Japanese Property Market Quarterly Review, Second Quarter 2017-Tokyo Grade-A Office Rents Rise Again, Investors Increasingly Consider Selling-

Financial Research Department Economic Research Department Researcher Kazumasa Takeuchi 


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  • Economic conditions have been improving. The cabinet office raised its assessment of the current state of the Japanese economy to “a moderate recovery.” The favorable economic conditions have brought labor shortages to many industries. While the population of Japan declines, the increase of foreign residents has gradually become obvious
  • Housing starts have remained active led by apartments for lease. While new condominium sales in the Tokyo metropolitan area have been stagnant, luxury units have sold well stimulated by the healthy economic conditions and equity markets.
  • Office vacancy rates have improved and Grade-A rents rose again in Tokyo. As upcoming buildings have smoothly secured tenants, anxiety concerning vacancy rate hikes due to large supply has mostly disappeared for 2017. Office vacancy rates in Sapporo and Fukuoka have been even better than those in Tokyo.
  • The number of foreign visitors has continuously increased led by tourists from South Korea. Department store sales increased in the second quarter stimulated by the healthy equity market and increase in foreign tourists. Hotel occupancy rates have remained at the highest level as not only foreign but also Japanese tourists increased overnight stays.
  • The TSE REIT index declined by 8.7% in the first half of 2017 affected by successive cash outflows from J-REIT mutual funds. Due to the weakening unit prices, J-REITs acquired limited amounts of properties. The weighted average P/NAV of J-REITs has shrunk to 1.1 times.
  • Two-thirds of property investors believe the market has peaked. Avoiding very low yields in the center of Tokyo, investors increasingly transacted properties in the suburbs of Tokyo and local cities. On the other hand, foreign investors have relatively become active.

1.Economic Conditions
2.Labor Shortage and Population Decline
3.Housing Market
4.Land Prices
  1) Office
  2) Residential Rental
  3) Retail
  4) Hotel
  5) Logistics
6.J-REIT and Property Investment Markets
  1) J-REIT
  2) Property Investment Market

Financial Research Department   Economic Research Department Researcher

Kazumasa Takeuchi

Research field