The Japanese Real Estate Investment Market 2016
October 2016
Otemachi Financial City Grand Cube,
1-9-2 Otemachi, Chiyoda-ku, Tokyo 100-0004, Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Population movements in Japan
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Office market
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 2
0
10,000
20,000
30,000
40,000
50,000
60,000
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
65-
15-64
0-14
households
Population movements in Japan
The number of households is increasing for now, but is projected to decrease after 2019.
The population of people 65 years or older is expected to level off in 2025 and head downwards from 2040.
In 2015, depopulation was observed for the first time in Japan, based on the national census.
Population and households in Japan
Forecast →← ActualPopulation
(thousand)Households
(thousand)
Source: National Institution of Population and Social Security Research and MIC “Population Census”
Note 1: Median-fertility (median-mortality) projection
Note 2: Forecast of population and the number of households are based on the “Population Census” in 2010, while the preliminary data in the “Population Census” in 2015 is basis for 2015.
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Population movements in Greater Tokyo
Population of Greater Tokyo has peaked out in 2015.
On the other hand, the number of households is projected to increase until 2025.
In Greater Tokyo, the population has peaked out; however, the number of households is expected to increase for 10 years.
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Tokyo Kanagawa Saitama Chiba
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Tokyo Kanagawa Saitama Chiba
Population of Greater Tokyo
Forecast →← Actual Forecast →← Actual
Number of households in Greater Tokyo
Population
(thousand)
Households
(thousand)
Source: National Institution of Population and Social Security Research and MIC “Population Census”
Note 1: Median-fertility (median-mortality) projection
Note 2: Forecast of population and the number of households are based on the “Population Census” in 2010, while the preliminary data in the “Population Census” in 2015 is basis for 2015.
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Population movements in Greater Tokyo
Recently, the population of Greater Tokyo has continued to rise.
Incremental population growth of foreign and Japanese residents in Greater Tokyo
Sources: MOJ “Zairyu Gaikokujin Toukei” “Aliens Statistics” and MIC “Basic Resident Registration”
Note: Foreigner population based on “Zairyu Gaikokujin Toukei” “Aliens Statistics” by 2011 and after that based on “Basic Resident Registration”.
The foreign population dipped temporarily due to the global financial crisis and aftermath of the 2011 earthquake, but
has been rising in line with economic recovery.
Foreigners accounted for 38.6% of the population growth in this area.
58,665
93,950
-100
-50
0
50
100
150
200
250
300
foreigners(by "Zairyu-Gaikokujin-Tokei" foreigners(by "Jumin-Kihon-Daicho" Japanese
61.4%
38.6%
Population
(thousand)
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Population movements in Greater Tokyo
The number of net inflows in 2015 recovered to the level of 2005 or 2006.
The inflow is projected to continue.
Population has been inflowing to Greater Tokyo
Net inflows of people to Greater Tokyo
Source: MIC “Jyumin Kihon Daichou Jinkou Idou Houkoku”
Net in
cre
ase
Net d
ecre
ase
-150
-100
-50
0
50
100
150
200
250
300
Tokyo Kanagawa Chiba Saitama
Population
(thousand)
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Population movements in Greater Tokyo
However, the number of single-person households is expected to peak out in 2030.
Single-person households are expected to drive growth in the number of households in Greater Tokyo over the near term.
Number of households by family composition in Greater Tokyo
Forecast →← Actual
1995 2000 2005 2010 2015 2020 2025 2030 2035
4,000
3,000
1,000
2,000
6,000
5,000
7,000
0
Other
One-parent-and-child(ren)
Couple-and-child(ren)
One-person
Couple-only
Households
(thousand)
Source: National Institution of Population and Social Security Research and MIC “Population Census”
Note 1: Median-fertility (median-mortality) projection
Note 2: Forecast of population and the number of households are based on the “Population Census” in 2010, while the preliminary data in the “Population Census” in 2015 is basis for 2015.
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Population movements in central Tokyo
Population is expected to increase in the Chuo, Koto, and Minato wards.
In seven wards, the population is projected to decrease by over 10% from 2010 to 2040.
The population in Tokyo’s 23 wards is projected to increase over the longer term only in the three wards along Tokyo Bay
←Actual Forecast→
Ward 2010 2015 2020 2025 2030 2035 2040
Chuo 100.0 114.9 115.3 116.6 116.8 116.1 114.4
Koto 100.0 108.1 104.4 106.8 108.2 108.8 108.5
Minato 100.0 118.7 107.0 107.9 107.8 107.0 105.2
Shinjuku 100.0 102.2 104.4 104.8 104.4 103.4 101.6
Nerima 100.0 100.8 105.1 105.3 104.5 102.9 100.6
Sumida 100.0 103.6 101.7 102.6 102.7 102.0 100.6
Arakawa 100.0 104.0 103.0 102.8 102.2 101.2 99.7
Chiyoda 100.0 123.8 106.9 106.1 104.6 102.2 99.3
Setagaya 100.0 102.7 102.7 102.4 101.5 100.0 97.9
Shinagawa 100.0 105.9 102.9 102.7 101.7 100.0 97.8
Edogawa 100.0 100.2 101.7 101.1 99.8 98.2 96.2
Bunkyo 100.0 106.4 101.9 101.3 100.1 98.2 95.7
Toshima 100.0 102.2 106.1 104.5 102.2 99.2 95.3
Ota 100.0 103.5 101.6 100.8 99.4 97.5 95.1
Itabashi 100.0 104.9 100.5 99.1 97.2 94.7 91.8
Meguro 100.0 103.6 100.2 98.8 96.8 94.1 91.1
Taito 100.0 112.8 99.5 97.7 95.4 92.6 89.4
Shibuya 100.0 109.9 98.8 96.6 93.9 90.9 87.4
Nakano 100.0 104.4 97.7 95.5 92.9 89.8 86.2
Kita 100.0 101.6 97.6 95.1 92.2 89.0 85.5
Suginami 100.0 102.8 97.6 95.1 92.0 88.5 84.5
Katsushika 100.0 100.2 95.7 92.4 88.7 84.8 80.8
Adachi 100.0 98.2 95.2 91.6 87.5 83.1 78.7
Population trends in the 23 wards of Tokyo (2010=100)
Source: National Institution of Population and Social Security Research and MIC “Population Census”
Note 1: Median-fertility (median-mortality) projection
Note 2: Forecast of population and the number of households are based on the “Population Census” in 2010, while the preliminary data in the “Population Census” in 2015 is basis for 2015.
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Percentage of foreigners in central Tokyo
The percentage of foreigners in Tokyo are increasing, and there is a ward where the ratio is over 10%.
Percentage of foreigners in the 23 wards of Tokyo (top 5)
The percentage in Shinjuku (over 10%) is the highest in Tokyo, and the percentages of Toshima and Arakawa are
over 8%.
In the other hand, the 23 wards as a whole have foreigners as 4.2% of their total population, indicating that the
situation of each ward is quite different.
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
2013 2014 2015 2016
Tatito
Shinjuku
23 wards
Minato
Toshima
Arakawa
Source: MIC
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Population aging in central Tokyo
In 2015, one in four people is over 65 years old in just 4 wards; however, the same situation will occur in 7 wards in 2025 and 21 wards in 2035.
Population aging by ward
←Actual Forecast→
Ward 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Sumida 13.1% 15.5% 18.1% 20.2% 21.4% 21.9% 21.1% 21.6% 22.7% 24.8% 28.1%
Arakawa 13.7% 16.5% 18.9% 20.8% 21.9% 23.4% 23.8% 23.5% 24.1% 25.6% 28.4%
Koto 9.4% 12.2% 15.2% 17.3% 19.1% 20.5% 20.0% 20.5% 21.7% 24.5% 28.5%
Shinjuku 12.6% 15.3% 17.1% 18.7% 19.1% 21.0% 21.6% 22.0% 23.4% 25.7% 29.3%
Edogawa 8.1% 9.9% 12.8% 15.4% 18.1% 20.6% 21.4% 21.7% 23.3% 26.1% 29.5%
Shinagawa 11.6% 14.5% 17.4% 18.0% 19.4% 21.5% 22.4% 22.8% 24.1% 26.7% 30.8%
Bunkyo 13.9% 16.4% 17.9% 18.3% 18.9% 20.9% 21.7% 22.6% 24.6% 27.3% 31.0%
Ota 11.6% 14.1% 16.3% 18.4% 20.4% 23.0% 24.1% 24.6% 26.0% 28.4% 31.7%
Setagaya 11.1% 13.4% 16.1% 17.3% 18.3% 20.3% 21.2% 22.3% 24.6% 27.9% 31.8%
Taito 15.9% 18.8% 21.1% 23.1% 23.6% 25.1% 25.4% 25.2% 26.0% 28.3% 32.2%
Kita 12.7% 16.0% 19.3% 21.6% 24.0% 26.7% 27.7% 27.6% 28.2% 29.8% 32.8%
Chiyoda 16.6% 20.2% 20.9% 20.2% 19.2% 19.7% 20.5% 21.7% 24.3% 27.9% 32.8%
Itabashi 10.0% 12.7% 16.3% 19.3% 21.3% 24.3% 25.8% 26.4% 27.8% 29.8% 33.1%
Chuo 15.4% 17.6% 18.3% 16.3% 15.9% 16.9% 17.9% 19.0% 22.0% 26.8% 33.4%
Meguro 12.5% 14.8% 17.4% 18.6% 19.6% 22.2% 23.3% 24.4% 26.6% 29.5% 33.5%
Nakano 12.1% 14.6% 16.3% 18.2% 19.9% 22.5% 23.8% 24.8% 26.8% 29.7% 33.8%
Toshima 12.8% 15.7% 18.4% 21.1% 19.3% 19.8% 21.6% 23.1% 25.5% 29.0% 34.3%
Minato 13.7% 16.3% 17.9% 17.8% 17.2% 18.3% 19.5% 21.0% 24.0% 28.4% 34.3%
Katsushika 10.6% 13.2% 16.6% 19.9% 22.0% 24.8% 26.1% 26.8% 28.4% 31.1% 34.5%
Shibuya 12.6% 15.2% 16.9% 18.5% 19.6% 21.9% 23.3% 24.6% 27.3% 31.0% 35.6%
Adachi 9.3% 11.9% 15.9% 19.9% 22.2% 25.4% 26.8% 27.3% 28.9% 31.8% 35.7%
Nerima 9.5% 12.2% 15.4% 20.3% 19.3% 23.1% 25.5% 27.7% 30.8% 34.6% 39.0%
Suginami 11.8% 14.4% 16.8% 18.8% 23.1% 26.3% 28.2% 29.8% 32.4% 35.6% 39.6%
Source: National Institution of Population and Social Security Research and MIC “Population Census”
Note 1: Median-fertility (median-mortality) projection
Note 2: Forecast of population and the number of households are based on the “Population Census” in 2010, while the preliminary data in the “Population Census” in 2015 is basis for
2015.
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Population movement in central Tokyo
The increase in Tokyo’s population has consistently outpaced estimates
Actual and projected population movement in Tokyo
1995 2000 2005 2010 2015
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Forecast in 2010
Forecast in 2005
Forecast in 2000
Actual data
Population
(thousand)
Source: National Institution of Population and Social Security Research and MIC “Population Census”
Note 1: Median-fertility (median-mortality) projection
Note 2: Forecast of population and the number of households are based on the “Population Census” in 2010, while the preliminary data in the “Population Census” in 2015 is basis for 2015.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Population movements in Japan
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Office market
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 12
0
5,000
10,000
15,000
20,000
25,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
(Billion USD)
Japan
China
US
KoreaUK
India
Macro fundamentals of Japan
Entering the 2020s, Japan will remain at third place globally in nominal GDP, ahead of developing countries such as
India.
Japan remains one of the largest economies in the world and should not be
ignored as an investment target
Source: Compiled by NRI from IM F(2016 Apr.) data.
Nominal GDP of major countries
Forecast →←Actual
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-10.0
-5.0
0.0
5.0
10.0
15.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
(%)
India
China
Korea
Japan
UKUS
Macro fundamentals of Japan
IMF forecasts estimate Japan’s GDP growth rate at around 0.5% for the next 5 years.
Japan’s economic growth is low compared to other major economies and high
growth going forward looks unlikely
Real GDP growth rate of major economies
←Actual Estimate→
Source: Compiled by NRI from IMF (2016 Apr.) data.
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Macro fundamentals of Japan
Fluctuations in each demand component became less pronounced from mid-2015 and continue to remain flat
overall.
Both domestic demand and overseas demand are treading water and there is no driver of economic growth.
(%)
Quarterly real GDP growth and contributions to changes (seasonally adjusted series, YoY)
Source: Compiled by NRI
from Cabinet Office data.
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
2010 2011 2012 2013 2014 2015 2016
Private Consumption
Private Investment
Public Demand
Exports
Imports
Real GDP Growth
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-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0(%) Core CPI BOJ's Core CPI
Macro fundamentals of Japan
Although an increase in the price index was reflected by the consumption tax hike in April 2014, it dulled after that
and the core CPI turned to negative YoY growth in 2016.
The increase rate of the BOJ’s core CPI (excludes fresh food and the energy) is also falling consistently in 2016.
Inflation was temporarily seen, but not enough to overcome deflation completely.
Inflation target
set by BOJ
Year-on-year comparison for the same month of the consumer price index
Sources: Compiled by NRI from
MIC and Bank of Japan data.
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-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60% Monetary Base Money Stock
Macro fundamentals of Japan
Since quantitative and qualitative easing in April 2013, the BOJ has been massively expanding the money supply
and purchasing JGBs.
Aggressive easing by BOJ has continued since 2013.
YoY change of money supply (Average balance) BOJ’s holdings of JGBs
0
100
200
300
400
Source: Compiled by
NRI from Bank of
Japan data
(Trillion Yen)
Source: Compiled by
NRI from Bank of
Japan data
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Macro fundamentals of Japan
The BOJ introduced NIRP which set the policy rate applied to the part of the current account balance at minus 0.1%
in January 2016.
Negative interest rates were also introduced additionally, and the short- and long-term interest rates dropped into negative territory.
Short-term interest rate (unsecured call rate) (Each end of the month) Long-term interest rate (10y-JGB) (Each end of the month)
Source: Compiled by
NRI from Bank of
Japan data
-0.20
-0.10
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
(%) (%)
Source: Compiled by NRI from Bloomberg data
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Macro fundamentals of Japan
Recent yen strength reflects mainly fading perceptions of a US rate hike, a risk-off mode by investors, and a
Japanese current account surplus
A reversal from yen weakness up to now, the yen has been stronger since the start of 2016.
Yen-dollar exchange rate (each end of the month)
(USDJPY=X)
70
80
90
100
110
120
130
Source: Compiled by NRI from Bloomberg data
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Macro fundamentals of Japan
Although the trade deficit and the reduction of the current surplus continued, the trade balance changed to the black in 2016 and also
reached a high level after several years.
The structure of the current surplus driven by exports is changing: Import value decreased due to a strong yen and declining resource
prices, and the deficit of the service balance also decreased due to an increase in foreign visitors to Japan. The primary balance which
shows subsidiary dividends and interest income on bonds is on an uptrend. On the other hand, export value has been falling recently.
The current account surplus returned to a high level due to the trade surplus, while the structure of the current account balance is changing.
Current account balance
Source: Compiled by NRI from MOF data
-8
-6
-4
-2
0
2
4
6
8
10
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
(Trillion Yen)
(年)
Trade balance Service balance Primary income balance Second income balance Current account
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-12
-10
-8
-6
-4
-2
0
2
4(%)
Japan US UK
0
50
100
150
200
250
300(%)
Japan US UK
Japan US UK
Gross debt
Net debt
Macro fundamentals of Japan
The government debt to GDP ratio has becoming flat in recent years due to a reduction in the primary balance deficit
and restraint of interest payments due to monetary easing as well as the increase in nominal GDP that is the
denominator of the ratio.
Government debt has plateaued at high level, while a primary fiscal balance surplus is not in sight.
Government debt to GDP ratio Primary balance to GDP ratio
Estimate →←Actual Estimate →←Actual
Source: Compiled by NRI from
IMF (2016 Apr) dataSource: Compiled by NRI from IMF (2016 Apr) data
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Beijing
Cairo
Chicago
Delhi
Dhaka
Guangzhou
Houston
Karachi
Kinshasa
Kolkata Lagos
LondonLos Angeles
Mexico City
Mumbai
New York
Osaka
Paris
São Paulo
Seoul Shanghai
ShenzhenTianjin
Tokyo
Washington
0
500
1,000
1,500
2,000
2,500
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
Macro fundamentals of Japan
Tokyo continues to be the world’s largest city in terms of population and GDP.
Population/GDP forecast for 2025 (Top 15 cities in terms of population or GDP)
Source:Compiled by NRI based on UN and Euromonitor data.
2025 nominal GDP
by city
(in billion USD)
2025 population
by city
( in thousands)
*No data for GDP of Dhaka and Kinshasa
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Macro fundamentals of Japan
Tokyo has the second largest concentration of world-class enterprises.
Number of HQ of Fortune Global 500 companies by city (2016) Fortune Global 500 companies in Tokyo (within top 200)
Source: Compiled by NRI from Fortune Global 500 (2016) data.
Rank CompanyRevenue
(Mil. USD)
36 Honda Motor 121,624
37 Japan Post Holdings 118,762
60 Nippon Telegraph & Telephone 96,134
79 Hitachi 83,584
92 SoftBank Group 76,469
113 Sony 67,519
131 JX Holdings 62,511
135 Dai-ichi Life Insurance 61,090
138 Marubeni 60,810
151 Mitsubishi 57,689
169 Toshiba 52,032
177 Tokyo Electric Power 50,561
179 Seven & I Holdings 50,099
191 Mitsubishi UFJ Financial Group 47,600
Beijing, 57
Tokyo, 37
New York, 17
London, 17
Paris, 17
Seoul, 11
Shanghai, 9Osaka, 7
Hong Kong, 7Houston, 7
Zurich, 5
Others, 309
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Macro fundamentals of Japan
Overview of real estate investment market in Japan
Population movements in Japan
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Office market
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The activity level of professional investors has steadily recovered, and market conditions are approaching that of 2005 to 2006.
In FY2013, J-REITs acquired over 2 trillion yen in property and showed overwhelming strength as buyers. After
FY2014, J-REITs were replaced by private equity as the leading real estate buyers.
Overview of real estate investment market in Japan
Acquisitions of securitized real estate
billion yen
Source: Compiled by NRI from MLIT “Real
Estate Securitization” data
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Office, residential, commercial and logistics properties account for 80% of transaction value but trading in hotels is growing more active.
A sharp rise in inbound demand from a jump in the number of foreign visitors is stimulating hotel investment.
Overview of real estate investment market in Japan
Acquisitions of securitized real estate by asset class
billion yen
Allocation of securitized real estate by asset class
in the past 5 years
Source: Compiled by NRI from MLIT “Survey of the Current State of Real Estate Securitization” data
Note: Because the usage of securitizations that require actual TMK is unclear, they have not been included after 2001. Because of this, the yearly totals and amounts will not match up with the documents
cited for this entry.
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Reflecting a lack of investable assets in Tokyo, investment money has begun to flow to other regions.
After FY2012, transaction volume in Tokyo has accounted for about 50% of the nationwide total due to a shortage
of investment opportunities in the urban area.
In FY2015 regional investment gained additional momentum, so from this viewpoint, it can be said that a market is
retracing the previous real estate cycle.
Overview of real estate investment market in Japan
Number of properties securitized by region
Source: Compiled by NRI from MLIT “Survey of the Current State of Real Estate Securitization” data
Note: Securitization of TMK properties is not included because their use is unknown.
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4.6
8.8
13.6
-7.4
8.7
4.8
-11.9
3.8
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Total return recovered to 8.7%, reaching the 2005 Q2 level.
Prior to the global financial crisis, total return reached 8.5% in 2005 Q2, and rose through 2006 Q2. Total return remained above c10%
until 2007 Q1.
Overview of real estate investment market in Japan
Source: MCI Real Estate - IPD
Income Return
Total Return
Capital Return
Performance trend in Japan
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Cap rates compressed rapidly and are lower than 2007 for some assets.
In the Tokyo market, an increasing number of real estate deals have cap rates of 3-4%. Some investors believe
arguing cap rates is futile as one can expect higher rents. Such market players consider timing and level of rent
increase more important than cap rate compression.
Overview of real estate investment market in Japan
Cap rates in Japan for major investment areas
Source: Compiled by NRI from Japan Real Estate Institute “Japanese Real
Estate Investor Survey” data.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 29
-40
-30
-20
-10
0
10
20
30
Fierce competition among commercial banks continues to help boost prices.
Banks’ lending attitude toward the real estate industry is the most lenient since 2000 and the standard of the time of
the global financial crisis in 2007 is exceeded. Many people in Japan believe there are too many banks, and
spreads continue to fall with covenants loosening.
Along with mega-banks and other major banks, regional mid-tier banks are entering the market, so conditions look
unlikely to change over the near term.
Overview of real estate investment market in Japan
Financial institutions’ lending attitude DI toward the real estate industry
Loose
Tight
Source: Compiled by NRI from
BOJ data.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 31
Office floor space shares by major region
Office market
Tokyo area holds 60% of Japan’s office rental market.
Japan has a stock of around 106 million ㎡ of available office rental space. The Tokyo area holds an overwhelming
share of the market at 64 million ㎡, comprising 60% of the total.
Source: JREI “The Annual Japanese Office Buildings Survey”
Note: Data is as of January 2014.
Note: The survey focuses on the central area of each city.
Note: Properties less than 3,000 square meters are excluded.
59.9%
4.7%1.0%
1.8%
14.9%
1.7% 1.0%5.5%
3.3%2.4%
2.1% 1.6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Tokyo Yokohama Saitama Chiba Osaka Kobe Kyoto Nagoya Fukuoka Sapporo Sendai Hiroshima
(5.00million ㎡)
(63.94million ㎡)
(1.03million ㎡)(1.95million ㎡)
(15.91million ㎡)
(1.85million ㎡)(1.12million ㎡)
(5.87million ㎡)(3.57million ㎡)
(2.54million ㎡)(2.23million ㎡)
(1.72million ㎡)
Tokyo Metropolitan Area
67.4%
12 major cities106.73million ㎡
Osaka Area
17.7%
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 32
Tokyo’s Central Business District (CBD) is concentrated in five wards
Tokyo’s CBD has an accumulation of office buildings and is concentrated in an area of 5km square, concentrated in
Chiyoda, Chuo, Minato, Shibuya, and Shinjuku wards.
30 km
30 km
Tokyo13.22 million people
Kanagawa9.07 million people
Saitama7.15 million people
Chiba6.15 milion people
SetagayaMinato
ItabashiKita
Adachi
Katsushika
Edogawa
Koto
SumidaTaito
Arakawa
Toshima
Bunkyo
Shibuya
ShinjukuChiyoda
Chuo
Meguro
Shinagawa
Ohta
Nakano
Nerima
Suginami
Office market
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 33
Monthly (Jan 2013 –Dec 2015)
Source: Miki Shoji Co., Ltd.
Office market
Vacancy rates in the Tokyo office market have been improving for over three
consecutive years.
Over the past 15 years, vacancy rates have been experiencing regular ups and downs, tending not to be stable for
more than two years.
Yearly (1998 - 2015)
Vacancy rate movement in Tokyo CBD
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Chiyoda
Chuo
Minato
Shinjyuku
Shibuya
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Jan
-13
Ap
r-1
3
Jul-
13
Oct
-13
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
Chiyoda
Chuo
Minato
Shinjyuku
Shibuya
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 34
Monthly (Jan 2013 – Apr 2016)
Source: Miki Shoji Co., Ltd.
Note: One tsubo is 3.3 square meters.
Office market
Rents entered an upward phase from around 2013 in all 5 Tokyo wards.
Yearly (1999 - 2015)
Rent trends in Tokyo CBD (yen/tsubo per month)
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
26,000
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
(yen/tsubo)
Chiyoda
Chuo
Minato
Shinjuku
Shibuya
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
26,000
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
(yen/tsubo)
Chiyoda
Chuo
Minato
Shinjuku
Shibuya
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 35
3,818 3,8353,660
3,461
3,243
2,020 1,988
1,884
1,467 1,474 1,415
3,648 3,6433,565 3,498
2,083 2,078 2,035 1,998
1,5391,533 1,501 1,473
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
1990 1995 2000 2005 2010 2015 2020 2025
23区
5区
3区
(千人)
The number of Tokyo’s office workers is declining at a fast rate than published
forecasts
Trend and forecast of office worker numbers in Tokyo
Office market
Central 3 wards
(Chiyoda, Chuo, Minato)
Central 5 wards
(Chiyoda, Chuo, Minato, Shibuya, Shinjuku)
23 wards
(1,000 people)
Forecast compiled in December 2010 (same for 5 and 3 wards)
Data announced in October 2013 same for 5 and 3 wards)
Source: MIC “Population Census” and Tokyo Metropolitan Government “Shugyosha no Yosoku”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 36
14.8%
15.8%16.4%
11.8% 11.8%
11.6%
13.5%
15.0%
15.6%
8.9% 8.7% 8.4%
6.2% 6.2% 6.1%
15.4%
15.3% 15.3%
11.5% 11.4% 11.3% 11.3%
15.2% 15.4%
15.5% 15.5%
8.6% 8.6% 8.6% 8.6%
6.3% 6.4% 6.4% 6.4%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2000 2005 2010 2015 2020 2025
千代田区
港区
中央区
新宿区
渋谷区
Chiyoda and Minato have been increasing their share of office workers, while
Chuo and Shibuya have been flat and Shinjuku has been losing share
Trend of office worker share in Tokyo’s CBD (23 wards =100%)
Office Market
Minato
Shibuya
Chuo
Chiyoda
Shinjuku
Source: MIC “Population Census” and Tokyo Metropolitan Government “Shugyosha no Yosoku”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 37
Office space supply in Tokyo’s 23 wards
Source: Mori Building Company “Market Trend Survey of Large-Scale Office Buildings in Tokyo's 23 Wards”
Office market
Despite the dwindling number of office workers, new office supply will likely
continue to grow.
56 55
83
100108104
114118
183
92
119
74
99
36
72
91
125
216
121
77
154
119
65
86 85
117
175
58
87
111107
63
131
183
0
10
20
30
40
50
60
70
0
50
100
150
200
250
1986
1987
198
8
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
200
5
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
# of buildingsSupplied floor area
(1,000 ㎡)
Office supply areaNumber of building supplied
forecast
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 38
Tokyo office market cap rate trend
Source: Japan Real Estate Institute “Real Estate Investor’s Survey”
Office market
Cap rates continues to decrease from 2012, reaching the level of 2007.
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
Oct
-03
Ap
r-0
4
Oct
-04
Ap
r-0
5
Oct
-05
Ap
r-0
6
Oct
-06
Ap
r-0
7
Oct
-07
Ap
r-0
8
Oct
-08
Ap
r-0
9
Oct
-09
Ap
r-1
0
Oct
-10
Ap
r-1
1
Oct
-11
Ap
r-1
2
Oct
-12
Ap
r-1
3
Oct
-13
Ap
r-1
4
Oct
-14
Ap
r-1
5
Oct
-15
Chiyoda(Marunouchi) Chuo(Nihonbashi) Minato(Toranomon)
Shinagawa Shinjuku Shibuya
ShinjukuShinagaShibuyaMinato(Toranomon)Chuo(Nihonbashi)Chiyoda(Marunouchi)
wa
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 39
Office rent trend in ex-Tokyo market
Source: Miki Shoji Co., Ltd.
Office market
Vacancy rate improvement not leading to a recovery in rents in the ex-Tokyo office
market.
Office vacancy trend in ex-Tokyo market
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Sendai
Fukuoka
NagoyaYokohama
SapporoOsaka
Tokyo
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
(yen/tsubo)
Tokyo
OsakaNagoyaYokohamaFukuoka
SendaiSapporo
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 40
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Oct
-03
Ap
r-0
4
Oct
-04
Ap
r-0
5
Oct
-05
Ap
r-0
6
Oct
-06
Ap
r-0
7
Oct
-07
Ap
r-0
8
Oct
-08
Ap
r-0
9
Oct
-09
Ap
r-1
0
Oct
-10
Ap
r-1
1
Oct
-11
Ap
r-1
2
Oct
-12
Ap
r-1
3
Oct
-13
Ap
r-1
4
Oct
-14
Ap
r-1
5
Oct
-15
Ex-Tokyo office market cap rate trend
Source: Japan Real Estate Institute “Real Estate Investor’s Survey”
Office market
Liquidity is growing in ex-Tokyo as well as the real estate investment market rises
and becomes overheated.
As property acquisition becomes more difficult in Tokyo, investment money must look to regional markets.
SendaiSapporoFukuokaNagoyaYokohamaOsaka
Copyright(C) Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 42
Breakdown of all households by housing type (2013)
Source: MIC “Housing and Land Survey”
Number of households by housing type 1988 - 2013
Residential market
About 20% of all households in Japan are living in non-public rental apartments,
and the percentage is trending upwards.
Households living in non-public rental apartments (excluding wooden apartments; hereafter the same in this section),
which numbered 3.34 million in 1988, increased by about 3.3 times to 9.96 million (about 20% of all households) in
2013.
3,7604,097
4,4214,716
4,9895,238
1,411 1,578 1,682 1,724 1,783 1,857
334 490 650 750 879 996
9%
12%
15%16%
18%
20%
0%
5%
10%
15%
20%
25%
0
1,000
2,000
3,000
4,000
5,000
6,000
'88 '93 '98 '03 '08 '13
Ratio
of H
ou
seh
old
s Living in
Private
Re
ntal &
A
partm
en
t Ho
use
(no
n-w
oo
d)
Nu
mb
er o
f Ho
use
ho
lds
(un
it:1
0,00
0)
Households Living in HousingHouseholds Living in Rental HousesHouseholds Living in Private Rental & Apartment Houses (non-wood)Ratio of Households Living in Private Rental & Apartment Houses (non-wood)
Own House63%
Private Rental House,
Apartment House (non-
wood)20%
Private Rental Housing, Others
9%
Public Rental House
6%
Company Housing
2%
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 43
Housing choices of moving households 1984 - 2013
Source: MIC “Housing and Land Survey”
Residential market
The total number of moving households has decreased, but the ratio of households
moving to non-public rental apartments is trending upwards.
The number of moving households peaked out in 1994-98 and decreased to about 77% of the peak level in 2009-13.
The number of households moving to non-public rental apartments is also on a decreasing trend, although its ratio to
the total number of moving households is trending upward.
1,1031,186 1,221
1,1351,039
939
782884 868
778698
639
427532 557
502 466 447
39%
45% 46% 44% 45%48%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
200
400
600
800
1,000
1,200
1,400
1,600
84-88 89-93 94-98 99-03 04-08 09-13
Ratio
of H
ou
seh
old
s Living in
Private
Re
ntal &
A
partm
en
t Ho
use
s
Nu
mb
er
of
Mo
vin
g H
ou
seh
old
s (U
nit
:10,
000)
Number of Moving Households in Past 5 Years
Number of Households Moved into Rental Houses
Number of Households Moved into Private Rental (Apartment) Houses
Ratio of Households Moved into Private Rental (Apartment) Houses
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 44
Location choices of moving households
Source: MIC “Housing and Land Survey”
Residential market
The majority of households moving to non-public rental apartments moved within
the same city.
Looking at the former locations of households moving into non-public rental apartments in seven major cities, those
that moved within the same city were greater in number than those that moved in from outside the city.
Tokyo’s 23 wards and Osaka saw a decline in households moving into non-public rental apartments from outside the
city, while major regional cities saw no change.
28 30 28 31 32 28 27 33
165 157 148 137
56 57 55 55 73 61 53 50 27 27 23 22 47 46 41 4850 46 48 55 25 24 24 27
266
207 197 200
58 54 51 58
10586 77 73
36 37 32 3045 47 49 54
0
50
100
150
200
250
300
350
400
450
500
94-9
8
99-0
3
04-0
8
09-1
3
94-9
8
99-0
3
04-0
8
09-1
3
94-9
8
99-0
3
04-0
8
09-1
3
94-9
8
99-0
3
04-0
8
09-1
3
94-9
8
99-0
3
04-0
8
09-1
3
94-9
8
99-0
3
04-0
8
09-1
3
94-9
8
99-0
3
04-0
8
09-1
3
Sapporo Sendai Tokyo 23
Wards
Nagoya Osaka Hiroshima Fukuoka
Bre
akd
ow
n o
f In
-Flo
w H
ou
seh
old
s M
ove
d in
Pri
vate
Re
nta
l Ho
use
s (n
on
-wo
od
) (U
nit
:1,0
00)
Household moving in a city
Household moving out a city
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 45
Housing stock by type 1988-2013
Source: MIC “Housing and Land Survey”
Residential market
The supply of non-public rental apartment units has increased more sharply than
total housing stock.
The growth of rental apartments (public and non-public combined) outpaced the growth of overall housing as well as
the more modest rise of rental housing in general.
As a result, the ratio of rental apartments to total rental houses increased from c60% to 70%.
Housing growth rates by type
39 44
50 54
58 61
16 18
20 21 22 23
12 14 15 16
0
10
20
30
40
50
60
70
'88 '93 '98 '03 '08 '13
Ho
usi
ng
Sto
ck (U
nit
:1 m
illio
n)
Number of Houses
Number of RentalHouses
Number of Rental & Apartment Houses (non-wood)
100
107
114
119
103
108
112 112
124
130
80
90
100
110
120
130
140
'98 '03 '08 '13
Gro
wth
Rat
e (1
988
= 10
0)Number of Houses
Number of RentalHouses
Number of Rental & Apartment Houses (non-wood)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 46
New housing supply trend: 1991-2015
Source: MLIT “Survey of Construction Work Started”
Breakdown of new rental housing construction by region
Residential market
Number of new housing starts decreases substantially in 2009, and is now on the
path to recovery.
The number of new housing starts in 2015 increased slightly on 2014, and the 900,000 unit mark was reached again
Because the number of new owner-built housing start kept decreasing, and the number of construction of new rental houses increased, the weighting of rental houses in construction housing rose.
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
91
92
93
94
95
96
97
98
99 00 01
02
03
04 05 06
07
08
09
10
11
12 13 14
15
Ratio
of R
en
tal Ho
use
s
Nu
mb
er o
f C
on
stru
ctio
n S
tart
s(U
nit:
1,0
00)
Own House Rental House Company House
House Built for Sale Ratio of Rental House
0
100
200
300
400
500
600
700
800
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
Ne
w R
en
tal H
ou
sin
g C
on
stru
ctio
n b
y R
egi
on
(Un
it:1
,00
0)
Provincial Region
Kinki Region
Chuubu Region
Metropolitan Region
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 47
8
9
10
11
12
13
14
15
16
17
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
2012 2013 2014 2015 2016
Re
nta
l Ho
usi
ng
Vac
ancy
Rat
e (
Un
it: %
)
All Tokyo areas
23 Tokyo districts
Tokyo cities
Kanagawa
Vacancy Rates of Rental Housing (non-wood) in Major Cities
Source: TAS Corp. and At Home Co., Ltd. “Report on Rental Housing Market”
Vacancy Rates of Rental Housing in Tokyo Metropolitan Area
Residential market
Rate of vacancy in Tokyo’s 23 wards and Tokyo city tend to improve. On the other
hand, rate of vacancy in Kanagawa with the high apartment ratio is rising suddenly.
It increased in rental apartment construction by the tax avoidance purpose with a basic deduction's of an inheritance tax being reduced from January 2015.
Because of number increasing in apartment supply irrespective of demand action, rate of vacancy is rising suddenly centering on the suburb part with the high apartment ratio occupied in a rental apartment.
Source: MIC “Housing and Land Survey”
0%
5%
10%
15%
20%
25%
Sapporo Sendai Tokyo23
Wards
Nagoya Osaka Hiroshima Fukuoka
Vac
ancy
Rat
e o
f R
en
tal H
ou
sin
g (n
on
-wo
od
) (U
nit
:%) '98 '03 '08 '13
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 48
Source: MIC “Consumer Price Index”
Residential market
Improved vacancy rates are not enough to raise rent levels.
The rent level of non-public rental housing rose steadily from 1990 to 2000, after which it gradually declined. The
rent level downtrend continued in 2015.
Rents in the private sector (annual average) – nationwide and central Tokyo
86.0
88.0
90.0
92.0
94.0
96.0
98.0
100.0
102.0
104.0
106.0
108.0
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
Pri
vate
(A
nn
ual
Ave
rage
) R
en
t In
de
x (B
ase
Ye
ar 2
01
0)
Japan
Tokyo 23 Wards
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 49
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
2012 2013 2014 2015
Mo
nth
ly R
ent
Leve
l (U
nit:
Yen
/tu
bo
=3
.3m
2)
Tokyo 3 central districts
Tokyo 23 districts
Nagoya city
Osaka city
Fukuoka city
90%
92%
94%
96%
98%
100%
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
Jan
Ap
r
Jul
Oct
2012 2013 2014 2015
Occ
up
ancy
Rat
e (
Un
it:%
)
Tokyo 3 central districts
Tokyo 23 districts
Nagoya city
Osaka city
Fukuoka city
Occupancy rates of REIT-owned and private fund-owned properties
Source: Association for Real Estate Securitization of Japan “ARES J-REIT Property Database”
Monthly rents of REIT-owned and private fund-owned properties
Residential market
The operating ratio of REIT case housing and the private fund reached the high
standard, and downtown 3 wards and Tokyo 23-ku's rent standard is rising.
Occupancy rates in Nagoya and Fukuoka have peaked. Rent levels remain flat or are on a slight downtrend.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 50
Housing ownership rate in Japan by age group
Source: MIC “Housing and Land Survey”
Residential market
The rate of housing ownership, which has a negative impact on rental housing
demand, has shown a downward trend in the 40-49 age group.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1998 2003 2008 2013
70+
60-69
50-59
40-49
30-39
-29
(age)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 52
New retail space supply vs. number of development projects
Note: The reported numbers for the fiscal years 2002 and 2008 include stores without floor space indication.
Retail property market
The number of locations for large stores has been on a downtrend in recent years.
Source: METI “Large-scale Retail Chain Site Expansion Report”
2,455
3,335 3,729
4,178 4,545
3,983 4,369
1,919 2,081 2,351 2,193
2,860 2,824 2,607
2,098
450
638
786 738 731 730 750
654
500
584 620
738 705
669
569
0
100
200
300
400
500
600
700
800
900
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Nu
mb
er of p
rojects(cases)
Flo
or
Are
a(1
00
0m
2)
(year)
Floor Area Number of projects
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 53
Overall floor area and per-store floor area for shopping centers
Note: In the old SC standard, only shopping malls with more than 10 retail tenants were considered.
In the new SC standard, the shopping center must have more than 10 tenants including food stalls, service centers and retail outlets.
On the same note, the shopping center must have more than 1,500 m2 retail space.
Retail property market
For shopping centers, the total floor area for all stores and the floor area per store
are both on the rise.
Source: Council of Shopping Centers “SC White Book”
30.6 30.4 31.5 33.1 34.6
36.5 38.0
42.1 42.7 44.2 45.7 46.4 47.9 49.8
11.8 11.6 12.1 12.4 12.8
13.2 13.6 14.1 14.2 14.5 14.8 15.0 15.3
15.7
0
2
4
6
8
10
12
14
16
0
10
20
30
40
50
60
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Floo
r area per sh
op
pin
g center
Ove
rall
flo
or
area
(year)
Overall floor area Floor area per SC
(in 1 million m2) (in 1000m2/store)Old SC
Standard
New SC
Standard
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 54
YoY comparison of existing shopping centers’ annual sales
Source: Council of Shopping Centers “Overall Sales Statistics Report”
Retail property market
Downtrend in shopping center sales is mitigating.
-3.4
-2.2 -2.1-1.6 -1.7
0.3 0.30.0
-1.5
-6.8
-2.0
-1.3
0.5
-0.50.1 0.0
-8
-7
-6
-5
-4
-3
-2
-1
0
1
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
(%)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 55
0
10
20
30
40
50
60
Jan
Apr Ju
l
Oct Jan
Apr Ju
l
Oct Jan
Apr Ju
l
Oct Jan
Apr Ju
l
Oct Jan
Apr Ju
l
Oct Jan
Apr Ju
l
Oct Jan
Apr Ju
l
Oct Jan
Apr Ju
l
Oct Jan
Apr Ju
l
Oct Jan
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Consumer outlook index chart
Source: Cabinet Office “Consumer Trends Survey”
Retail property market
Abenomics has not changed consumer outlook dramatically.
▼ Dec. 2012
Liberal Democratic Party
becomes the ruling party
again
Note: Consumer outlook index calculation methodology:
Consumers are asked to rate their outlook for the next 6 months for the following 4 categories: “Lifestyle”, “Income”, “Job environment” and “Determining when to purchase consumer
durables” using a 5-scale index.
Each of the 5 scales is assigned a value: +1 for “Will get better,” +0.75 for “Will get somewhat better,” +0.5 for “Won’t change,” +0.25 for “Will get somewhat worse,” and +0 for “Will get
worse”. This numerical index is used to provide a component ratio for each of the answers, from which the results are calculated.
To illustrate, a value of 50 will be produced if all participants answer “Won’t change” for all available items.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 56
1st floor rent ranking in 13 principal business areas (yen/month/tsubo)
Source: Japan Real Estate Institute, BAC Urban Projects, and Attractors Lab “Retail Chain Rental Trends”
Note1: Rent in Yokohama is shown to have spiked in the early half of 2012, but this can be attributed to the extremely small sample size
Note 2: Rent in Shinjuku is shown to have spiked in the late half of 2012, but this can be attributed to a sample bias toward small, high-rent properties
Note 3: Rent in Ikebukuro is shown to have dived in the early half of 2013, but this can be attributed to a sample bias toward low-rent properties in unfavorable locations
Retail property market
Compared to other areas, rent levels in Ginza, Omotesando, and Shinjuku are still
high.
※2
※1 ※3
Tokyo Metropolitan
Area
Provincial Areas
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Late 2011 Early 2012 Late 2012 Early 2013 Late 2013 Early 2014 Late 2014 Early 2015 Late 2015
Ginza
Omotesando
Ikebukuro
Shinjuku
Shibuya
Yokohama
Shinsaibashi
Oodori (Sapporo)
Sannomiya (Kobe)
Sendai
Tenjin (Fukuoka)
Shijokawaramachi (Kyoto)
Sakae (Nagoya)
(yen / month / tsubo)
Ginza
Omotesando
Shinjuku
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 57
Commercial establishment cap rates (expected yield)
Source: Japan Real Estate Institute “Real Estate Investor’s Survey”
Retail property market
Cap rates have been falling from around 2011, and hit a record low in metropolitan Tokyo.
Definition:
Metropolitan high-class specialty stores:
Length of time after construction -or- large-scale repair/improvement:
less than 5 years
Tenants: Mainly retailers of high-class brands.
Rent system: Mainly fixed-term, variable rental schemes based on the
revenue.
Areas: Along Chuodoori in Ginza’s Chuo district.
Along Omotesando in Shibuya’s Omotesando district.
Suburban shopping centers:
Sales floor area: around 20,000m2
Key tenants: Prominent general merchandise stores (GMS)
Rent system: Mainly fixed-term, fixed-charge rental schemes
Areas: Along main thoroughfares within about an hour from
metropolitan Tokyo.
Stores for areas outside Tokyo follow similar locational conditions as
above.
Metropolitan , GinzaMetropolitan , Omotesando
Suburban, Nagoya
Metropolitan , NagoyaMetropolitan, Osaka
Suburban, TokyoSuburban, Osaka
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Copyright(C) Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 59
Cargo quantity by transport method (FY2012)
(Unit: 1 million tons)
Automobile cargo quantity movement
Note: The chronological continuity of data from prior to 2009 could not be guaranteed due to the changes made to the tallying methodology in the middle of 2010.
Logistics property market
Truck-based transport volume (in tons), which forms the bedrock of Japan’s cargo
industry, has continued to decline in recent years.
Truck-based (automobile) transport is the primary transport method that constitutes a large share of Japan’s freight traffic.
In recent years, the volume of cargo transported via automobile has declined due to the downturn in the volume handled by personal-
use trucks.
Source: MIC “Transport quantity by transport method” and MLIT “Automobile Transport Statistics Survey”
Motor vehicles 4,366,91%
Coastwise vessels 366,8%
Domestic aviation 1,0%
Railways
42,1%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
'60 '65 '70 '75 '80 '85 '90 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13
Business Personal
(1 million tons)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 60
46.4%
59.2%
72.4%
0 500,000 1,000,000 1,500,000 2,000,000
2000
2005
2010
(instances)
Below 0.1t 0.1~0.5t 0.5~1t 1~5t Above 5t
64.4%
69.2%
75.3%
0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000
2000
2005
2010
(instances)
Below 0.1t 0.1~0.5t 0.5~1t 1~5t Above 5t
Industry-wide (except warehousing) distribution quantity by lot size
(unit: number of instances)
Warehousing distribution quantity per lot size
(number of instances)
Source: MLIT “Logistics Census”
Logistics property market
As the movement to smaller logistics lots progresses, the quantity distributed in
such lots appears to be in upward trend based on the number of instances.
As the movement to smaller logistics lots progresses across the whole industry, the quantity distributed has
increased to a yearly rate of 4.0% based on the number of reported instances.
The increased quantity of distribution in warehouses is remarkably high. This increase is propelled by the increase in
distribution quantity using small lots that are less than 0.1 tons.
CAGR
4.5%
CAGR
3.7%
CAGR
7.3%
CAGR
12.6%
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 61
Market size of B-to-C e-Commerce
Note: Business -to-consumer e-commerce: sale of products and services to consumers in general via the Internet
Logistics property market
Small-lot consignments increase, due partly to the expansion of e-Commerce,
which is expected to continue growing hereafter.
Market size of Business-to-Consumer e-Commerce is expected to surpass 20 trillion yen in 2019.
Source: NRI
0
5
10
15
20
25
30
202120202019201820172016
(trillion JPY)
201520142013
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 62
Nationwide number of supplied warehouses
including warehouses for transport and transport industry shareFloor space per warehouse building
Source: MLIT “Construction Statistics”
Logistics property market
While new supply has stopped dwindling, facilities are growing larger due to
businesses consolidating their logistics capabilities.
The number of supplied warehouse buildings fell to roughly 23% of the peak level in 1991 (12,000 buildings/year) which has stabilized
in recent years.
The number of supplied warehouse buildings for the transport industry is dwindling at a more relaxed pace compared to the rest of the
industry (see figure below left), but the floor space per building is on an upward trend (below right).
This explains the increased need for SCM support for generic enterprises and new/large-scale logistics facilities for logistics
consolidation.
0%
5%
10%
15%
20%
25%
0
10,000
20,000
30,000
40,000
50,000
60,000
'88
'89
'90
'91
'92
'93
'94
'95
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
(Buildings)
Transport industry Other than transport Transport industry share
0
500
1,000
1,500
2,000
2,500
'88
'89
'90
'91
'92
'93
'94
'95
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
(㎡)Entire industry Other than transport Transport industry
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 63
Order volume for construction of warehouses/logistics facilities by ordering industry
Note: Only contracts worth 500 million yen and above are included
Logistics property market
Development of logistics real estate, which had been shrinking since the global
financial crisis, is now back in full swing.
Source: MLIT “Construction Order Trends, Statistics and Survey”
0
100
200
300
400
500
600
700
800
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
(1 billion yen) Real estate industry Transport industry Others
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 64
Logistics property market
Major foreign-based logistics property players and Japanese real estate developers are
gearing up for roadside development ahead of new expressway construction.
Ken-O Expressway
Gaikan
Expressway
Joban
Expressway
Chuo
Expressway
Tomei Expressway
DPL Kawasaki YakouDeveloper:Daiwa House IndustryCompletion:Mar.2017Total floor area:119,000㎡
Prologis Park Ichikawa 3Developer:PrologisCompletion:Dec.2017Total floor area:64,000㎡
Logi-Cross AtsugiDeveloper:Mitsubishi EstateCompletion:Mar.2017Total floor area:30,000㎡ MFLP FunabashiⅠ
Developer:Mitsui FudosanCompletion:Sep.2016Total floor area:198,000㎡
GLP Sayama HidakaⅡDeveloper:GLPCompletion:2016 AutumnTotal floor area:85,000㎡
MFLP HiratsukaDeveloper:Mitsui FudosanCompletion:Nov.2016Total floor area:33,000㎡
Logi-Square NiizaDeveloper:CRECompletion:Apr.2017Total floor area:26,000㎡
Logi-Square MoriyaDeveloper:CRECompletion:May.2017Total floor area:34,000㎡
Logi-Square UrawamisonoDeveloper:CRECompletion:Apr.2017Total floor area:52,000㎡
DPL Kawaguchi RyoukeDeveloper:Daiwa House IndustryCompletion:Oct-Dec.2017Total floor area:43,000㎡
DPL NagareyamaIDeveloper:Daiwa House IndustryCompletion:Feb.2018Total floor area:144,000㎡
DPL SatteDeveloper:Daiwa House Industry
Redwood KawashimaDistribution CenterDeveloper:Redwood GroupCompletion:Feb.2017Total floor area:40,000㎡
GLP KashiwaⅡDeveloper:GLPCompletion:Jan.2017Total floor area:32,000㎡
Narashino AkanehamaⅢDeveloper:Sumitomo CorporationCompletion:Sep.2016Total floor area:38,000㎡
Redwood NaritaDistribution CenterDeveloper:Redwood GroupCompletion:Dec.2016Total floor area:23,000㎡
Logi-Cross NarashinoDeveloper:Mitsubishi EstateCompletion:2018 SpringTotal floor area:41,000㎡
Expressway
Expressway
(Planned)
New devts
HanedaAirport
Narita Airport
Source: Compiled by NRI from companies’ respective websites
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 65
Monthly rent offers and vacancy rates of logistics properties
Note: Logistics facilities which have a total lot area or total floor area of 10,000m2
Logistics property market
Low vacancy rates have not yet translated into higher rents in the Tokyo area.
Source: Ichigo Real Estate Information Service “Survey on the Logistics Facilities Rental Market”
Rent offer
Vacancy rates
Jul.2008
Jul.2010
Oct.2012
Oct.2014
Jul.2008
Jul.2010
Oct.2012
Oct.2014
3,000
3,500
4,000
4,500
5,000
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%
(yen / month / tsubo) Tokyo area Osaka area
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 66
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
Oct
-05
Ap
r-0
6O
ct-0
6A
pr-
07
Oct
-07
Ap
r-0
8O
ct-0
8A
pr-
09
Oct
-09
Ap
r-1
0O
ct-1
0A
pr-
11
Oct
-11
Ap
r-1
2O
ct-1
2A
pr-
13
Oct
-13
Ap
r-1
4O
ct-1
4A
pr-
15
Oct
-15
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
Oct
-05
Ap
r-0
6O
ct-0
6A
pr-
07
Oct
-07
Ap
r-0
8O
ct-0
8A
pr-
09
Oct
-09
Ap
r-1
0O
ct-1
0A
pr-
11
Oct
-11
Ap
r-1
2O
ct-1
2A
pr-
13
Oct
-13
Ap
r-1
4O
ct-1
4A
pr-
15
Oct
-15
Single tenant Multi-tenant
Note: Single tenant: 2-3 floors; total floor area of around 10,000m2
Multi-tenant: 3-4 floors; total floor area of around 50,000m2
Logistics property market
Cap rates have been falling since 2012, with Tokyo hitting an all-time low.
Source: Japan Real Estate Institute “Real Estate Investor’s Survey”
Tokyo(bay)Tokyo(inland)
Chiba(inland)
Tokyo(bay)Tokyo(inland)
Chiba(inland)
Logistics real estate cap rate (expected yield)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 68
Hotel market
Foreign travelers in 2015 accounted for c15% of total domestic travel expenditure
Domestic travel expenditure in 2015 was the largest in the last 6 years, driven by an increased number of foreigner travelers to Japan.
Trends in domestic travel expenditure
(trillion yen)
Sources: Compiled by NRI from Japan Tourism Agency “Ryokou・Kankou Sho-hi Doukou Chosa” and “Consumption Trend
Survey for Foreigners Visiting Japan” data
-Consumption tax increase
-:East Japan earthquake
+:depreciation of yen progress
+:「Silver Week」Start
15.4 14.8 15.0 15.4 13.9 15.8
5.1 5.0 4.4 4.84.5
4.6
1.1 0.8 1.1 1.42.0
3.521.6
20.6 20.521.6
20.4
23.9
0.0
5.0
10.0
15.0
20.0
25.0
30.0
'10 '11 '12 '13 '14 '15
Japanese Stay Travel Japanese Day Trip Foreigners Travel
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 69
Hotel market
The number of travelers among Japanese residents has edged sideways.
Cumulative domestic traveler numbers (Overnight Travel/Day Trip)
(Million)
Source: Compiled by NRI from Japan Tourism Agency “Ryokou ・Kankou Sho-hi Doukou Chosa”
data
Note: Cumulative domestic traveler numbers do not include foreign travelers to Japan.
Cumulative domestic traveler numbers(by trip objective)
(Million)
318 314 316 320 297 313
314 299 297 311298 292
632 613 613 631595 605
0
100
200
300
400
500
600
700
'10 '11 '12 '13 '14 '15
Stay Travel Day Trip
372 360 368 383 349 365
143 145 138 141134 130
117 108 107 107112 109
632 613 613 631595 605
0
100
200
300
400
500
600
700
'10 '11 '12 '13 '14 '15
Sightseeing/Recreations Homecoming/Friend Visit
Business Trip
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 70
Hotel market
Measured by departure country, Chinese visitors will account for about 53% of the total in 2030.
Conversely, the number of travelers to Japan increased rapidly and reached about 20 million, thanks to the weak yen and relaxed visa criteria.NRI projects the number of travelers to Japan rising about 50 million in 2030
No. of foreigner travelers to Japan(by departure country)
Sources: Compiled by NRI from (Actual numbers) JNTO
(Forecast numbers) UNWTO and UN data
Note: Chinese economy doesn't fall into a panic and remains stable. As premise, Asian tourists
choosing Japan as a travel destination rises slightly from the current level owing to relaxed visa
standards and LCC expansion.
No. of foreigner travelers to Japan by departure country (2015)
Source: Compiled by NRI from JNTO data
0.0
10.0
20.0
30.0
40.0
50.0
60.0
'05'06'07'08'09'10'11'12'13'14'15'16'17'18'19'20 '25 '30
China Others
(Million)
←Actual Forecast→
China
53.0%
※ Assumes the base scenario below
China, 499,
25%
Korea, 400,
20%
Taiwan, 368,
19%
Hong Kong,
152, 8%
Thailand,
80, 4%
U.S., 103,
5%Others, 371,
19%
1,974 Ten thousand
(Ten thousand visitors)
Four neighboring
countries in Asia
account for about 72%.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 71
417 413 432 429 438
18 2633 45
66417439
466 474504
0
100
200
300
400
500
600
'11 '12 '13 '14 '15
Domestic Customer Foreign Customer
Hotel market
Viewed by facility type, the rise in foreign travelers is impacting growth in business hotels.
Foreigner visitors accounted for 13% of all stays in 2015.This ratio continues to rise in tandem with the increase in overseas visitors
Domestic accommodation(Domestic/Foreign)
(Million)
Source: Compiled by NRI from Japan Tourism Agency “Syukuhaku Ryokou Toukei” data
Domestic stays (by accommodation type)
(Million)
※Business Hotel:Budget Hotel
106 106 106 103 106
61 65 69 68 72
160 170 184 194 211
62 67 73 7580
8 910 9
26417439
466 474504
0
100
200
300
400
500
600
'11 '12 '13 '14 '15
Japanese-Style Hotel Resort Hotel
Business Hotel City Hotel
Lodging House Company/Group Loidging
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 72
Hotel market
The total number of the accommodation facilities remains stable.By type, however, the proportion of hotels continues to rise
Trend in number of guest rooms
Source: Compiled by NRI from MHLW “Report of Health Administration and Services” data
(Thousand rooms)
756 781 798 803 814 815 827 835
823 808 792 764 761 741 735 710
1,579 1,588 1,590 1,568 1,576 1,556 1,562 1,545
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
'07 '08 '09 '10 '11 '12 '13 '14
Japanese-Style Hotel Hotel
(Fiscal year)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 73
Hotel market
Floor space per building is 1.25 times higher than 2011, as large buildings are being built
The number of accommodation facilities and area of floor space both rose owing to a stable economic environment and growing demand for accommodations
Accommodation facilities※
No of buildings and floor space
Source: Compiled by NRI from MLIT “Statistics on Construction Undertaken” data
Accommodation facilities ※ Floor space per building
※Accommodations assume a hotel.
Surveyed buildings are those built with steel framed reinforced concrete, ferroconcrete and
steel frame
(Buildings) (thousand ㎡)
327 345419 412
547
393448
615675
848
0
200
400
600
800
1,000
0
200
400
600
800
1,000
'11 '12 '13 '14 '15
Number of Ridge(Left Axis) Floor Space(Right Axis)
(㎡)
1,2021,298
1,467
1,6391,550
0
300
600
900
1,200
1,500
1,800
'11 '12 '13 '14 '15
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 74
Hotel market
c10,000 rooms are expected to open in Tokyo over the next 3 years
Operator Area Opening yearNumber of
rooms
APA Group Shinjuku 2017 129
Asakusa 2017 464
2017 126
Akasaka 2018 500
Akihabara 2017 117
Shintomicho 2017 140
Higashi-Shinjuku 2020 819
NihonbashiBakurocho
2018 153
Iidabashi 2017 98
Ryougoku 2019 1,015
Roppongi 2019 875
Nishi-Shinjuku 2017 710
Keio Dentetsu Yaesu 2017 170
Keikyu EX Inn Haneda 2017 313
Keio Presso Inn Kyobashi 2017 170
Hamamatsucho 2017 約330
Route-Inn Hotels Kamata 2017 148
Mori Trust Toranomon 2019 約200
Operator Area Opening yearNumber of
rooms
Mitsui Fudosan Ginza 2017 107
Hulic Ginza 2018 約160
Hankyu-HanshinHotels Roppongi 2017 400
ES-CON JAPAN Nihonbashi 2017 102
2017 63
Texas Ginza 2018 105
Sankei Building Kyobashi 2017 205
Abest Corporation Kyobashi 2017 45
Asahi Shimbun Company
Ginza 2018 164
JR Kyushu RailwayCompany
Shinbashi 2019 267
Sotetsu Fresa Inn Ginza 2017 128
Roppongi 2017 205
Kinshicho 2017 292
Tokyu Hotels Shibuya 2017 200
Hotel Keihan Tsukiji 2018 300
Mitsui Fudosan Toyosu 2019 200
Main new hotel development projects in Tokyo※
Note: A hotel development project is chosen as the area where weekly HOTERES investigated.
Source: Compiled by NRI from Ohta Publications Co., Ltd. ”Weekly HOTERES” data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 75
Hotel market
Over 4,000 rooms are expected to open in Osaka as well over the next 3 years
Operator Area Opening year Number of rooms
Candeo Hotels Shinsaibashi 2017 390
Osaka 2017 496
West Japan Railway
Company VIA InnTennoji 2017 172
Umeda 2017 217
Hotel Keihan Kitahama 2017 210
Route-Inn Hotels Izumi 2017 200
Keikyu EX Inn Haneda 2017 313
Route-Inn Japan Takaishi 2017 172
Bellco Nanba 2019 150
Vessel Hotel Development Osaka 2017 133
ES-CON JAPAN Osaka 2017 96
Sotetsu Inn Osaka 2018 244
APA Group Osaka 2019 917
Nanba 2017 380
Asahi Shimbun CompanyOsaka 2017 164
Main new hotel development projects planned in Osaka prefecture※
Note: A hotel development project is chosen as the area where weekly HOTERES investigated.
Source: Compiled by NRI from Ohta Publications Co., Ltd. ”Weekly HOTERES” data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 76
Hotel market
Occupancy rates at hotels in Osaka and Tokyo have risen to c80% are approaching full capacity.
Guest room occupancy rates vary widely by prefecture
Source: Compiled by NRI from Japan Tourism Agency “Syukuhaku Ryokou Toukei” data
Average occupancy rate by prefecture
(%)
85 83
71 71 71 68 67 67 67 65 65 62 61 60 60 59 59 56 56 55 55 55 55 54 54 54 53 53 53 52 52 51 51 50 50 50 50 48 48 48 48 47 46 45 43 42 35
0
10
20
30
40
50
60
70
80
90
100
Osa
ka
Toky
o
Chib
a
Kyo
to
Aic
hi
Fuku
oka
Ka
na
ga
wa
Sa
ita
ma
Oki
naw
a
Ish
ika
wa
Hir
osh
ima
Hok
kai-
do
Miy
ag
i
Hyo
go
Yam
agu
chi
Nag
asak
i
Sh
iga
Shim
ane
Oka
yam
a
Ku
ma
mo
to
Toya
ma
Saga
Shiz
uoka
Kaga
wa
Ehim
e
Oit
a
Iwa
te
Fuku
shim
a
Miy
azak
i
Kago
shim
a
Ibar
aki
Gif
u
Tott
ori
Toku
shim
a
Gu
nm
a
Mie
Ao
mo
ri
Toch
igi
Wa
kaya
ma
Ya
ma
na
shi
Ko
chi
Ya
ma
ga
ta
Aki
ta
Nar
a
Fu
kui
Nig
ata
Nag
ano
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 77
Hotel market
Looking at occupancy rates by type of accommodation in the top 5 prefectures, hotels are above 70%. However, Japanese-style inns were under 50% even in top 5 prefectures.
Average occupancy rate in top 5 prefectures (by type of accommodation)
Source: Compiled by NRI from Japan Tourism Agency “Syukuhaku Ryokou Toukei” data
(%)
49 53
83 86
41
8372
81
2536
76 80
33
58
7570
4053
7077
0102030405060708090
100
Jap
an
ese
-Sty
le H
ote
l
Res
ort H
otel
Bus
ines
s H
otel
City
Hot
el
Japa
nese
-Sty
le H
otel
Res
ort H
otel
Bus
ines
s H
otel
City
Hot
el
Japa
nese
-Sty
le H
otel
Res
ort H
otel
Bus
ines
s H
otel
City
Hot
el
Japa
nese
-Sty
le H
otel
Res
ort H
otel
Bu
sin
ess
Ho
tel
Cit
y H
ote
l
Jap
an
ese
-Sty
le H
ote
l
Res
ort H
otel
Bu
sin
ess
Ho
tel
Cit
y H
ote
l
Osaka Tokyo Chiba Kyoto Aichi
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 78
Hotel market
Hotel REIT earnings are expanding due to high occupancy rates
Rents at hotel REITs
Source: Compiled by NRI from ARES “J-REIT Property Database” data.
Note: 1tsubo=About 3.3㎡
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1月 4月 7月
10月 1月 4月 7月
10月 1月 4月 7月
10月 1月 4月 7月
10月 1月 4月 7月
10月 1月 4月 7月
10月
10年 11年 12年 13年 14年 15年
Month
ly rent
sta
ndar
d
Unit: y
en/t
subo
※
Tokyo metroporitan area All over the country
23 wards of Tokyo
Nationwide
Copyright(C) Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 80
14.8 14.8
1.4
15.1
0.4
0
4
8
12
16
20
Listed REIT Private Fund Private REIT RMBS CMBS
(¥tn)
Unlisted open-ended private REITs were offered in November 2010, and the size of the private REITs market is
growing rapidly.
Real estate investment instruments
An overall perspective of the Japanese real estate market
Equity type Debt type
Listed Unlisted
Close-ended Open-ended
Residential
mortgage
Commercial
mortgage
Overview of real estate investment instruments in Japan and AUM
Note: Listed REIT figure is updated as of end of Jul 2016, private fund and private REIT figure is updated as of end of Dec 2015, RMBS/CMBS figure is updated as of end
of Mar 2016.
Sources: Compiled by NRI from Association for Real Estate Securitization, Sumitomo Mitsui Trust Research Institute Co., Ltd., and the Japan Securities Dealers Association data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 81
0
10
20
30
40
50
60
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2001/9 2002/9 2003/9 2004/9 2005/9 2006/9 2007/9 2008/9 2009/9 2010/9 2011/9 2012/9 2013/9 2014/9 2015/9
(No. of J-REITs)(¥bn)
Market Capitalization No. of J-REITs
J-REITs began trading on the stock market in September 2001 with two companies and a market capitalization of
250 billion yen.
As of end-July 2016, there were 55 J-REITs traded worth approximately 12 trillion yen.
Real estate investment products
Launched in September 2001, J-REIT market capitalization has reached approximately 12 trillion yen.
J-REIT market cap and number of J-REITs
Source: Bloomberg
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 82
Office46.6%
Residential16.3%
Retail19.2%
Hotel4.7%
Logistics11.5%
Others1.8%
5 Central Wards of
Tokyo36.0%
23 Wards of Tokyo17.6%
Kanto Area20.4%
Chubu Area4.7%
Kinki Area13.1%
Other Areas8.2%
Real estate investment products
c75% of real estate owned by J-REITs is in the Tokyo metropolitan area.
In recent years, J-REITs have become more diversified in type of property owned, and a healthcare REIT was
launched in November 2014.
c75% of J-REIT assets are located in the Tokyo metropolitan area and c50% are
portfolios of office properties.
Greater Tokyo area
74.0%
Approx.14.8
trillion yen
Approx.14.8
trillion yen
Asset mix of J-REITs by area and asset class
Source: Compiled by NRI from ARES data
Note: As of the end of July 2016
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 83
0
500
1,000
1,500
2,000
2,500
3,000
2003/3 2004/2 2005/1 2005/12 2006/11 2007/10 2008/9 2009/8 2010/7 2011/6 2012/5 2013/4 2014/3 2015/2 2016/1
TSE REIT Index TOPIX TOPIX Real Estate Sector Index
The TSE REIT index dropped sharply from its peak in May 2007, but has recovered rapidly from late 2012.
Real estate investment products
The TSE REIT index surged in late 2012 and remain firm.
TSE REIT Index, TOPIX, and the TOPIX Real Estate Sector Index
Source: Compiled by NRI from
Bloomberg data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 84
Yield spreads are currently around just above 3%
Real estate investment products
J-REIT dividend yields rapidly increased to around 8%, but are currently down to around 3%.
J-REIT dividend yield and JGB 10-year yield
Sources: Compiled by NRI from Bloomberg and TSE data
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
2002/1 2003/1 2004/1 2005/1 2006/1 2007/1 2008/1 2009/1 2010/1 2011/1 2012/1 2013/1 2014/1 2015/1 2016/1
Spread J-REITs Dividend Yield JGB 10-Year-Yield
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 85
According to the index based on actual performance of core funds invested in domestic real estate, the performance
of real estate investments in Japan recovered to positive territory in terms of capital return and has been firm since.
Real estate investment products
Capital return is firm.
ARES Japan Property Index (AJPI) and ARES Japan Fund Index (AJFI)
Sources: Compiled by NRI from ARES “ARES Japan Property Index” and “ARES Japan Fund Index” data.
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
2002/12 2004/10 2006/8 2008/6 2010/4 2012/2 2013/12 2015/10
AJPI: Income Return
AJFI: Income Return
AJPI: Capital Return
AJFI: Capital Return
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
2002/12 2004/10 2006/8 2008/6 2010/4 2012/2 2013/12 2015/10
AJPI: Total Return
AJFI: Total Return
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 86
9,702
14,81516,935
32,31130,260
20,955
16,276 16,352
12,143
7,53711,113
8,491 8,34111,132
15,064
10,742 11,148 9,741 10,7609,194 8,235
10,15113,275 13,472
3,511
1,994
6,937
4,370 7,418
7,679
8,75510,338
2,038
1,701
980
341 138
413
563
1,288 140153
5271
0
274
287 152
0
10,000
20,000
30,000
40,000
50,000
60,000
20041stHalf
20042ndHalf
20051stHalf
20052ndHalf
20061stHalf
20062ndHalf
20071stHalf
20072ndHalf
20081stHalf
20082ndHalf
20091stHalf
20092ndHalf
20101stHalf
20102ndHalf
20111stHalf
20112ndHalf
20121stHalf
20122ndHalf
20131stHalf
20132ndHalf
20141stHalf
20142ndHalf
20151stHalf
20152ndHalf
(¥100m)
RMBS CMBS CDO Lease Consumer Loan Shopping Credit Accounts receivable/Commercial Bills Others
Real estate investment products
Most recently, about 70% of residential mortgage-backed securities were originated by the Japan Housing Finance
Agency.
CMBS issuance has decreased drastically since 2008, and at present only RMBS
are issued on a ongoing basis.
Asset backed securities breakdown by type of backing and RMBS breakdown by originator
0% 20% 40% 60% 80% 100%
2004FY 1H2004FY 2H2005FY 1H2005FY 2H2006FY 1H2006FY 2H2007FY 1H2007FY 2H2008FY 1H2008FY 2H2009FY 1H2009FY 2H2010FY 1H2010FY 2H2011FY 1H2011FY 2H2012FY 1H2012FY 2H2013FY 1H2013FY 2H2014FY 1H2014FY 2H2015FY 1H2015FY 2H
Housing Finance Agency Banks/Trust Banks Regional Banks Non-bank Others
Source: Compiled by NRI from Japan Securities Dealers Association data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 87
Authors
Contact:
Nomura Research Institute, Ltd.
Consulting Division
亀井 敬太Keita KAMEI
Consultant
Section in Charge
Office market, Retail property market,
Real estate investment products
Expertise
Real estate, residential loan and
infrastructure business strategy and
research.
村上 慧悟Keigo MURAKAMI
Consultant
Section in Charge
Hotel market
Expertise
Residential, real estate and inbound
business strategy and research.
荒木 康行Yasuyuki ARAKI
Consultant
Section in Charge
Macro fundamentals of Japan
Expertise
Real estate, urban infrastructure
business strategy and research.
Especially, International market
research, business planning and entry
support.
大道 亮Akira DAIDO
Consultant
Section in Charge
Overview of real estate investment
market in Japan, Residential market,
Logistics Property market
Expertise
Residential, real estate and energy
business strategy and research.
沼田 悠佑Yusuke NUMATA
Consultant
Section in Charge
Population movements in Japan
Expertise
Real estate and energy business
strategy and research. In addition,
industrial policy planning and
monitoring.