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Japan Real Estate Report Q4 2010
Business Monitor International, Sep 2010, Pages: 57
The Japan Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Japan's Real Estate industry.
Japan’s structural problems are substantial and well known. A massively indebted government is under pressure to reduce the scale of its borrowings; demographics are conducive to a contraction in the overall economy, given the impact of ageing is not being offset by net immigration; and Japan’s globally competitive exporters continue to face patchy conditions in most of their overseas markets. Furthermore, the savings rate remains high and bank lending is stagnant, therefore Japan remains susceptible to deflation.
None of this augurs well for Japan’s long-embattled commercial real estate sector. An additional problem is that there is gross oversupply of property – with the partial exception of the office and retail sub-sectors of Osaka. Over the last decade, Japan has essentially become over-developed relative to the needs of its economy.
The last two years have been brutal. The data provided to us by our in-country sources in the interviews – which we conducted in March and July 2010 – confirm that rental rates fell sharply during 2009. Where there were property transactions, they generally resulted in substantial drops in capital values. More recently, there appear to have been minor rises in rents across the board. However, given the actual conditions and protagonists’ expectations, this appears to be little more than a bounce in the wake of a horrendous year. Our in-country sources expect rental rates to track sideways through 2011.
Yields have moved in differing directions across the various sub-sectors. The fall in yields in Yokohama over the last year or so is probably reflective of an absence of transactions. The market clearing capital values and yields are, we suspect, respectively lower and higher than they currently appear to be. Looking forward, we expect that yields will track sideways.
It is easier to foresee the persistence of difficult conditions for real estate protagonists in Japan than in any other country that BMI surveys.
Key Features Of This Report:
This is the latest edition of a new series of industry reports published by BMI that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. Once again, the questions that we seek to answer for each country remain as follows: What are the main issues that will matter to actors in and around real estate development in the country concerned, both over the long and the short term? What are the main constraints that they face? What are the key insights that one garners when one compares the real estate sector of the country concerned with its peers in other countries?
In Q3 we have introduced a very substantial new improvement to the reports. We have incorporated data and qualitative observations provided to us by commercial real estate agents operating in the countries we survey. As a result we have gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors – office, retail and industrial. We have also introduced a new approach to the forecasting of rental yields, discussed in the methodology section of this report.
In Q4, we have incorporated a lot of new data in relation to rents and yields in 2010. We gained this data by way of a new round of interviews with our in-country sources in mid-2010. In some cases, the latest information from our sources has caused us to make significant revisions to our forecasts for 2011-2014. We asked our sources to indicate what growth in rents is likely for 2011. We explain their answers in the Forecast Scenarios.
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