Tokyo Office Market Update – February 2009
Latest Economy Brief:
- The Economy has been hit by the global recessional trend. Mainly due to a reduction in exports (Dec quarter end: minus 27%), the Japanese economy is expected to shrink in the FY2010 (March ’10) and also in the FY2011 (March 2011).
- In contrast to other global economies, the Japanese economy is not suffering from major structural problems, especially in its financial systems which remain intact.
- The real estate sector is being hit by the exit of foreign lenders (mainly CMBS arrangers) who provided excess cash during 2003 to 2007 at terms no longer available.
- Rent began to fall in most areas starting in the latter half of 2008.
- Prime area S class size office rent dropped rapidly compared to traditional areas.
- The traditional area medium size office rent drop was minor due to diversity of tenants and healthy demand base.
- Vacancy in all markets is in an upward trend, but still keeping at an average level of 4.7%.
- Minato, Shinjuku, and Shibuya ward vacancy exceeded 5 %, while traditional areas stay below 5%.
- Tokyo holds relatively low vacancy rates (below 10% during the last decade) compared to other major global cities like Hong Kong, London or Frankfurt.
- Developers/REITs/Opportunistic investors are currently disposing their assets.
- Only a limited number of transactions are occurring due to a buyer-seller gap.
- Recent buyers are Japanese balance sheet holders and foreign core funds.
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