Real estate transaction volumes in Japan plunge 74.6%

Blame it on extremely cautious investors who carefully evaluate investment opportunities.

According to Jones Lang LaSalle, Japan remains an enigma due to a combination of a usual 2Q11 seasonal downturn and the recent Tohoku earthquake‑related negative sentiment. However, expected asset dumping did not materialise as investors continue to maintain their long‑term investment positions without any expectation of short‑term panic selling.

This explains the 74.6% decrease in direct real estate transaction volumes as investors proceed cautiously in evaluating investment opportunities. Still, we did see a slight decline in capital values and rents, with the Tokyo CBD 3‑kus down 0.4% for both capital values and rents.

The direct real estate market has not only seen a much smaller number of deals but also a lack of large deals. The largest deal in 2Q11 occurred in Yokohama where Arena Tower was sold by Arena Tower Y.K. to the United Urban Investment Corporation, a listed REIT. The deal went for JPY 9.5 billion (USD 117 million) at a yield of 5.6%.

The largest Tokyo deal was the sale of Eishin Building in Chiyoda‑ku for JPY 6 billion (USD 73.8 million). This office asset was sold by listed developers Meiwa Estate to the Keihan Electric Railway Company.

Going forward, we expect cross‑border and opportunistic investors together with core‑type investors to enter the markets searching for opportunities. Capital values will remain constant to the end of the year, before rising from 2012 onwards, continuing on from the pre‑quake economic revival we saw at the beginning of the year.