While Japan’s GDP growth rate was revised down in the third quarter, private consumption and private capital expenditure are expected to recover hereafter. The housing market has mostly been steady and housing starts increased by 6.4% y-o-y in 2016. However, new condominium sales volume has shrunk for the third consecutive year in the Tokyo metropolitan area, outnumbered by the secondary condominium transaction volume. Land prices continued to appreciate, however, those in Tokyo have already decelerated.
While the vacancy rates of Tokyo grade-A offices remained low and stable, their rents have apparently peaked out. The residential rents in Tokyo have continued to rise. While foreign visitor arrivals grew by 22% to 24 million in 2016, total stays and consumption by foreigners in Japan have not grown as expected. The vacancy rates of logistics facilities will remain high in areas where glut of new supply appear.
The TSE REIT Index rose by 6.2% in 2016 after declining in 2015. J-REITs acquired 1.7 trillion of assets in 2016, the third largest yearly amount in history, even in the shrinking investment market. The NLI Research Institute’s "thirteenth property investment market survey" indicated that the market direction has become increasingly hard to read.
