Japanese Property Market Quarterly Review, First Quarter 2012 -Sizable Grade-A Supply Overwhelms the Tokyo Office Market-

Toru Matsumura

■Summary

The Japanese economy apparently resumed recovering, as corporate production has become active again with retail consumption remaining resilient. Both new and secondary condominium sales posted good numbers in the Tokyo Metropolitan area. National land prices declined at a mitigated pace as land prices of certain areas with redevelopment projects or new transportation access and some popular residential areas began appreciating, while disaster hit areas were still struggling.
The Tokyo office market suffered from higher vacancy rates and lower rents, as many large sized offices were completed in the quarter, though the pace of rent decline slowed somewhat. Residential rents showed weakness again after suggesting stabilization in the previous quarter. Hotel occupancy rates have recovered to the level before the Great East Japan Earthquake. In the logistics sector, regarded as a bright spot with sizable predicted demand for large sized facilities, major property developers have entered into the development market.
The TSE REIT Index soared by 18.6% in the quarter based on positives such as additional BOJ financial loosening, European debt concern mitigation and expected global economic recovery. Especially, the office sector rebounded outstandingly by 24.9% following the recent drastic decline. The transaction volume increased toward the fiscal year end, with J-REITs, S-REITs and domestic developers showing noticeable acquisition activity.