The Japanese economy faced a turning point on 1 April 2014, as the government lifted the consumption tax rate for the first time in 17 years. Private consumption dipped in April but showed improvement thereafter, proving that the Japanese economy remains resilient. The dampening effect from the increase in consumption tax is anticipated to last only temporarily.
The Tokyo CBD grade A office vacancy fell further by 0.70 percentage points q-o-q to 5.6% in Q2, while grade A rent increased by 3.0% q-o-q to JPY 25,757 per tsubo per month. It was the first time in 11 quarters that the vacancy dropped below 6% since Q3 2011. DTZ forecasts that the vacancy is poised to decline and rents are likely to increase further. Given that the vacancy rate now approaches 5%, which is a balanced market vacancy rate, our earlier forecast that rent increase would accelerate in H2 2014.
Commercial real estate transaction volume fell 48% q-o-q to JPY 699 billion in Q2. J-REITs reduced their public offerings in Q2 as compared to a year ago, which explains why activities by J-REITs decreased. The volume decline was also partly attributable to the emergence of fiercer competition for assets, which has been yet another factor preventing some investors from deploying their capital. This has also resulted in a pressure on yields while property prices have increased.
Source : DTZ (Groupe UGL)