apr. 2007 ANA Hotels (13 hotels) 2,800 million USD All Nippon Airway Morgan Stanley
Feb. 2008 Westin Hotel Tokyo 770 million USD Morgan Stanley GIC Real Estate
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 73Source: NRI based on various sources
y g y
Dec, 2008 Hotel Gracery Tamachi 41 million USD NA Hankyu REIT
7 Hotel market
Cap rates are increasing gradually.
Hotel cap rates have increased approximately 100 BP since the Financial Crisis.Hotel cap rates have increased approximately 100 BP since the Financial Crisis.
Cap Rate Trend of Hotelsp
7.0%
8.0%
系列1
系列2
Tokyo
Sapporo
4.0%
5.0%
6.0% 系列2
系列3
系列4
Sapporo
Nagoya
Osaka
1 0%
2.0%
3.0% 系列5Fukuoka
0.0%
1.0%
ct‐05
eb‐06
un‐06
ct‐06
eb‐07
un‐07
ct‐07
eb‐08
un‐08
ct‐08
eb‐09
un‐09
ct‐09
eb‐10
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 74
Oc
Fe Ju Oc
Fe Ju Oc
Fe Ju Oc
Fe Ju Oc
FeSource: NRI based on various sources
1 Macro fundamentals of Japan
2 Overview of Japanese real estate market
3 Office market
5 Retail property market
4 Residential market
5 Retail property market
6 Logistics property market
7 Hotel market
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved.
8 J-REIT market
Introduced in the year 2000, the J-REIT market has shrunk by half from the peak, 8 J-REIT market
with capitalization at approximately 3.0 trillion yen as of October 2010.
The J-REIT market started In September 2001 with 2 listings and a market capitalization of approximately 25 billion yen.The J REIT market started In September 2001 with 2 listings and a market capitalization of approximately 25 billion yen.Currently, there are 36 listed J-REITs with a total share value of approximately 3.0 trillion yen as of October 2010.
J-REIT market capitalization
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 76
Source: NRI based on Bloomberg
The Tokyo Stock Exchange (TSE) REIT Index has moved more or less in tandem 8 J-REIT market
with TOPIX and has been less volatile than the listed Real Estate Industry Index.
The TSE REIT Index has been more stable than the TSE Stock Price Index by Real Estate Industry but has dropped sharply from its peak in May The TSE REIT Index has been more stable than the TSE Stock Price Index by Real Estate Industry but has dropped sharply from its peak in May 2007.
TSE REIT Index, TOPIX, and TSE Stock Price Index by Real Estate Industry
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 77
Note: March 2003 = 1,000.
Source: NRI based on Bloomberg
The average dividend yield of J-REITs has remained in the 3.0% - 6.0% range 8 J-REIT market
except during the global financial crisis period.
The dividend yield of J-REITs rose steeply in September 2008 but has fallen back to around 6% at present. The dividend yield of J REITs rose steeply in September 2008 but has fallen back to around 6% at present.
Expected Dividend Yield of J-REIT
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 78
Source: NRI based on Bloomberg
The investment attitudes toward J-REITs of both local individuals and foreign 8 J-REIT market
investors changed dramatically after the global financial crisis.
Around the time of the global financial crisis, foreign investors changed their investment behavior toward J-REITs, switching from net buying to Around the time of the global financial crisis, foreign investors changed their investment behavior toward J REITs, switching from net buying to net selling.
J-REIT Trading Volume by Investor Type
Net B
uyingN
et Sellinng
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 79
Source: NRI based on Tokyo Stock Exchange
8 J-REIT market
M&A activity has increased in the J-REIT market since November 2008.
Listed J-REITs as of October 2008 Listed J-REITs as of October 2010
NO. Code REIT Sector1 8951 Nippon Building Fund Office2 8952 Japan Real Estate Office3 8953 Japan Retail Fund Retail4 8954 ORIX JREIT Diversified5 8955 Japan Prime Realty Diversified6 8956 P i Di ifi d
NO. Code REIT Sector1 8951 Nippon Building Fund Office2 8952 Japan Real Estate Office3 8953 Japan Retail Fund Retail4 8954 ORIX JREIT Diversified5 8955 Japan Prime Realty Diversified6 8956 Premier Diversified 6 8956 Premier Diversified
7 8957 TOKYO REIT Diversified8 8958 Global One Real Estate Office9 8959 Nomura Real Estate Office Fund Office
10 8960 United Urban Diversified11 8961 MORI TRUST Sogo REIT Diversified12 8963 Invincible Diversified13 8964 Frontier Real Estate Retail14 8966 CRESCEND Di ersified
6 8956 Premier Diversified7 8957 TOKYO REIT Diversified8 8958 Global One Real Estate Office9 8959 Nomura Real Estate Office Fund Office
10 8960 United Urban Diversified11 8961 MORI TRUST Sogo REIT Diversified12 8962 Nippon Residential Residential13 8963 Invincible Diversified14 8964 Frontier Real Estate Retail 14 8966 CRESCEND Diversified
15 8967 Japan Logistics Fund Industrial16 8968 Fukuoka REIT Diversified17 8972 Kenedix Realty Diversified18 8973 Sekisui House SI Diversified19 8975 FC Residential Diversified20 8976 Daiwa Office Office21 8977 Hankyu REIT Diversified22 8979 Starts Proceed Diversified
14 8964 Frontier Real Estate Retail15 8965 New City Residence Residential16 8966 CRESCEND Diversified17 8967 Japan Logistics Fund Industrial18 8968 Fukuoka REIT Diversified19 8969 Prospect REIT Diversified20 8970 Japan Single Residence Diversified21 8972 Kenedix Realty Diversified22 8973 Sekisui House SI Diversified 22 8979 Starts Proceed Diversified
23 8981 Japan Hotel and Resort Hotel24 8982 TOP REIT Diversified25 8983 JAPAN Office Office26 8984 B Life Diversified27 8985 Nippon Hotel Fund Hotel28 8986 Japan Rental Housing Residential29 8987 Japan Excellent Diversified30 3226 Nippon Accommodations Fund Residential
22 8973 Sekisui House SI Diversified23 8974 LaSalle Japan Diversified24 8975 FC Residential Diversified25 8976 Daiwa Office Office26 8977 Hankyu REIT Diversified27 8978 Advance Residence Residential28 8979 Starts Proceed Diversified29 8980 LCP Diversified30 8981 Japan Hotel and Resort Hotel 30 3226 Nippon Accommodations Fund Residential
31 3227 MID REIT Diversified32 3229 Nippon Commercial Diversified33 3234 MORI HILLS REIT Diversified34 3240 NOMURA REAL ESTATE RESIDENTIAL Residential35 3249 Industrial & Infrastructure Fund Industrial36 3269 Advance Residence Residential
30 8981 Japan Hotel and Resort Hotel31 8982 TOP REIT Diversified32 8983 JAPAN Office Office33 8984 B Life Diversified34 8985 Nippon Hotel Fund Hotel35 8986 Japan Rental Housing Residential36 8987 Japan Excellent Diversified37 3226 Nippon Accommodations Fund Residential38 3227 MID REIT Diversified
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 80
38 3227 MID REIT Diversified39 3229 Nippon Commercial Diversified40 3234 MORI HILLS REIT Diversified41 3240 NOMURA REAL ESTATE RESIDENTIAL Residential42 3249 Industrial & Infrastructure Fund Industrial
8 J-REIT market
J-REITs more than doubled their acquisitions in 2010 on a year-over-year basis.
Acquisitions by J-REITs have picked up slightly since the start of 2010, following a downturn in the third quarter of 2009.Acquisitions by J REITs have picked up slightly since the start of 2010, following a downturn in the third quarter of 2009.
図表題 フォント:MSPゴシック サイズ:14 色:黒
J-REIT Acquisition Volume
図表題 フォント:MSPゴシック サイズ:14 色:黒例)Tokyoオフィス市場の賃料推移
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 81
Note: 2010 3Q is up to August
Source: NRI based on ARES
Authors
SungYoon [email protected]
Lead author and author of
Tomohiko [email protected]
Lead author and author of 4 R id ti l k tLead author and author of
2 Overview of Japanese real estate market3 Office market
4 Residential market8 J-REIT market
Daisuke ISHIHARA Atsushi KOGUCHIa koguchi@nri co [email protected]
Author of 7 Hotel market
Author of 6 Logistics property market
Shoko [email protected]
Yasuyuki [email protected]
Author of 4 Residential market5 Retail property market
Author of 1 Macro fundamentals of Japan6 Logistics property market
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 82
Copyright(C) 2011 Nomura Research Institute, Ltd. All rights reserved. 83