Japanese Property Market Quarterly Review, Second Quarter 2012-Signs of Recovery in Tokyo Grade-A Office Rents-

Toru Matsumura

■Summary

The Japanese economy has maintained its recovery in the second quarter, as corporate production has been active with retail consumption remaining resilient. Both new and secondary condominium sales posted good numbers, while national land prices declined at a mitigated pace.
The Tokyo office market especially of grade-A offices showed signs of rent recovery. Now that the volume peak of newly completed large office buildings has passed, grade-A offices will lead the market recovery in the second half of 2012 or the first half of 2013, as they are overwhelmingly superior to older buildings in terms of corporate needs for business continuity planning and energy saving. The Tokyo residential rents for all usages showed weakness including those for family-use which had showed some recovery in the second half of 2011. The hotel occupancy rates recovered to the pre-earthquake level. The large logistics facility rents in Tokyo are about to rise.
The TSE REIT Index declined in the second quarter as a reversal of large appreciation in the previous quarter. However, J-REITs acquired a large volume of assets equivalent to that of the first quarter of 2008 before the global financial crisis, contributed to by the two newly listed J-REITs. While financial conditions for private funds are improving and many new funds have been set up, large-sized transactions and refinancing deals have been noticed in the investment market.