Japanese Property Market Quarterly Review, Third Quarter 2012 -Favorable Investment Sentiment Despite Economic Uncertainty-

Toru Matsumura

■Summary

The Japanese economy is losing momentum with slowing domestic consumption and shrinking foreign demand from China and other countries. NLI Research Institute revised its GDP growth forecast for Japan in 2012 downward to 1.7%. New condominium sales in the Tokyo metropolitan area maintained good momentum with high contract rates. The land prices in metropolitan areas are turning around.
Apparently, the office market recovery is delayed because of the declining rents of very large sized buildings. However, unless the economic slowdown becomes serious, rents of grade-A buildings can expect to recover in the first half of next year. The Tokyo residential rents for all usages showed some stability. While hotel vacancy rates recovered to the level before the earthquake, hotel operators in sightseeing areas are concerned about the declining number of foreign visitors. The large logistics markets have been quite tight.
The TSE REIT Index appreciated by 6.7% in the third quarter, as investors favored the relatively high dividend yield above 5%. The investment market has remained favorable with funding conditions for private funds improving and many new funds being set up, but housing sales and office leasing markets are subject to economic uncertainty.

Toru Matsumura