J-REIT transaction volume marks record quarterly high

  • Commercial real estate investment volume totaled JPY 1.07 trillion in Q1 2018. Although this was a 23% y-o-y decline, it was still the third highest Q1 transaction volume since 2009.
  • Domestic investors drove purchasing activity, accounting for 90% of total volume. Investment by J-REITs rose 2% y-o-y to JPY 583 billion (for deals of JPY 1bn or more), the highest quarterly volume recorded since the survey began in 2005. The TSE REIT index has risen steadily since the end of last year, with public offerings also hitting a record high in terms of value.
  • CBRE's latest investor survey (as of April 2018) found that expected yield for offices (Otemachi) fell by 10bps q-o-q to 3.45%, while expected yield for multi-family residential (Tokyo South, Tokyo East) and logistics facilities (Tokyo bay area) also fell by 1bps to 4.44% and 4.63, respectively. These are the lowest levels since CBRE's surveys began. Expected yields for offices in all six regional cities also hit record lows.
  • The reappointment of Bank of Japan (BoJ) Governor Haruhiko Kuroda is expected to ensure that the BoJ's low interest rate policy will continue for the time being, and that there are unlikely to be any major shifts in the funding environment. While investment appetite is robust, particularly among institutional investors, there continues to be a shortage of properties in central Tokyo, and the market is likely to remain tight. Yields could fall further in regional cities, as interest among investors is growing in anticipation of further rise in office rents