Research Report

Japan Real Estate Third Quarter 2012

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The outlook for Japan’s economic growth in 2012 has improved. Deutsche Bank economists now expect GDP growth of 3.1 percent this year instead of the 2.8 percent forecast from just three months ago. With consumer confidence recovering, private consumption has surprised on the upside. Although most near-term leading indicators appear encouraging, economic growth is expected to peak in mid 2012. Waning external demand from Europe, the United States, and China is likely to contribute to a slowdown in 2013. A planned consumption tax could also hold back growth to some extent in 2014.

Japan’s property markets provided mixed signals in the first half of 2012. On the upside, J-REITs enjoyed buoyant performance earlier in the year, paving the way for two new IPOs in the second quarter with more planned for later this year. The volume of asset purchases by J-REITs reached JPY462.9 billion in the first half of 2012, an increase of 49.5 percent from the same period in 2011. Limited construction of new logistics space helped pull the industrial vacancy rate below 2.0 percent in Tokyo and close to full occupancy in Osaka. Both domestic and foreign buyers have responded to Japan’s industrial market fundamentals, sending transaction volumes up in this sector. Asking rents in the residential sector held stable across Tokyo’s 23 wards in the second quarter, with positive upward movement in the five centrally located wards. In the retail sector, improving consumer sentiment helped pull sales up for shopping centres.

The downside of the property market centres heavily on the office sector. New supply in Tokyo drove the vacancy rate to an all-time high of 9.4 percent in June, and transaction volumes in the sector have been limited. Osaka may face a similar disruption to office fundamentals over the coming year as a wave of new supply is expected to complete in that market as well. The high-end segment of the residential rental market in Tokyo softened between the first and second quarters, a general reflection of the outlook for financial services, a key driver of luxury residential rents.

Source : RREEF Real Estate

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Mots-clés : RREEF Real Estate