Total commercial real estate investment transaction (excluding residential and hotel properties) further expanded by 38% to JPY 1,333 bn in Q1 2014 from JPY 963 bn in Q4 2013 (Figure 1). This was the highest transaction volume recorded in the first quarter of the year since the survey started in the early 2000s. A couple of significant deals over JPY 100 bn this quarter pushed up the total investment volume.
The main driver of the volume increase in Q1 was the fiscal year-end effect. Traditionally, we see a jump in transaction activity in Q1 every year as most local companies try to sell their holding assets or acquire new assets in order to improve their balance sheets before the fiscal year-end in March.
The largest deal in Q1 was the sale of Nakano Central Park for a total of JPY 184.5 bn. Nakano Central Park comprises two office buildings and one leasing apartment. AXA Life Insurance acquired one of the office buildings, while several entities including Tokyo Tatemono and Hulic were involved in the acquisition of the rest of the facilities. The other significant deal was a partial acquisition of a prime office building, Otemachi Tower (30% of office portion), by Mizuho Bank for JPY 178.2 bn.
The investment market in Q1 2014 ended the quarter on a buoyant note, driven by transactional activity by J-REITs and local players. The increased volume was also a result of improved liquidity as some investors cashed out their holding assets, thanks to recent property price appreciation. As the market is expected to improve further in 2014 with declining vacancy and increasing rent, a further compression in yield is anticipated in coming quarters.
Source : DTZ (Groupe UGL)