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Japan Real Estate Report Q1 2012
Business Monitor International, Dec 2011, Pages: 53
Business Monitor International's 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.
From BMI's Q311 update, in which the outlook for Japan’s real estate market was bleak immediately following the earthquake and tsunami in March, BMI is now envisaging a return to stability in many areas of the country’s commercial real estate sector. Demand for modern and earthquake-proof housing and logistics facilities is increasing steadily, providing opportunities for developers to begin new projects and complete existing ones. This demand is also likely to be supported by a potential increase in investment from overseas, as ongoing debt concerns in the US and eurozone (that do not see signs of letting up) are pushing investors to the more stable real estate market in Asia Pacific. Similarly, BMI has recorded instances of manufacturers looking to emerging markets for their new locations, which may well increase demand and activity in the industrial sub-sector.
However, there is a downside for Japan that has come out of the US and eurozone crises. Japanese banks are looking to improve their balance sheets by cutting back on real estate loans. This could lead to a number of smaller real estate companies experiencing difficulties as they struggle to gain access to funding for their projects. In light of this, survey firm Tokyo Shoko Research Ltd has predicted that the number of bankruptcies in Japanese real estate will increase in 2012.
Key Opportunities In The Real Estate Market:
- An increase in the activity of local real estate investment trusts (REITs) is likely in light of lower prices and this will be alongside continued improvements in their structure in the country.
- A shortage of available warehouse space will prompt an increase in development in the sector, and in the medium term, demand for new premises will continue to support continued supply.
- Over 2011 so far, real estate prices have remained surprisingly resilient, suggesting that the market is stable enough to weather such natural occurrences as March’s earthquake and tsunami.
Key Risks To The Real Estate Market:
- Existing and well known structural problems in the economy, with the government under pressure to rein in its massive debt.
- The difficulty of smaller firms to refinance their loans or gain access to funding may cause bankruptcies. This will also decrease competition in the market, at least for a time, as the larger companies are likely to soak up this extra market share.
- In the office sub-sector, supply in recent months has surged and is expected to surpass demand, which will result in a decrease in office rental levels and an increase in vacant space, particularly in Tokyo.
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