The Japanese Real Estate Market
Starting in late 2007, the market suffered from the departure of many debt providers, mainly CMBS players. After the Japanese real estate market saw a major change in 2008 with very little liquidity, 2009 was a kind of turning point. This was very different from the years 2004 to 2007 when ample liquidity was available in debt and equity.
While liquidity and the overall transaction volume increased by September 2009, Tokyo was the second largest market after London with a total transaction volume of US$16.6 billion in all categories, excluding land development. Of this figure, US$11.4 billion accounts for trades in office property (Source: Real Capital Analytics, Commercial Real Estate Sales Research).
As a departure from the three years before 2008, only a few transactions were very large in size like the US$1.2 billion Nippon Life office purchase from AIG. Few transactions were larger than US$100 million. The late 2009 German Open End Fund SEB purchase of a retail shopping centre amounting to JPY12 billion received notable media interest. Thus far, it was the only known investment by a German Open End fund in 2009. As a comparison, these long-term investors were very active during 2008 with investments close to JPY200 billion, twice their investments until then.
Corporate investors with significant liquidity and few ways to expand their core business were big players in 2009. This included railway companies such as Keihan Electric Railway who acquired an office building in Tokyo for US$150 million. Its competitive edge was enhanced by the fact that non-recourse lending to institutional investors from banks was still limited and CMBS players had left the scene. Many investments in real estate have been financed via traditional corporate lending transactions.
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