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Japan Real Estate - Q2 2013

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Japan Real Estate Second Quarter 2013

Economy: In the first quarter of 2013, confidence in the Japanese macro economy experienced one of the most significant surges in recent history. Haruhiko Kuroda, the new governor of the Bank of Japan, announced in April 2013 an unprecedented policy of monetary easing that includes inflation targets and purchase commitments. Although the eventual impact of these plans will take some time to unfold, capital markets have reacted favourably so far, and the Japanese economy appears poised to grow strongly in the latter half of the year.

Capital market: Given investors’ solid expectation of inflation in the future, Japanese real estate has recently gained allure since it is expected to benefit from an inflation economic environment. The J-REIT index has skyrocketed to its highest point since the global credit crisis, and the aggregate amount of equity raised by J-REITs in the six months to March 2013 set an all time record. Because capital is now flowing strongly into real estate transactions, further cap rate compression is expected this year.

Property markets: The leasing market for Japanese property has so far been much less buoyant than capital markets might imply, but there have nevertheless been some positive changes. The average rents for newly-built offices in Tokyo grew 9.2% in the first two months of 2013, the largest growth spurt in more than five years. Among Tokyo’s central five wards, Shibuya emerged as the strongest office submarket with a vacancy rate of 6.0% in February 2013 compared to an 8.6% average for the central five wards. Property leasing also showed signs of broad stabilisation in the residential and logistics markets in Japan in early 2013.

Source : Deutsche Asset & Wealth management

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