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Tag Archives: marunouchi

The latest JREI investor sentiment survey findings were just reported, opinions gathered in April so a fairly fresh view to the market.   Summary: Expected cap rates have gone up 50-100bp over the last survey 6 months ago and still 20-30bp higher than current market cap rates…  although I don`t believe there are enough transactions happening to underwrite that well.

The core of core Marunouchi/Otemachi Class A Office has moved moved upward to 4.5% or 300bp over the risk free and to match core Ginza Retail at the same 4.5% which are now the theoretical bases to which we add risk premium points for other classes, namely:

Omotesando Retail at 4.7%, Suburban Tokyo retail 6.5%, Regional Retail Downtown areas 6-7% / Suburban 7-8%

Tokyo Warehouse Single Tenant / Multiple Tenant 6%, other metropolitan hubs 6.3% to 7%

Residential at 6.0% to 6.3% and in the regions 6.6-6.7% for Yokohama to a high of 7.7% for Sapporo

Economy Lodging Tokyo 6.1%, Osaka 6.8%, Nagoya 6.9%, Fukuoka/Sapporo 7%

The most recent survey of Japan land prices for 4th quarter 2008 in the “Land Price LOOK Report“, issued Feb 24th by the Japan Ministry of Land, Infrastructure, Transport and Tourism (MLIT) shows how how far things have turned downward for the last half of 2008 after a flat start to correction during the first half.

Both 3rd and 4th quarter 2008 results were down generally across the country, with particularly bad news in Sendai, Nagoya, Osaka, and Naha, central area land prices all down 9%+ for the 4th quarter, following 3rd quarter news which was nearly as bad.

The results for Tokyo were also poor in the -3 to -9% range with bright spots in Marunouchi, Bancho, and Shibuya (0 to -3% range) and negative spots in Ikebukuro and Shinagawa (-9%+).   The popular area of west tokyo down to Yokohama including Kawasaki was generally much better than the north and east side of the city out toward Saitama and Chiba.   That being said, the whole Greater Tokyo area was down for 2 consecutive quarters.   The number of transactions are also down significantly as developers go bust and banks refuse to lend to new projects.   We expect this abrupt slowing of new supply starting in 2008 and continuing for the time being will have a very positive impact on central area condominium prices 2-3 yrs down the road.

Surprising spots where land prices remained robust although not moving upward were right in front of Niigata and Kagoshima Chuo main stations.  Assumedly the major redevelopment of these stations including preparation for the new bullet train access to Kagoshima have held the land prices.

The MLIT official land prices `kojikakaku` for 2008 will come out later this month giving another indication.    For now, the debt liquidity pressure remains but in most cases existing real estate loans to property in private funds and JREITS seem to be working out solutions with lenders to extend financing periods at reasonable terms.   We hope that government measures and new financing sources will ease the market pressure more starting in April.