Japanese Real Estate Investment Market 2012
April, 2012
Consulting Division
Marunouchi Kitaguchi Bldg. 1-6-5 Marunouchi, Chiyoda-ku,
Tokyo 100-0005, Japan
To create a transparent real estate investment market in Japan
This report has been produced by Nomura Research Institute solely for information purposes. It is not intended to be a
complete description of the markets or developments to which it refers. No warranty for representation, express or implied is
made as to the accuracy or completeness of any of the information herein and Nomura Research Institute shall not be liable
to any reader of this report or any third party in any way whatsoever.
whatsoever
Research Framework and Perspectives
for this Report
p
Macrofundamentals
Financial and Capital Markets
GDP growth, corporate performance, demographic movements…
Interest rates, financial and other regulations, political trends…
Rental Market
Trading Market
Demand
Supply
Buyers
Lenders
Sellers
What are the key drivers of demand?
Which industries require more space?
Which districts are in demand?
…
How much floor space
is newly developed ?
How much ffloor space
p
is demolished?
…
What properties
interest buyers?
How strong is their
buying appetite?
What properties
are lenders willing
to finance?
What are the lending
conditions?
Who are the
potential sellers?
What assets are
likely to be sold?
Vacancies
Liquidity
Increase or decrease?
What kinds of properties are transacted successfully
andd what
h t are not?
t?
Rent and NOI
Cap Rate
Increase or decrease?
What cap rate level leads to successful transactions?
Will asset value rise or fall?
Times New Roman, size 8, color: Dark Gray
Asset Price Estimation
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Ex)) Source: NRI based on IMF
2
Macro fundamentals of Japan
Overview of Real Estate Investment Market in Japan
Office market
Residential market
Retail property market
Operational asset market (logistics properties, hotels, and data centers)
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
3
Macro fundamentals of Japan
Overview of Real Estate Investment Market in Japan
Office market
Residential market
Retail property market
Operational asset market (logistics properties, hotels, and data centers)
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
4
Macro Fundamentals of Japan
Japan’s population is aging and shrinking due to low birth rate.
„ Total population peaked out in 2005
2005. The number of households is increasing for now
now, but it is
projected to decrease after 2015.
Population and Households in Japan
Population
(th
(thousand)
d)
← Actual
140,000
Forecast →
Households
(th
(thousand)
d)
70,000
120,000
60,000
100,000
50,000
80,000
40,000
60,000
30,000
40,000
20,000
20,000
10,000
0
0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
65歳以上人口
O
Over
65 YRS
1515-64
15～64歳人口
64歳人口
15 64
YRS
0 0-14
0～14歳人口
0 14歳人口
14 YRS
世帯数
H
Households
h ld
Source: NRI based on National Institution of Population and Social
Security Research
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
5
Macro Fundamentals of Japan
Economic growth is weak and expected to remain so for the foreseeable future.
(%)
15.0 Real GDP Growth in Major Countries
←実績
←Actual
A実績 l
予測 → →
Forecast
F
China
10.0 India
Korea
5.0 US
UK
Japan
0.0 Japan
United States
United Kingdom
United Kingdom
Korea
China
India
‐5.0 ‐10.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: NRI based on IMF
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
6
Macro Fundamentals of Japan
Despite the weak growth, Japan remains one of the largest economies in the world.
„ While Japan has fallen to third place after the US and China
China, it is expected to remain ahead of highgrowth countries including India, Brazil and Russia up to at least 2020.
Nominal GDP of Major Countries
((Billion USD))
25,000
←Result
←実績 Forecast
予測 →→
US
20,000
China
Japan
15,000
United States
United Kingdom
Korea
10,000
Japan
China
India
5,000
India
UK
Korea
0
Note:
Figures up to 2016 are IMF forecasts and those up to 2020 are
calculated with the assumption that the CAGR from 2011 to 2016 will
be maintained.
Source: NRI based on IMF
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
7
Macro Fundamentals of Japan
Post-earthquake
q
restoration has p
progressed
g
rapidly,
p y but corporate
p
earnings
g remain lackluster
due to the worldwide recession and a greatly appreciated yen.
„ The Industrial Production Index recovered more quickly after the Great East Japan Earthquake than after the Lehman
Ci i
Crisis.
„ Corporate earnings have picked up somewhat after falling steeply in the wake of the quake. They remain short of full
recovery, however, due to such factors as the European financial crisis, weak consumption in the US, and a strong yen.
Industrial Production Index
(Trillion yen)
110
Ordinary Income of Japanese Companies
16.0
14.0
100
12 0
12.0
Total
10.0
90
Non-manufacturing
8.0
6.0
Manufacturing
80
4.0
2.0
70
0.0
‐2.0
60
‐6 ‐5 ‐4 ‐3 ‐2 ‐1
0
1
2
東日本大震災（2011年2月=100）
Tohoku Earthquake
(Feb. 2011 = 100)
3
4
5
6
7
8
9 10 11 12
リーマンショック（2008年8月=100）
Lehman
Crisis
(Aug. 2008 = 100)
Source: NRI based on METI
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
‐4.0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
CY08 CY08 CY08 CY08 CY09 CY09 CY09 CY09 CY10 CY10 CY10 CY10 CY11 CY11 CY11
全産業
Total
Manu製造業
非製造業
Non-manufacturing
facturing
Note: Except finance industry and insurance industry
Source: NRI based on MOF
8
Macro Fundamentals of Japan
A strong
g yyen has boosted Japanese
p
firms’ M&A activities abroad at the same time that it has
depressed manufacturers’ earnings and forced them to transfer production abroad .
Japanese Firms’ M&A Activities Abroad
Yen/Dollar Foreign Exchange Rate
(USDJPY)
140
(Billion yen)
12,000 60.0%
135
130
50.0%
10,000 125
40.0%
120
8,000 115
30.0%
110
6,000 20.0%
105
100
4,000 10.0%
95
90
2,000
2,000 0 0%
0.0%
85
80
0 ‐10.0%
75
70
金額
Amount
Source: NRI based on Bloomberg
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Ratio
to total amount
全案件に占める割合
Source: NRI based on Recof
9
Macro Fundamentals of Japan
There are concerns about Japan’s huge fiscal deficit, which may drive up interest
rates in the future.
„ Currentlyy Japan
p keeps
p its interest rates at a lower level than that of countries rated higher
g
than Japan.
p
If the
irrational gap between the interest rate level and sovereign ratings is closed, Japan’s interest rates may raise.
Ratio of Government Debt to GDP
(%)
300
ÅActual
Long-term Interest Rates and Sovereign Ratings
(%)
7.0
ForecastÆ
Japan
250
6.0
5.0
US
AA+/Negative/A-1+
UK
AAA/Stable/A-1+
200
4.0
150
100
US
3.0
UK
2.0
Germany
50
1.0
Germany
AAA/Stable/A-1+
Japan
AA-/Negative/A-1+
0.0
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: NRI based on IMF
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Note: Ratings are as of Nov. 2011.
Source: NRI based on IMF and S&P
10
Macro Fundamentals of Japan
A financial collapse
p is unlikely
y as long
g as domestic capital
p
remains in Japan
p and
continues to circulate.
„ Household’s financial assets,, which had been decreasing
g since 2006,, posted
p
an increase in 2009 for the first time
in three years.
„ The possibility of Japanese government bonds collapsing is seen to be small, as more than 90 percent of the
bonds are held by domestic investors.
(Trillion yen)
Household’s Financial Assets in Japan
Government Bond Investors by Country
2,000
100%
1,500
75%
1,000
50%
500
25%
0
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Japan
US
UK
Domestic Investors
Germany
Greece
Foreign Investors
Note: As of Dec. 2010
Source: NRI based BOJ
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Source: NRI based on BOJ, FRB, ONS, Bundesbank, Bank of Greece
11
Macro Fundamentals of Japan
Tokyo remains the world’s top metropolis in terms of population and GDP.
Population and GDP in 2020 by City
GDP size in 2020
(Billion USD)
1,800
Tokyo
New York
1,600
1,400
1,200
1,000
Los Angeles
800
London
Mexico City
Paris
Osaka/Kobe
Sao Paulo
B
Buenos Aires
Ai
Shanghai
Seoul
Mumbai
Chicago
600
400
200
0
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Population in 2020
(thousand)
40,000
Source: NRI based on PricewaterhouseCoopers and UN
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
12
Macro Fundamentals of Japan
Tokyo is the most popular headquarter location for Fortune Global 500 companies.
Fortune Global 500 Companies in Tokyo
Ranking among the Top 200
Number of Fortune Global 500 Companies by City (2011）
Rank
Tokyo, 47
Beijing, 41
Paris, 23
Ne York 18
New York, 18
London, 17
Others 327
Others, 327
Seoul, 12
Osaka 8
Osaka, 8
Toronto, 7
Company
9
Japan Post Holdings
31
Nippon Telegraph & Telephone
40
Hitachi
45
Honda Motor
58
JX Holdings
73
Sony
89
Toshiba
118
Tokyo Electric Power
125
Mitsubishi
131
Seven & I Holdings
141
Meiji Yasuda Life Insurance
148
Mitsui
153
Dai-ichi Life Insurance
157
Mitsubishi UFJ Financial Group
158
Fujitsu
173
Nippon Steel
189
Sumitomo Mitsui Financial Group
199
Marubeni
Note: Numbers indicate Global 500 ranking.
Source: NRI based on Fortune Global 500 2011
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
13
Macro Fundamentals of Japan
Population continues to increase in Greater Tokyo while declining in Japan overall.
„ The growth of Tokyo
Tokyo’ss population and households is expected to continue over the long term on the
strength of both natural and social increases.
Net Population Inflow into Greater Tokyo
Kanagawa
200,000
Tokyo
Chiba
Saitama
Total
150,000
Inflow
100,000
50,000
0
O tfl
Outflow
50 000
‐50,000
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
‐100,000
Source: NRI based on Basic Resident Register Population Migration Report
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
14
Macro fundamentals of Japan
Overview of Real Estate Investment Market in Japan
Office market
Residential market
Retail property market
Operational asset market (logistics properties, hotels, and data centers)
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
15
Overview of Real Estate Investment Market in Japan
Japan has the second largest real estate investment market in the world.
Estimated Size of Institutional-Grade
Institutional Grade Real Estate by Country
New Zealand
Thailand 0.3%
Indonesia 0.3%
Estimated Size of Institutional-Grade
Institutional Grade Real Estate by Country in Asia-Pacific
Asia Pacific
Philippines Vietnam
0.2%
0.1%
0
Taiwan0.6%
0.7%
Hong Kong
0.8%
Singapore
0.9%
500
1,000
1,500
(US$B)
2,500
2,000
Japan
2,484
China
Turkey
1.0%
India
1.1%
M i
Mexico
1.3%
1,424
Australia
United States
27 5%
27.5%
Netherlands
1.5%
559
South Korea
South Korea
415
India
South Korea
1.7%
Russia
2.0%
23,879
US$B
Australia
2.3%
Spain
2.7%
Brazil
2.8%
Japan
10 4%
10.4%
Canada
2.9%
Italy
3.9%
France
4.9%
United
Kingdom
5.4%
Germany
6.3%
China
Chi
6.0%
271
Singapore
204
g
g
Hong Kong
98
198
Taiwan
173
Indonesia
155
Thailand
81
Malaysia
73
New Zealand
63
Philippines
39
Vietnam
17
Gulf Cooperation
Council
2.0%
Latin America
5.8%
Asia
Pacific
25.8%
Europe
36.0%
23,879
US$B
US/Canada
30.4%
Source: NRI based on PwC and ULI “Emerging Trends in Real Estate 2011”, Pramerica Real Estate Investors Research “A Bird‘s Eye View of Global Real Estate Markets: 2011 Update”
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
16
Overview of Real Estate Investment Market in Japan
Real Estate and Financial Assets and Real Estate Investment Market in 2010.
FINANCIAL ASSETS
5,715
Cash & deposits
Note: figures are trillions of yen
REAL ESTATE ASSETS
2,489
Land
B ildi
Buildings
: 1,205
: 1,284
1 284
1,288
Including 24 in foreign-currency deposits
821
（55%）
Investment assets
4 traditional assets：1,824
52
（3%）
Domestic equities (listed)：320
Domestic bonds：1,148
Foreign equities & bonds：356
19
（2%）
Households
1,488
Private corporations
(non-financial)
786
Institutional investors
Alternative assets
<Income Property>
Corporate-owned Securitized Assets
C
rental properties
approx. 31
(ex. housing)
(J-REIT
96
approx. 8)
Equity
fi
financing
i
approx.12
Rental housing
28
Natural resources
Intellectual properties
& other assets
Investor Sector
Real estate related assets
Investment trusts：87
Structured-Financing Instruments：24
(CMBS： approx. 7)
Domestic equities (unlisted) & investments: 233
Derivatives：91
Debt financing
approx. 20
(NRL approx. 16)
8
（7%）
16
（4%）
Pension
P
i ffunds
d
122
Insurance Companies
373
13
（1%）
Other assets
Private financial institution lending：682
g
Insurance & pension reserves & Deposits
592
（39%）
Banks
1 523
1,523
Source) NRI Based on MLIＴ, CAO, BOJ, JASDA, ARES, Statistics Bureau, Trust Banking Association, STBRI
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
17
Overview of Real Estate Investment Market in Japan
Japan’s securitized real estate market has grown to 48 trillion yen since 1997.
„ Although the amount of acquisitions has dropped steeply since 2008
2008, assets worth 2
2.2
2 trillion yen were acquired for
securitization in 2010.
Acquisitions of Securitized Real Estate
(¥bn)
(No. of Transactions)
1,800 10,000
9,000
1,582
1,642
8,884
8,273
1,523
1,600 8,000
1,400 6,930
7,000
1,200 1,119
6,000
5,335
6,242
5 000
5,000
800 5,158
3,984
4,000
620
2,778
3,000
2,000
2,167
1,167
1,000
62
0
316
9
26
1997
1998
269
343
2,210
1999
2000
2001
J‐REIT (Left Axis)
275
2,236
2,031
1,772
611
2 195
2,195
1,798
161
74
518
456
3,308
1,867
600 2,838
4,440
2,541
1,000 7,205
305
2002
676
895
2003
2004
Non J‐REIT (Left Axis)
2005
2006
1,591
200 1,359
1,679
2007
628
439
604
2008
2009
2010
No. of Transactions (Right Axis)
400 0 （ FY)
Source: NRI based on MLIT
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
18
Overview of Real Estate Investment Market in Japan
The office sector accounts for 38 percent of the total amount of securitized real
estate.
„ Residential properties comprise 18 percent and retail 15 percent,
percent so that office
office, residential and retail combined
constitute 70 percent of securitized real estate.
Acquisitions of Securitized Real Estate by Asset Class
(¥bn)
8,000
7,000
Other
23.7%
Office
37.6%
6,000
Industrial
2.5%
Retail 14.8%
4,000
359
1,472
Residenti
al
18.1%
291
1,107
981
790
902
77
34
12
300
71
1,000
4
49
1997
805
166
19
59
211
597
746
1998
1999
2000
1,293
1,589
61
25
808
418
38
686
270
1,611
2,194
552
1,516
1,728
2,124
2,503
Office
2002
Residential
479
365
348
167
289
235
891
710
2001
493
130
565
145
79
160
97
161
267
1,321
835
404
512
0
259
193
263
120
122
67
3,000
2 000
2,000
1,398
1,706
Approx.
43Trillion
Yen
Hotel
3.3%
5,000
1,644
2003
2004
Retail Industrial
2005
Hotel
2006
2007
2008
32
556
2009
48
63
252
441
768
2010
Other
Source: NRI based on MLIT
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
19
Overview of Real Estate Investment Market in Japan
Japan’s securitization market was dominated by office properties at first, but various
other types of real estate have been securitized in recent years.
„ Manufacturing facilities,
facilities logistics facilities and hotels are being securitized in addition to office
office, residential
residential, and retail
properties.
Net Asset Amount of Securitized Real Estates by Asset Class
100%
7 2%
7.2%
6.1%
12.4%
90%
13.3%
18.8%
6.8%
80%
7.7%
16.1%
3.8%
1.0%
19.9%
24.8%
33.2%
0.5%
0.7%
6.2%
2.1%
1 3%
1.3%
8.1%
70%
13.7%
10.4%
2.5%
1.1%
30.3%
60%
11.1%
2.4%
1.6%
16.5%
11.1%
8.3%
4.0%
4
0%
3.0%
12.3%
24.0%
20.4%
18.1%
5.2%
1.7%
5.4%
3.8%
1 8%
1.8%
4 2%
4.2%
16.2%
14.3%
22.2%
2.0%
10.1%
23.9%
2.3%
3 1%
3.1%
12.2%
20.8%
17.6%
18.9%
50%
8.9%
40%
29.2%
26.5%
23.2%
34.2%
34.1%
31.0%
2003
2004
2005
2006
Retail
Industrial
16.0%
22.7%
79.4%
67.0%
19.3%
20.1%
21 3%
21.3%
15.1%
14.3%
62.4%
30%
51.2%
20%
41.7%
39.9%
29.3%
36.5%
38.7%
2007
2008
33.8%
37.1%
10%
0%
1997
1998
1999
2000
2001
Office
2002
Residential
Hotel
2009
2010
Other
Source: NRI based on MLIT
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
20
Overview of Real Estate Investment Market in Japan
Securitized real estate markets outside Tokyo have shrunk, causing 78 percent of securitized
real estate acquisitions in 2010 to be concentrated in the Tokyo Metropolitan Area.
„ Most of the securitized properties were in the Tokyo Metropolitan Area
Area, with only 8 – 10 percent in the Osaka
Metropolitan Area.
Number of Properties Securitized by Prefecture
0%
10%
20%
30%
2010
40%
50%
60%
66.0%
70%
6.2%
80%
2.9% 2.7%
90%
6.9%
100%
1.5%
1.2% 1.2% 1.7%
2.1%
7.5%
Greater Tokyo Area: 77.8%
2009
53.0%
2008
2007
4.0%
51.9%
5.1%
41.9%
Tokyo 6.4%
Kanagawa
Chiba
Saitama
Osaka
3.3% 2.4%
Hyogo
Aichi
4.0% 2.5%
3.1% 4.5%
10.5%
Fukuoka
8.4%
8.8%
6.4%
Hokkaido
2.2%
6.9%
4.0% 2.8%2.2%
1.4% 5.5%
6.0%
Miyagi
3.7% 2.6%2.0%
4.6%
3.1%
10.0%
11.4%
15.3%
Others
Source: NRI based on MLIT
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
21
Overview of Real Estate Investment Market in Japan
The Japanese
p
real estate market experienced
p
a speculative
p
bubble and collapse
p
around 1990.
„ Land prices rose and fell steeply in the late 1980’s
1980 s and early 1990’s
1990 s, especially in the commercial districts of
metropolitan areas.
Long-Term Trend of Japanese Land Prices
600
500
400
300
200
100
0
Average of Three Categories
Commericial
Residential
Industrial
* Index: The end of March of 2000 =100 , Data of six major cities of Tokyo, Yokohama, Nagoya, Kyoto, Osaka and Kobe
Source: NRI based on Japan Real Estate Institute
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
22
Overview of Real Estate Investment Market in Japan
Total return has recovered to the p
plus level,, and capital
p
return is showing
g signs
g of
following suit.
„ After the summer of 2009,
2009 capital return finally ceased declining and reversed trends upwards
upwards. Meanwhile
Meanwhile, income
return remained stable at around 5 percent even during the turmoil period following the Lehman Shock.
Performance Trend in Japan
20.0%
15.0%
10.0%
5.0%
0.0%
‐5.0%
‐10.0%
‐15.0%
Total Return
Capital Return
Income Return
Source: IPD Japan
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
23
Overview of Real Estate Investment Market in Japan
Cap rates have leveled off since returning to the 2005 level.
„ Cap rates declined steadily up to the end of the second quarter of 2008
2008, after which they headed upwards for a
while. They are on a plateau at present, and this trend is expected to continue for a while.
„ Cap rate gaps between regions and between asset classes remain more or less unchanged.
Cap Rate Trend in Japan
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
Office Tokyo CBD
Office Osaka CBD
Retail Tokyo
Residential Tokyo
Source: NRI based on Japan Real Estate Institute
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
24
Overview of Real Estate Investment Market in Japan
The J-REIT market,, which was formed in September
p
2001,, has shrunk by
y half from
its peak, with capitalization at approximately 3.0 trillion yen.
„ The JJ-REIT
REIT market started in September 2001 with two listings and a market capitalization of approximately 25
billion yen.
„ Currently, there are 34 listed J-REITs with a total share value of approximately 3.0 trillion yen.
J-REIT Market Capitalization
(¥bn)
7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Office REITs
Residential REITs
Other REITs
Source: SMTRI “SMTRI J-REIT Index”
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
25
Overview of Real Estate Investment Market in Japan
More than 70 percent of J-REIT assets are located in the Tokyo Metropolitan Area,
and approximately 55 percent of J-REIT assets are office properties.
Asset Mix of J-REITs by Area and Asset Class
Others
7.9%
Other Areas
7.6%
Kinki Area
12.3%
Chubu Area
3 6%
3.6%
Approx.
Approx
8.2
Trillion
Yen
Retail
18.4%
5 Central
Wards of
Tokyo
43.7%
Approx.
Approx
8.2
Trillion
Yen
Kanto Area
15.7%
Office
55.2%
Residential
18.5%
23 Wards of
Tokyo
y
17.1%
G
Greater
t Tokyo
T k Area
A
76.5%
* As of the end of October of 2011
Source: NRI based on ARES
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
26
Overview of Real Estate Investment Market in Japan
The Tokyo Stock Exchange (TSE) REIT Index has moved more or less in tandem
with TOPIX and the listed Real Estate Industry Index.
„ The TSE REIT Index has dropped sharply from its peak in May 2007
2007.
(Index:Feb‐10=1,000)
3,500
TSE REIT Index, TOPIX, and the Listed Real Estate Industry Index
3,000
2,500
2,000
1,500
1,000
500
0
TOPIX
TOPIX Real Estate Index
TSE REIT Index
TSE REIT Office Index
TSE REIT Retail & Logistics, Others Index
TSE REIT Residential Index
Source: NRI based on Bloomberg
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
27
Overview of Real Estate Investment Market in Japan
CMBS issuance has decreased drastically since 2008,
and at present only RMBS is issued at a constant pace.
„ Most recently,
recently about 90 percent of residential mortgage-backed
mortgage backed securities were originated by the Japan Housing
Finance Agency.
Backed Securities Breakdown by Type of Backing and RMBS Breakdown by Originator
0%
(¥100m)
60,000
2004FY 1H
2004FY 2H
2005FY 1H
2005FY 2H
2006FY 1H
2006FY 2H
2007FY 1H
2007FY 2H
2008FY 1H
2008FY 2H
2009FY 1H
2009FY 2H
2010FY 1H
2010FY 2H
2010FY 2H
2011FY 1H
50,000
40,000
4,370
7,418
30,000
20%
40%
60%
80%
100%
15.5%
14.2%
44.8%
39.6%
39.8%
46.4%
66.7%
71.6%
79.7%
65.9%
85.1%
88.4%
87.6%
93 7%
93.7%
89.8%
7,679
8,755
6,937
20,000
32,311
1,994
Japan Housing Finance Agency
10,338
3,511
Nonbank
Others
563
980
20,955
14,815
Local bank
30,260
2 038
2,038
10,000
City bank・Trust Bank
16,935
16,276
1,701
16,352
12,143
9,702
11,113
7,537
413
341
138
8,491
8,341
2009
2nd Half
2010
1st Half
15,064
11,132
0
2004
1st Half
2004
2nd Half
RMBS
2005
1st Half
CMBS
2005
2nd Half
CDO
2006
1st Half
Lease
2006
2nd Half
2007
1st Half
Consumer Loan
2007
2nd Half
2008
1st Half
Shopping Credit
2008
2nd Half
2009
1st Half
Receivable・Commerｃial bill
2010
2nd Half
2011
1st Half
Others
Source: NRI based on Japan Securities Dealers Association
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
28
Overview of Real Estate Investment Market in Japan
Lenders’ liberal attitude has slightly increased despite the Great East Japan
Earthquake.
„ Local financial institutions’ willingness to extend real estate loans has gradually improved, but foreign-based
institutions have become less willing, especially in mezzanine financing,
f
so that the average gearing off real estate
players runs at 50 – 70 percent. Gearing as high as 90 percent has virtually disappeared.
Financial Institutions’ Lending Attitude toward Real Estate Industry
100
00
80
60
Loose
40
20
0
‐20
Tight
‐40
‐60
‐80
‐100
Total Enterprise Middle market enterprise
Minor enterprise
Source: NRI based on BOJ
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
29
Overview of Real Estate Investment Market in Japan
Japanese institutional investors still remain cautious about real estate investments
„ Pension funds are particularly reluctant to invest in real estate and are unlikely to become active investors for the
foreseeable future.
Pension Funds’ Interest or Involvement
in Real Estate Investment
Pension Funds Investment Trend on Real Estate
0%
100%
20%
40%
60%
80%
100%
90%
2006
80%
70%
23.8%
1.4%
20.3%
9.1%
39.9%
5.6%
44.4%
65.6%
74.6%
60%
75.0%
60.4%
67.7%
66.2%
63.8%
0.9%
2007
21.0%
2008
21.8%
2.8% 13.6%
12.5%
47.7%
2.3%
14.1%
46.5%
2.4%
11.4%
48.6%
1.9%
50%
40%
29.1%
0.6%
0.8%
30%
2.3%
20%
18.4%
10%
2.6%
4.0%
3.8%
13.9%
15.4%
23.1%
3.1%
10.3%
18.8%
5.2%
3.2%
6.3%
2006
2007
2008
2009
2006
In a year 4.3%
14.9%
11.7%
11.8%
5.3%
4.6%
5.3%
2007
2008
2009
In 3‐5 years
Increase investment Keep current investment
Decrease investment
Don't invest
7.1% 8.2%
21.2%
4 1%
4.1%
15.4%
8.8%
0%
2.6%
4.2%
6.4%
Change attitude as the market
2009
30.5%
3.8%
3.8%
Investing
Used to invest, but not any more
Used to invest, but not any more
Considering
Used to consider, but not any more Never having consider, neither will do No answer
Source: NRI based on MLIT
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
30
Macro fundamentals of Japan
Overview of Real Estate Investment Market in Japan
Office market
Residential market
Retail property market
Operational asset market (logistics properties, hotels, and data centers)
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
31
Office Market
Tokyo, Osaka and Nagoya account for 50 percent of Japan’s commercial real estate.
Commercial Real Estate Stock in Japan
New Construction of Office Space by Area
(million m2 )
25,000
Tokyo 16.0%
22,711
Tokyo Area
29 5%
29.5%
Other 27 Pref. 24.0%
20,099
20,000
Kanagawa 6.0%
15,000
Commercial
Real Estate
0.8 billion
m2
Tochigi 1.5%
Nagano 1.6%
Miyagi 1.8%
y g
13,857
Chiba 3.9%
12,262
11,602
1,777
11,337
Saitama 3.7%
1,803
,
10 132
10,132
10,000 3,352
Niigata 1.8%
8,699
2,506
Ibaragi 2.1%
9,001
8,345
8,496
8,369
7,670
6,955 6,880
Osaka 8.5%
Hiroshima 2.3%
8,659
7,852
7,053
6,941
6,350
1,134
959
Shizuoka 2.9%
1,803
5,000
8,344
Fukuoka 4.0%
Hokkaido 4.1%
Mie 1.4%
Aichi 6.3%
Gifu 1.6%
Hyogo 3.9%
Kyoto 2.0%
Nara 0.7%
Osaka Area
15.1%
1,002
583
838 472
701
651
729 1,028
768 975 751
1,092 654 390
937
934
7,616
1,754
879
664 768 691
1,397
1,029
1,221
1,450
1,354
844
953 835
1,184
4,249
3,798 3,495
3,491 3,921
3,094 3,460
2,934
2,878 2,443 3,019 2,885
2,736
2,4322,452
2,3652,331
2,195
929
838 2,248
0
Nagoya Area
9.2%
Note: Commercial Real Estate means offices, retails, and banks.
Source: NRI based on Ministry of Internal Affaires and Communications
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Tokyo Area
Osaka Area
Nagoya Area
Source: NRI based on MLIT “Statistics of Building Construction Starts”
Other Areas
32
Office Market
Corporate-owned rental real estate is 96 trillion yen in 2008,
which is increased by 30 trillion yen over five years.
„ The asset value of corporate-owned rental real estate (excluding residential) increased by 30 trillion
yen over five years, from 68 trillion yen in 2003 to 96 trillion yen in 2008.
Asset Value of Corporate-Owned Rental Real Estate (excl. Residential)
(¥tn)
100
96
90
26
80
70
60
68
19
35
50
40
21
30
20
35
28
10
0
2003
Leasing Land
2008
Ground of Leasing Buildings
Leasing Building
Source: NRI based on MLIT “Basic Survey on Land”
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
33
Office Market
Tokyo accounts for 56 percent of Japan’s office market.
„ There are approximately 89 million square meters of rentable office floor space in Japan
Japan.
„ Tokyo has approximately 50 million square meters of office floor space, which represents 56 percent
of the overall Japanese market.
Office Floor Space Shares by Major City
100%
3.9%
90%
2.1%
80%
(1 9 milil sq.m))
(1.9
15.3%
70%
60%
1.1%
5.3%
(1.0 mil sq.m)
2.2%
(13.64 mil sq.m)
1.3%
5.8%
2.8%
(2.5 mil sq.m)
2.4%
(2.1 mil sq.m)
1.9%
(1.7 mil sq.m)
(3.4 mil sq.m)
(5.2 mil sq.m)
(1 1 mil sq.m)
(1.1
sq m)
Osaka Area
18.6％
(1.9 mil sq.m)
(4.7 mil sq.m)
Major
ajo 12 Cities
C t es
89.29 mil sq.m
50%
40%
30%
56.1%
Greater Tokyo Area
64.7％
(50.07 mil sq.m)
20%
10%
0%
T k
Tokyo
Y k h
Yokohama
S it
Saitama
Chib
Chiba
O k
Osaka
K b
Kobe
Source: NRI based on JREI
As of Dec .2010
The investigation focus on central area of each city.
In Tokyo, Osaka and Nagoya buildings which are smaller than 5,000 square meter are excluded
In other nine cities buildings which are smaller than 3,000 square meter are excluded
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
K t
Kyoto
N
Nagoya
F k k
Fukuoka
S
Sapporo
S d i
Sendai
Hi hi
Hiroshima
34
Office Market
There are five sub sectors in Tokyo’s CBD area.
„ Tokyo’s
Tokyo s office markets are mainly located in the five central wards: Chiyoda
Chiyoda, Minato
Minato, Chuo
Chuo, Shinjuku and Shibuya
Shibuya.
This small area contains most of the S class and A class buildings, and the 33 million people who live in Tokyo and
its satellite cities gather to this CBD area.
„ Comfortable residential areas in the suburbs and highly developed transportation systems enable the Tokyo
Metropolitan Area to function as a single mega city
city.
Adachi
Itabashi
Kita
Arakawa
Saitama
7.2 million people
Tokyo
13.1 million
Kanagawa
9.0 million
Chiba
6.2 million
Katsushika
Toshima
Bunkyo Taito Sumida
Nakano
Edogawa
Shinjuku
Chiyoda
Koto
Chuo
30 km
Shibuya
Minato
Setagaya
Meguro
Shinagawa
Ohta
30 km
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
35
Office Market
Office vacancy rates in Tokyo rise to 20-year high.
„ The so
so-called
called “Year
Year 2003 Problem”
Problem of offices in Tokyo
Tokyo, ii.e.
e that the market will be hit by excess supply in 2003
2003,
turned out to be a false scare, and office vacancy in Tokyo decreased significantly from 2005 to 2007. However, the
financial crisis in 2008 drastically altered the situation.
„ At present, office vacancy rates in Tokyo are at the highest level in 20 years.
Office Vacancy in Tokyo CBD
12.0%
10.0%
Shibuya
Minato
Shinjuku
Chuo
Chiyoda
8.0%
Minato
Shinjuku
Shibuya
Chuo
Chiyoda
6.0%
4 0%
4.0%
2.0%
0.0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Jan‐07
Jul‐07
Jan‐08
Jul‐08
Jan‐09
Jul‐09
Jan‐10
Jul‐10
Jan‐11
Jul‐11
Source: NRI based on Miki Shoji
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
36
Office Market
Rent has declined gradually due to the high vacancy rates.
„ Office rents have dropped to the lowest level in 10 years
years, and there are no signs that the decline with
stop anytime soon.
Office Rents in Tokyo CBD
(yen/tsubo per month)
26,000 24,000 22,000 20,000 Chiyoda
Shibuya
Minato
18,000 Chiyoda
Minato
Shibuya
Chuo
Chuo
16,000 Shinjuku
Shinjuku
14,000 ,
12,000 10,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Jan‐07
Jan 07
Jul 07
Jul‐07
Jan 08
Jan‐08
Jul 08
Jul‐08
Jan 09
Jan‐09
Jul 09
Jul‐09
Jan 10
Jan‐10
Jul 10
Jul‐10
Jan 11
Jan‐11
Jul 11
Jul‐11
Source: NRI based on Miki Shoji
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
37
Office Market
Huge supply in the CBD will worsen market conditions.
„ There are 119 large
large-scale
scale office buildings (total floor space of 10
10,000
000 square meters or larger) slated for completion
between 2010 and 2015. The buildings altogether will provide 8.0 million square meters of new office space.
„ In 2012, when new supply will be at peak, there will be 32 completed buildings and 2.1 million square meters of new
office space in Marunouchi, Otemachi, Nakano, Odaiba and other districts.
Office Space Supply in Tokyo
Office supply area
(thousand sq.m.)
2,500
70
Office supply area
2,000
2,160
Number of
building supplied
60
Number of building supplied
1,810
50
1,500
40
1,170
850
1,000
870900
570
500
30
20
340
0
1
1986
1987
1
1988
1
1989
1
1990
1
1991
1
1992
1
1993
1
1994
1
1995
1
1996
1
1997
1
1998
1
1999
1
2000
2
2001
2
2002
2
2003
2
2004
2
2005
2
2006
2
2007
2
2008
2
2009
2
2010
2
2011
2
2012
2
2013
2
2014
2
2015
2
2016
2
0
10
Source: Mori Building
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
38
Office Market
Cap rates have risen but still remain below 5 percent.
„ Cap rates of office buildings in Tokyo fell steeply from 2000
2000. The drop was driven by the participation of many
foreign and domestic investors in the Tokyo market and the ease with which investors could procure cheap loans
and high LTV. From 2006 to 2008, the cap rate in Marunouchi ran at less than 4 percent. This means that there
were not enough investable buildings.
„ Cap rates rose approximately 100 basis points after the financial crisis
crisis. However
However, they remain at less than 5
percent, which is not very attractive for investors.
Cap
p Rate Trend of Tokyo
y Office Market
8.0%
7.0%
Marunouchi
6.0%
Nihonbashi
Roppongi
5.0%
Shinagawa
Shinjuku
4.0%
Sep‐11
Apr‐11
Nov‐10
Jun‐10
Jan‐10
Aug‐09
Mar‐09
Oct‐08
May‐08
Dec‐07
Jul‐07
Feb‐07
Sep‐06
Apr‐06
Nov‐05
Jun‐05
Jan‐05
Aug‐04
Mar‐04
Oct‐03
3 0%
3.0%
Source: NRI based on JREI
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
39
Office Market
Osaka struggles with constitutional weakness.
„ Huge supplies in 2008 and 2009 have boosted vacancy to over 11 percent
percent. Supply may remain unchanged in the
coming years, causing vacancy to rise still further.
„ Office workers and sales workers in Osaka have decreased since 1996. This movement is different from other cities
in Japan. Market observers predict that the increase of vacancy and decrease of rent will continue over the medium
to long term
term.
Office Space Supply and Vacancy in Osaka
Number of Office Workers and Sales Workers by Major City
Total Area
of office supply
pp y
(1000 sq.m)
35.0 Vacancy
y
10 thousand p
people
p
15.0%
1600
13.0%
1400
11.0%
1200
9.0%
1000
7.0%
800
5.0%
600
2006
3.0%
400
2011
5.0 1.0%
200
0.0 ‐1.0%
30.0 11.5%
24.1 25 0
25.0 23 4
23.4 20.0 16.8 10.0 1991
1996
15.8 2001
13.5 8.3 9.6 1992
2
1993
3
1994
4
1995
5
1996
6
1997
7
1998
8
1999
9
2000
0
2001
1
2002
2
2003
3
2004
4
2005
5
2006
6
2007
7
2008
8
2009
9
2010
0
2011
1
2012
2
2013
3
2014
4
2015
5
15.0 1986
2016
0
Sapporo
Sendai
Yokohama Nagoya
Osaka
Fukuoka
Forecast
Source：NLI Research
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Source：NLI Research
40
Office Market
Cap rates in regional cities are currently on a plateau after having risen steeply.
„ In Tokyo
Tokyo, cap rates have remained at the same level since 2009
2009. Similarly
Similarly, cap rates in regional
cities such as Sapporo, Nagoya and Osaka have leveled off.
Office Cap Rates in Major Regional Cities
8.0%
7.0%
Sapporo
Sendai
6.0%
Nagoya
g y
Osaka
5.0%
Fukuoka
4 0%
4.0%
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Sep‐11
Apr‐11
Nov‐10
Jun‐10
Jan‐10
Aug‐09
Mar‐09
Oct‐08
08
May‐0
Dec‐07
Jul‐0
07
Feb‐0
07
06
Sep‐0
Apr‐06
Nov‐0
05
05
Jun‐0
Jan‐05
Aug‐04
Mar‐04
Oct‐03
3.0%
Source: NRI based on JREI
41
Macro fundamentals of Japan
Overview of Real Estate Investment Market in Japan
Office market
Residential market
Retail property market
Operational asset market (logistics properties, hotels, and data centers)
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
42
Residential Market
About 20 percent of all households in Japan are living in non-public rental
apartments, and the percentage is trending upwards.
„ Households living in non-public rental apartments (excluding wooden apartments; hereafter the same
in this section), which numbered 3.32 million in 1988, increased by about 2.6 times to 8.77 million
(about 18% of all households) in 2008.
Number of Households by Housing Type 1988 - 2008
B kd
Breakdown
off All Households
H
h ld b
by H
Housing
i T
Type (2008)
Own House
63%
Number of House holds (unit: 10,00
00)
Private Rental House, Apartment House (non‐
House (non
wood)
18%
6,000 Company Housing
3%
20%
5,000 4,077 12%
4,000 3,741 15%
4,392 16%
4,686 ,
18%
4,960 18%
16%
14%
12%
3,000 3,000
9%
10%
0%
8%
2,000 1,401 1 000
1,000 332 1,569 502 1,673 647
647 1,717 747 1,777 877 6%
4%
2%
0 0%
'88
'93
'98
'03
Ratio of Households LLiving in Private R
Rental &
Apartment Houses (non‐wood)
Public Rental House
6%
Private Rental ate e ta
Housing, Others
10%
'08
Households Living in Housing
Households
Living in Housing
Households Living in Rental Houses
Households Living in Private Rental & Apartment Houses (non‐wood)
Ratio of Households Living in Private Rental & Apartment Houses (non‐wood)
Source: “Housing and Land Survey”, Ministry of Internal Affairs and Communications of Japan. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
43
Residential Market
The total number of moving households has decreased, but the number of
households moving to non-public rental apartments has remained fairly steady.
„ The number of moving households peaked out in 1994-98 and decreased to about 85 percent of the peak-time level
i 2004
in
2004-08
08 .
„ The number of households moving to non-public rental apartments remained steady, resulting in a higher proportion
of such households in the total number of moving households.
1,600
1,400
1,200
39%
1,103
600
50%
45%
44%
1,221
,
1 186
1,186
45%
40%
1,135
1,039
1,000
800
46%
45%
884
30%
868
782
532
35%
778
557
427
25%
698
502
466
400
20%
15%
10%
200
5%
0
0%
84‐88
89‐93
94‐98
99‐03
04‐08
Number of Moving Households in Past 5 Years
N
b
fM i H
h ld i P t 5 Y
Number of Households Moved into Rental Houses
Number of Households Moved into Private Rental (Apartment) Houses
Ratio of Households Moved into Private Rental (Apartment) Houses
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Ratio off Households Living in Private Rental & Apartment Houses
Numbe
er of Moving Ho
ouseholds (Unitt: 10,000)
Housing Choices of Moving Households 1984 - 2008
Source: “Housing and Land Survey”, Ministry of Internal
Affairs and Communications of Japan. Charts and graphs
created by NRI.
44
Residential Market
The majority of households moving to non-public
non public rental apartments moved
within the same city.
„ Looking at the former locations of households moving into non-public rental apartments in seven major cities, those
th t moved
that
d within
ithi th
the same city
it were greater
t iin number
b th
than th
those th
thatt moved
d iin ffrom outside
t id th
the city.
it
„ Tokyo’s 23 wards and Osaka saw a decline in households moving into non-public rental apartments from outside
the city, while major regional cities saw no change.
Location Choices of Moving Households
Household moving in a city
Household moving out a city
450 400 350 300 266 207 197 250 200 150 105 Sapporo
Sendai
86 77 Tokyo 23 Wards
Nagoya
Osaka
Hiroshima
04‐08
99‐03
94‐98
04‐08
99‐03
94‐98
04‐08
99‐03
94‐98
04‐08
99‐03
94‐98
04‐08
47 49 45 47
45 49
36 37 32 73 61 53 56 57 57 27 27 23 47 46 41 99‐03
04‐08
99‐03
94‐98
04‐08
0 50 46 48 25 24 24 28 30 28 32 28 27 99‐03
50 165 157 148 58 54 54 94‐98
100 94‐98
Breakdow
wn of In‐Flow Ho
ouseholds Movved in Private Ren
ntal Houses (non‐wood) (Unit:: 1,000)
500 Fukuoka
Source: “Housing and Land Survey”, Ministry of Internal Affairs and Communications of Japan. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
45
Residential Market
The supply
pp y of non-public
p
rental apartment
p
units has increased more sharply
p y than
total housing stock.
„ The growth of rental apartments (public and non
non-public
public combined) outpaced the growth of overall housing as well
as the more modest rise of rental housing in general.
„ As a result, the ratio of rental apartments to total rental houses increased from 60 to 70 percent.
Housing Stock by Type 1988
1988-2008
2008
Housing Growth Rates by Type
130 70 120
120 44 39 16 18 22 21 20 15 14 12 10 Growth Rate (1
1988 = 100)
Housing Sttock (Unit: 1 million
n)
50
50 30 20 124 53 50 40 125 57 60 115 110 105 103 100 90 '88
'93
'98
'03
Number of Houses
Number of Rental Houses
Number of Rental & Apartment Houses (non‐wood)
'08
108 108 95 0 115 112 85 100 Number of Houses
Number of Rental Houses
Number of Rental & Apartment Houses (non‐wood)
80 98
'98
'03
03
'08
08
Source: “Housing and Land Survey”, Ministry of Internal Affairs and Communications of Japan. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
46
Residential Market
New rental housing starts have declined and are less concentrated in the Tokyo
Metropolitan Area.
„ New housing construction starts decreased drastically in 1997, 2007 and 2009. The ratio of rental housing dropped
sharply
h l iin 2009
2009, and
d new rental
t lh
housing
i starts
t t d
decreased
d significantly.
i ifi
tl
„ Looking at yearly breakdowns of new rental housing construction starts by region, the composition ratio of the
Tokyo Metropolitan Area has dropped sharply, while that of the Kinki region has increased.
Breakdown of New Rental Housing Construction by Region
50%
100%
1,800
45%
90%
1,600
40%
1,400
35%
1,200
30%
1,000
25%
800
20%
600
15%
400
10%
200
5%
0
0%
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
House Built for Sale
H
B ilt f S l
Own House
Company House
C
H
Ratio of Rental House
R t lH
Rental House
Note: Date for 2011 is up to November.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Ratio of N
New Rental Housing Construction Start s by Region
n
2,000
Ratio of Re
ental Houses
Numb
ber of Constructio n Starts (Unit: 1,00
00)
New Housing Supply Trend: 1991-2011
80%
35%
42%
46%
41%
38%
70%
60%
50%
12%
11%
40%
13%
13%
Regional Area
Regional Area
16%
12%
18%
42%
42%
Kinki Chubu 11%
30%
20%
20%
11%
38%
31%
26%
'01
'06
'11
10%
Metro Tokyo
0%
'91
'96
Source: “Survey of Construction Work Started”, Ministry of Land, Infrastructure,
Transport and Tourism of Japan. Charts and graphs created by NRI.
47
Residential Market
Vacancy rates trended downwards in central Tokyo and in Osaka.
„ Vacancy rates trended downwards in central Tokyo (23 wards) and Osaka but upwards in major regional cities.
„ Most recently in the Tokyo Metropolitan Area, vacancy rates have risen slightly in Kanagawa Prefecture and the
outlying areas of Tokyo.
Vacancy Rates of Rental Housing (non-wood) in Major Cities
'98
'03
17 '08
Vacanccy Rate of Rental Ho using (non‐wood) (U
Unit:%)
20%
15%
10%
5%
16 15 14 13 12 11 Total Area Tokyo
10 23 Wards Tokyo
9 Urban Area Tokyo
Kanagawa 8 0%
Sapporo
Sendai
Tokyo 23 Tokyo
23 Nagoya
Wards
Osaka
Hiroshima Fukuoka
Source: Data from “Housing and Land Survey”, Ministry of Internal Affairs and
Communications of Japan. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
Vacancy Rate off Rental Housing((non‐wood) (Unitt:%)
25%
Vacancy Rates of Rental Housing in Tokyo Metropolitan Area
2010
2011
Source: “Report on Rental Housing Market”, TAS Corp. (Analyzed by TAS Corp. Data
Supplied by At Home Co., Ltd.) Charts and graphs created by NRI.
48
Residential Market
The rent level of non-public rental housing continues to fall.
„ The rent level of non-public
non public rental housing rose steadily from 1990 to 2000
2000, after which it gradually declined
declined. The
rent level downward trend continued in 2011.
Rent in the Private Sector (Annual Average) – Nationwide and Central Tokyo
Private ((Annual Average)) Rent Index (Basse Year 2010)
108 0
108.0 106.0 104.0 102 0
102.0 100.0 98.0 96 0
96.0 94.0 92.0 Japan
90 0
90.0 Tokyo 23 Wards
88.0 86.0 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Source: “Consumer Price Index”, Ministry of Internal Affairs and Communications of Japan. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
49
Residential Market
Occupancy rates of REIT-owned properties are rising, while their rent levels remain
stable.
„ The occupancy rates of REIT-owned
REIT owned residential properties in Tokyo,
Tokyo excluding the three central wards of Chiyoda
Chiyoda,
Minato and Chuo, have increased since August 2009, while their monthly rents have remained stable.
Occupancy
p
y Rates of REIT-owned Properties
p
Monthlyy Rents of REIT-owned Properties
p
100%
5,000 23 Wards Tokyo
4,500 Nagoya
4 000
4,000 Monthly Rent ((Unit: yen/m3 )
Occupancy R
Rate (Unit: %)
98%
3 Central Wards Tokyo
Osaka
Fukuoka
96%
94%
3,500 3,000 2 500
2,500 2,000 3 Central Wards Tokyo
1,500 23 Wards Tokyo
1,000 ,
92%
Nagoya
Osaka
500 Fukuoka
0 90%
Jan
Apr
Jul
09
Oct
Jan
Apr
Jul
Oct
Jan
Apr
10
Jul
11
Oct
Jan Apr
Jul
09
Oct Jan Apr
Jul
10
Oct Jan Apr
Jul
Oct
11
Source: “ARES J-REIT Property Database”, Association for Real Estate Securitization of Japan. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
50
Residential Market
The rate of housing ownership, which has a negative impact on rental housing
demand, has reversed trends downwards.
„ Average annual income has decreased since 2007,
2007 and the housing ownership rate has declined since 2008
2008.
Housing Ownership Rate and Average Annual Income in Japan
90%
700
680
House Ow
wnership Rate
85%
660
650
645
645
80%
649
660
81%
80%
80%
640
81%
637
75%
77%
77%
77%
78%
78%
630
620
616
600
House Ownership
Annual Income
70%
Average
e Annual Income (Unit: 10,000 ye
en)
683
580
'02
'03
'04
'05
'06
'07
'08
'09
'10
Source: “Consumer Price Index (CPI)”, Ministry of Internal Affairs and Communications of Japan. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
51
Macro fundamentals of Japan
Overview of Real Estate Investment Market in Japan
Office market
Residential market
Retail property market
Operational asset market (logistics properties, hotels, and data centers)
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
52
Retail Property Market
Development of large-scale retail stores has started to recover since 2010.
„ Development of large-scale retail stores
stores, which fell steeply after Lehman shock
shock, bottomed out in
2009 and is now on the recovery path.
New Retail Space Supply vs. Number of Development Project Cases
Floor Space 5,000,000
(Sq.m)
4,500,000
900
800
786
738
726
4,000,000
751
730
728
Reported
Development
Projects
700
651
3,500,000
584
600
3,000,000
500
500
2,500,000
450
400
2,000,000
300
1,500,000
200
1 000 000
1,000,000
100
500,000
0
0
1
2
3
4
5
6
7
8
9
10
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Note: The reported numbers for the fiscal years 2002 and 2008 include stores without floor space indication.
Source: Ministry of Economy, Trade and Industry of Japan. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
53
Retail Property Market
The growth of retail floor space supply has slowed considerably.
„ The CAGR of retail floor space in eight years from 1999 to 2007 was only 1
1.4%.
4%
Retail Floor Space
(Mil sq.m)
160
160 CAGR 1.4%
1 4%
140 134 150 144 141 120 100 80 60 40 20 0 1999
2002
2004
2007
Source：”Census of Commerce”, Ministry of Economy, Trade and Industry of Japan. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
54
Retail Property Market
Total floor space of shopping centers appears to have reached saturation level.
„ The total floor space of shopping centers remained more or less unchanged over the past five years
at around 45 million square meters.
(Mil Sq.m)
50 45 Total Floor Space of Shopping Centers (Sq.m)
43 45 47
47 42 43 2008
2009
44 40 35 30 25 20 15 10 5 0
0 2005
2006
2007
2010
Source： “SC White Paper”, Japan Council of Shopping Centers. Charts and graphs created by NRI
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
55
Retail Property Market
Retail sales have dropped
pp steadily,
y, especially
p
y at department
p
stores after the
Lehman shock.
(%)
Year-on-Year Changes in Annual Revenues - Shopping Centers, Department Stores and Chain Stores
2
0
2000
‐2
‐4
‐2.2
‐0.4
2001
‐2.2
‐3.4
2002
‐2.1
‐2.3
2003
2004
‐1.6
1.6
‐1 7
‐1.7
‐2.8
‐3.2
‐2.8
‐3.5
0.3
‐0.2
2005
0.3
2006‐0.7
‐2.6
‐2.7
0
2007‐0.5
‐1.4
2008‐0.7
‐1.5
‐4.3
‐5.1
2009
2010
‐2
‐2.6
‐3.1
‐4.3
‐5.2
‐6
‐6.8
‐8
‐10
Shopping center
Department store
Chain Stores
‐10.1
‐12
Source：Japan Council of Shopping Centers. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
56
Retail Property Market
Consumer confidence has recovered to the level before the earthquake.
„ After Great East Japan Earthquake
Earthquake, consumption fell temporarily in a "mood
mood of voluntary restraint"
restraint . However,
However by
early summer, consumer confidence had recovered to nearly the same level as before the earthquake.
Consumer Confidence Index
60
50
▼ March 2011
Occurrence of Great East
Japan Earthquake
40
30
20
10
0
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep
2007
2008
2009
2010
2011
Source: “Consumer Confidence Survey”, Cabinet Office, Government of Japan. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
57
Retail Property Market
Rent levels in regional
g
cities have declined steadily,
y and the rent level g
gap
p between regional
g
cities and downtown Tokyo (e.g. Ginza) has widened.
First Floor Monthly Rent Ranking of 13 Major Commercial Districts in Japan (Yen / Tsubo = Appox
First-Floor
Appox.3.3
3 3 Sq.m))
Sq m))
(Thousand 55
Yen)
50
1 銀座
1. Ginza
2 新宿
2. Shinjuku
45
3 表参道
3. Omotesando
T k CBD
Tokyo
40
Tokyo CBD
4 渋谷
4
渋谷
4
4.
Shib
Shibuya
Downtown
Tokyo
5 池袋
5. Ikebukuro
6 神戸
6. Kobe
35
7 心斎橋
7.Shinsaibashi
30
8 福岡
8. Fukuoka
9 京都
9. Kyoto
25
Regional Cities
10 札幌
10. Sapporo
Regional Cities
20
Regional
Cities
11 栄
11
栄 Sakae
11
11.
12 仙台
12. Sendai
15
13 横浜
13. Yokohama
10
09年下半期
2009
2ndd half
10年下半期
2010
2ndd half
11年上半期
2011 2ndd half
Source: “Store Rent Trend”, Japan Real Estate Institute. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
58
Retail Property Market
Development and expansion of airport-vicinity outlet malls targeting visitors from
abroad as well as domestic shoppers have increased.
Outlet Mall Expansion & New Construction Projects in Tokyo Metropolitan Area in Recent Years
Karuizawa Prince Shopping Plaza
i
i
h
i
l
Opened in ’95, extended in ’98. Retail space 32,000 m2
Operator: Seibu Properties
Oarai Resort Outlet
Opened in ’06. Retail space 17,000 m2
Operator: Yatsugatake Mall Management
Sano Premium Outlet
Opened in Opened
in ’03
03, extended in extended in ’08
08. Retail space 37,000 m
Retail space 37 000 m2
Operator: Chelsea Japan
Lake Town Outlet
Ami Premium Outlet
Opened in ’11. Retail space 26,000 m2 Operator: Aeon Retail
Opened in ’09, extended in ’11. Retail space 21,000 m2
Operator: Chelsea Japan
p
p
Mitsui Outlet Park Iruma
Mitsui Outlet Park Iruma
Opened in ’08. Retail space 32,000 m2
Operator: Mitsui Outlet Park
Narita
Airport
Venus Outlet
Renovated and opened in ’09. Retail space 10,000 m2
Operator: Venus Fort Mitsui Outlet Park Tama Minami Osawa
Opened in ’00, extended in ’07. Retail space 21,000 m2
Operator: LaLaport Management
Haneda
Airport
Mitsui Outlet Park Makuhari
Opened in ’00. Retail space 16,000 m2
Operator: Mitsui Outlet Park
Mitsui Outlet Park Yokohama Bayside
Mitsui Outlet Park Kisarazu
Opened in ’96, extended in ’08. Retail space 15,000 m2
Operator: Mitsui Outlet Park
Opened in ’12. Retail space 28,000 m2
Operator: Mitsui Outlet Park
Gotemba Premium Outlet
2
Opened in ’96, extended in ’08. Retail space 45,000 m
p
,
p
,
Operator: Chelsea Japan
Highway
Highway (in planning)
Source: Homepages of outlet mall operating companies. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
59
Retail Property Market
Development of large-scale commercial complexes in conjunction with the
redevelopment of train stations have increased in recent years.
„ As railroad companies renovate their aged stations and station buildings, they are actively promoting the
development of commercial facilities where department stores and specialty shops would be leased
leased.
Recently Opened or Planned Station-Front Commercial Facilities
Station
Sendai
Station
Chiba
Operator
East Japan Railway
Operator
East Japan Railway
Project
Development of hotels, commercial facilities
and office buildings on the grounds of ca.
68,000 m2 with investment of 10 billion yen.
Project
Reconstruction of Station and Station
Building. Development of commercial
facilities with retail space of ca.50,000 m2.
Scheduled
to open
2017 - 18
Scheduled 2016 - 18
to open
Station
Osaka
Station
Tamachi – Shinagawa
Operator
West Japan Railway
Operator
East Japan Railway
Project
j
Reconstruction of North Station and Station
Building. Development of office and commercial
facilities with retail space of ca. 130,000 m2 to
house department stores and specialized
shops.
Project
Redevelopment of ca. 150,000 m2 vacant
l t off the
lot
th former
f
Tamachi
T
hi Depot
D
t Center
C t into
i t
offices and commercial facilities.
Opened
May 2011
Station
Scheduled To be decided
to open
Station
Yokohama
Hakata
Operator
East Japan Railway, Tokyu
Operator
Kyusyu Railway
Project
Project
Reconstruction of Station and Station Building.
Development of commercial facilities with retail
space off ca.180,000
180 000 m2 to
t house
h
d
department
t
t
store.
Reconstruction of South Station and
Station Building. Development of office and
commercial facilities with retail space of ca.
130,000 m2.
Opened
March 2011
Scheduled 2019
to open
Source: Newspaper articles
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
60
Macro fundamentals of Japan
Overview of Real Estate Investment Market in Japan
Office market
Residential market
Retail property market
Operational asset market (logistics properties, hotels, and data centers)
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
61
Logistics Property Market
The volume of motor freight
g has p
peaked out,, and the domestic transportation
p
market
is shrinking.
„ The
e volume
o u e of
o motor
oto freight
e g t ttransportation
a spo tat o iss on
o a declining
dec
g trend,
t e d, especially
espec a y p
private
ate motor
oto freight
e g t in recent
ece t yea
years.
s
„ Commercial motor freight had increased steadily until it reached a peak in around 2000.
„ Private motor freight had dropped particularly steeply after the financial crisis.
（mil. tons）
（
）
Motor Freight Transport
7,000
Private
Commercial
6,000
5,000
4,000
3,000
2,000
1,000
FY50
FY55
FY60
FY65
FY70
FY75
FY80
FY83
FY84
FY85
FY86
FY87
FY88
FY89
FY90
FY91
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
0
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Source: MLIT Gov.
62
Logistics Property Market
New supply
pp y is smaller,, while the size of individual properties
p p
is larger
g due a rising
g
tendency for companies to consolidate their logistics functions.
„ While the number of newly developed warehouses has decreased in recent years, gross floor area per building has expanded.
„ Thi
This is
i attributable
ib bl to companies’
i ’ need
d ffor llarger, more hi
high-performance
h
f
warehouses
h
in
i conjunction
j
i with
i h their
h i adoption
d i off supply
l chain
h i
management and consolidation measures to save costs.
„ Both the number of buildings supplied and gross floor area per building reversed trends upwards in 2010.
Number of Warehouses Supplied and Gross Floor Area per Warehouse – All Industries
（units）
（㎡）
60,000
600
50,000
500
40,000
400
30,000
300
20,000
200
10,000
100
Warehouse
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
FY1
10
FY0
09
FY0
08
FY0
07
FY0
06
FY0
05
FY0
04
FY0
03
FY0
02
FY0
01
FY0
00
FY9
99
FY9
98
FY9
97
FY9
96
FY9
95
FY9
94
FY9
93
FY9
92
FY9
91
FY9
90
FY8
89
0
FY8
88
0
Gross floor space per warehouse
Source: MLIT Gov.
63
Logistics Property Market
Vacancy rates have dropped due to changes in supply and other factors.
„ Vacancy rates have been stalled at a high level since the first half of 2008, when a large number of new facilities became available in
the Tokyo
y Bayy area.
„ On the other hand, newly-developed warehouses have achieved comparatively high occupancy rate due to manufacturers’ demand for
high-spec, large-scale facilities in conjunction with their adoption of consolidation and supply chain management measures.
„ Vacancy rates headed downwards in 2011 owing to limited supply of newly-developed large-scale logistics properties, coupled with
increased demand in the wake of the Great East Japan Earthquake.
25.0%
Average Vacancy Rate of Logistics Properties*
in the Tokyo Metropolitan Area**
20.0%
15.0%
10.0%
5.0%
*Multi-tenant facilities with gross floor area of over 3,300 square meters
**Tokyo, Kanagawa, Saitama and Chiba
Mar‐04
Jun‐04
Sep‐04
Dec‐04
Mar‐05
Jun‐05
Sep‐05
Dec‐05
Mar‐06
Jun‐06
Sep‐06
Dec‐06
Mar‐07
Jun‐07
Sep‐07
Dec‐07
Mar‐08
Jun‐08
Sep‐08
Dec‐08
Mar‐09
Jun‐09
Sep‐09
Dec‐09
Mar‐10
Jun‐10
Sep‐10
Dec‐10
Mar‐11
Jun‐11
0.0%
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Source: CBRE
64
Logistics Property Market
Asking rent for warehouses other than large properties has been decreasing since
2008, when vacancy soared.
„ Rents in Chiba reversed trends upwards
p
recently.
y Asking
g rent in the overall market remains low,, however,, and a
full-scale recovery in rent levels has yet to be realized.
„ Rents for new and large warehouses have held steady due to the strong market demand.
Asking Monthly Rent for Logistics Properties*
Properties
In the Tokyo Metropolitan Area**
¥/tsubo***
7,000
6,000
5,000
4,000
3,000
2,000
1,000
Tokyo
Kanagawa
Saitama
Chiba
**Tokyo, Kanagawa, Saitama and Chiba ***tsubo = 3.3 square meters
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
2010
2009
2008
2007
2006
2011 1H
*Multi-tenant facilities with gross floor area of over 3,300 square meters
2005
2004
2003
2002
2001
2000
1999
1998
1997
0
Source: CBRE
65
Logistics Property Market
Cap rates, which had been rising steadily since mid-2008, has leveled off since the
beginning of 2010.
Cap Rates for Logistics Properties
8.00%
7.00%
6.00%
Tokyo, single‐tenant*
Tokyo, single
tenant
5.00%
Tokyo, multi‐tenant**
4.00%
Chiba single tenant*
Chiba, single‐tenant*
3.00%
Chiba, multi‐tenant**
2.00%
1.00%
0.00%
*Gross
Gross floor area of 10,000 square meters, with two or three floors
**Gross floor area of 50,000 square meters, with three or four floors
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Source: JREI
66
Hotel Market
The number of yearly hotel development and expansion plans continues to decline
and declining trend remained.
„ Plans for hotel development or expansion continue to show a downward trend
trend. On the other hand
hand, the number of
guest rooms slated to be constructed has bottomed out.
Hotel Development/Expansion Projects and Rooms Slated for Construction
50
50 40 35
35 30 25 20 15 10 15 Planned Rooms
Planned Projects
5 350
350 300 250
250 200 150
150 Number of Projjects
N
Number of Plann
ned Rooms (Unitt: 1,000)
45 324
324 308 308 315 297 286 293 262 269 255 254 43 42 42 247 39
39 226
226 226 38 226 224
224 38
37 38 37 215 209 184 176 33 32 31 172 29 159 157 161 29 27 26 26 136 25 26 25 24
24 23 23 21 20 100 50
50 0 0 '00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
1st Half 1st Half
1st Half
1st Half 1st Half
1st Half 1st Half
1st Half 1st Half
1st Half 1st Half
1st Half 1st Half
1st Half 1st Half
1st Half 1st Half
1st Half 1st Half
1st Half 1st Half
1st Half 1st Half
1st Half
Source: “Weekly HOTERES”, Ohta Publications, Co., Ltd. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
67
Hotel Market
The number of hotel guest rooms in Japan continues to increase.
„ The number of hotels has fallen slightly
slightly, while the number of guest rooms has shown a consistent increase
increase. We
assume from these trends that there are now fewer but larger hotels in the country.
Existing Hotels and Guest Rooms
900
900 12 000
12,000 756 700 600 583 7,769 596
596 613
613 622 8,220 7,944 8,110 638 649 8,363 8,518 664 681 8,686 8,811 698 781 798 802 722 9 180
8,990 9,180 10,000 9,442 9,603 9,688 9,629 8,000 500 6,000 400
400 300 Number of Facilities
Number of Plann
ned Rooms (Unit: 1,,000)
800 4,000 200 Hotel Rooms
Hotel Rooms
100 2 000
2,000 Hotel Facilities
0 0 FY 97 FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10
Note: Data at the end of fiscal year.
Source: “Report on Public Health Administration and Services”, Ministry of Health, Labor
and Welfare of Japan. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
68
Hotel Market
Guests from abroad decreased by half due to the resent earthquake,
but overall demand for lodgings in Japan dipped only slightly.
„ International guests staying at Japanese lodging facilities decreased by half in the second quarter of 2011
2011, soon
after the Great East Japan Earthquake.
„ Overall demand for lodgings dipped only slightly in the same period, however. This is attributable to the fact that 90
percent of the demand comes from Japanese guests.
Hotel Guests - Nationwide
100 Number of Guests (Unit: 1 million
n)
90 80
80 70 60 50 40 All Guests
30 Overseas Guests
20 10 0 07
1Q
07
2Q
07
3Q
07
4Q
08
1Q
08
2Q
08
3Q
08
4Q
09
1Q
09
2Q
09
3Q
09
4Q
10
1Q
10
2Q
10
3Q
10
4Q
11
1Q
11
2Q
Note: Survey conducted on lodging facilities with more than 10 employees.
Source: “Statistical Survey on Overnight Travel”, Japan Tourism Agency, MLIT. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
69
Hotel Market
Room occupancy rates fell only slightly after the earthquake throughout most of Japan.
„ The recent earthquake is seen to have had only a minor impact on room occupancy rates overall
overall,
although a sharp fall was seen in the resort sector.
Room Occupancy Rates by Type of Lodging Facility
Room Occupanccy Rates by Facilitty (Unit: %)
70 60 50 40 30 20 Resort Hotel
Business Hotel
10 City Hotel
0 08
1Q
08
2Q
08
3Q
08
4Q
Note: Data beyond the 2nd quarter of 2010 include hotel
facilities with less than 9 employees.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
09
1Q
09
2Q
09
3Q
09
4Q
10
1Q
10
2Q
10
3Q
10
4Q
11
1Q
11
2Q
Source: “Statistical Survey on Overnight Travel”, Japan Tourism Agency, MLIT. Charts
and graphs created by NRI.
70
Hotel Market
Room rates for single-night stays are headed downwards again.
„ Room rates for single-night stays,
stays which showed signs of bottoming out in 2010
2010, once again reverted
to a downward trend in 2011.
Room Rates for Single-Night Stays
16,500 Rate per Night (Unit: ye
en)
16,000 15,500 15,000 14,500 14,000 Rate per Night (weekdays)
13,500 Rate per Night (before holiday)
13,000 '03
'04
'05
'06
Note: One breakfast is included in the price. The price per night is for one person staying
at a private-run hotel. The number for 2011 is an average price up to November 2011.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
'07
'08
'09
'10
'11
Source: “Retail Price Survey”, Ministry of Internal Affairs and
Communications of Japan. Charts and graphs created by NRI.
71
Hotel Market
Occupancy rates of major hotels in Tokyo have recovered to pre-quake levels.
„ Major
j hotels in Tokyo
y experienced
p
a drastic drop
p in occupancy
p
y rates in March and April
p 2011, immediately
y after the
Great East Japan Earthquake. The rates recovered to previous-year levels in September of the same year and
have since remained stable.
100
100 Occupancy
p
y Rates of Major
j Hotels in Tokyo
y and Osaka
Room Occu
upancy Rate (Un
nit: %)
90 80 70
70 60 50 40
40 30 20 19 major hotels in Tokyo
10
10 15 major hotels in Osaka
15 major hotels in Osaka
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
0 2009
2010
2011
Source: Nikkei Newspaper Survey, Nikkei Inc. Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
72
Hotel Market
The earthquake had a severe impact on foreign-capital hotels, which rely on
international tourists and business guests.
„ Room occupancy rate and revenue per available room (RevPAR) of major foreign-capital hotels
dropped in 2011 after posting increases in 2010.
Occupancy Rates and RevPAR of Major Foreign-Capital Hotels in Tokyo and Osaka
400 80 350 70 300
300 60 RevPAR
R (Unit: US$)
Room Occupan
ncy Rates (Unit: %
%)
90 50 40
40 30 20 200 150 100 Mandarin Oriental Tokyo
The Peninsula Tokyo
Shangri‐La Hotel Tokyo
10 250 Mandarin Oriental Tokyo
The Peninsula Tokyo
Shangri‐La Hotel Tokyo
50 0 0 '06
'07
'08
'09
'10
'11
1 H lf
1st Half
'06
'07
'08
'09
'10
'11
1 t H lf
1st Half
Source: Annual reports of each company Charts and graphs created by NRI.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
73
Hotel Market
Investment has become active in Hokkaido and Okinawa, where tourists from
abroad are anticipated to increase hereafter.
I
Investments
Announced
A
d by
b Foreign-Capital
F i C i lH
Hotels
l iin 2011
Location
Nakagyou-ku, Kyoto
Location Niseko District, Kutchan-cho, Hokkaido
Investor
The Ritz-Carlton Hotel Company
Investor
Project
Demolishment of the existing hotel
hotel, new
construction of a hotel facility with 136 guest
rooms. Open in spring 2014.
Pacific Century Premium Development (Hong
Kong)
Project
Start of construction of hotels and condominiums by
investing more than 100 billion yen from 2012
onwards. Partially open in 2014.
Location
Abeno-ku, Osaka
Location Niseko District, Kutchan-cho, Hokkaido
Investor
Marriott International (USA)
Investor
Four Seasons Hotels & Resorts (Canada)
Project
“Osaka Marriott Miyako Hotel (376 rooms)”
in Abenobashi Terminal Building. Open in
spring 2014.
Project
Construction of a resort hotel for foreign tourists.
Location Nago, Okinawa
Investor
The Ritz-Carlton Hotel Company (USA)
Project
Renovation of the existing hotel into the
Japan’s first resort hotel. Open in spring
2014.
Location Onna-son, Okinawa
Investor
Four Seasons Hotels & Resorts (Canada)
Project
In talks with partners for the opening in
2014
2014.
Location
Tokyo Metropolitan Area
Investor
Starwood Hotels & Resorts Worldwide (USA)
Project
Opening of the top brand “St. Regis” under
consideration.
Source: Newspaper articles
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
74
Data center market
Data center infrastructure has been upgraded
pg
in response
p
to g
greater usage
g of
downsized and high-density servers.
„ The spread of space-saving blade servers and an increase in high-density servers for virtualization and cloud
computing have boosted data center capacities in terms of floor weight and power supply
supply.
„ If this trend continues, data centers will be required to have a higher-spec infrastructure hereafter.
„ However, if energy-saving technologies advance and/or concerns about dwindling electricity supply increase, the
trend mayy not necessarilyy continue.
Capacity
Floor weight:1.2t/sq m
Power supply:2.4kVA/sq m
▼
Data Center Capacity Trend
Floor weight:1t/sq m
Power supply:1.8kVA/sq m
▼
Floor weight:500kg/sq m
Power supply:0.8kVA/sq m
▼
Floor weight:800kg/sq
Fl
i ht 800k / m
Power supply:1.3kVA/sq m
▼
1990’s
Mainframe
computers
2010’s
2000’s
Rack mount
servers
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Blade servers
Higher density
servers
75
Data center market
Data centers for public cloud services emphasize scale and cost over location.
„ On the other hand,
hand data centers for private cloud services must be conveniently located
located, such as in urban areas
areas, as
they are primarily used for core backbone systems by large-scale companies.
Comparison of Public and Private Cloud Services
Description
Users and purpose
Public cloud
service
9 Several corporate users
share IT resources, such as
storage, servers and
applications.
9 IT resources are provided
and owned by a third-party
service
se
v ce provider.
p ov de .
9 Information system and
9 A larger site for advantage of
non-core business system
scale
9 Some core backbone system
9 Low cost of land and
of small companies
electricity
9 Personal users
Private
P
i t cloud
l d
service
9 A private cloud service is
structured and provided
solelyy for a single
g
organization or group.
9 It is operated internally or
externally by a third-party
service provider.
9 Updated facilities, such as
9 Major companies large
large power supply capacity,
enough
g to structure a
weight
g capacity
p y and airprivate cloud system
conditioning equipment
9 Core backbone system to be 9 Accessibility for emergency
highly secured
recovery, such as in central
Tokyo
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Specs and location requirements
76
Data center market
Data centers in central Tokyo are likely to have higher-spec infrastructure, while
those for public cloud services are likely to be located increasingly in outlying areas.
„ Some data centers in the Tokyo area have been relocated to major regional cities such as Osaka and Nagoya in
the wake of the Great East Japan Earthquake
Earthquake, in conjunction with companies’
companies contingency planning and disaster
preparedness.
Data Center Trends in Terms of Location and Infrastructure
High
１
Upgrading of
infrastructure
due to higher density
equipment
Infrastructure
Specifications
Low
Existing
data centers
2
Increase in
regional
i
l locations
l
ti
due to spread of
public cloud services
Metro area and urban area
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
Local area
Location
77
Data center market
New supply is likely to be limited in central Tokyo but greater in regional cities.
Data Center Development/Expansion Plans
Central Tokyo
April, NTT
Kita,
2013 Communications Tokyo
Tokyo Suburbs or Nearby Cities
22,000 May,
2012
NS Solutions
Mitaka,
Tokyo
JJuly,
l
2012
Canon M
C
Marketing
k i
Ni hi k
Nishi-tokyo,
Japan
Tokyo
Fall,
2012
NRI
Tama,
Tokyo
Nov,
Nov
2012
CTC
Yokohama,
Yokohama
Kanagawa
Regional Cities
10,000
Jan.,
2012
KS Solutions
Osaka,
Osaka
17,500
March,
2012
IDC Frontier
Shirakawa,
Fukui
20,000
April,
2012
IDC Frontier
Kita-kyusyu,
Fukuoka
April
April,
10,000 2012
Spring,
2012
2012
2012
NA
Sapporo,
Sapporo
Hokkaido
Obama,
Nihon Unisys
Fukui
Tohoku
NTT East
district
Okayama,
Hitachi
Okayama
Nissho
Osaka
Electoronics
12,000
8,200
NA
NEC
NA
2,900
NA
8,300
NA
Note: Date of completion, Operator, Location, GFA(sq m)
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
78
Data center market
Although
g data center has not been p
popular
p
as a real estate investment asset so far in Japan,
p
a data center-focused fund was formed recently and a few deals have been made.
„ Diamond Realty Management Inc.,
Inc an asset manager affiliated to Mitsubishi Corporation
Corporation, introduced Japan’s
Japan s first
private fund focused on data centers (the DREAM Data Center Fund) in 2011.
Outline of DREAM Data Center Fund
Properties
p
Held by
y DREAM Data Center Fund
Fund name
DREAM data centers fund
Vintage
g yyear
2011
Asset portfolio
Three data centers, two in the Greater
Tokyo and one in Hokkaido
Seller
Portfolio size
25.8 billion yyen
GFA
(about)
20000 sq m
24000 sq m
10000 sq m
Investment
period
5 years
2008
1995
2002
Target IRR
8%
Completio
n date
LTV
60%
Tennant
Investors
Mitsubishi Corporation
Domestic pension funds
Domestic institutional investors, etc.
Contract
term
Location
Koto-ku, Tokyo
Inzai, Chiba
Sapporo,
Hokkaido
Industrial six LCC
Softbank Telecom
15 years
20 years
20 years
Source： Diamond Realty Management Inc and Nikkei
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
79
Authors
SungYun KIM
Tomohiko TANIYAMA
Lead author
Lead author and author of Overview of Real Estate
Investment Market in Japan, and Office market
Mr. Kim is engaged in consulting and research projects. As a consultant, his
clients are real estate developers, real estate asset management companies,
power companies, gas companies, trading companies etc. His resent research
theme is real estate and real asset investment by institutional investors.
Dr. Taniyama is engaged in consulting and research projects. His resent
research theme is the analysis of alternative investment market including real
estates, and the development of new financial instruments.
Tomoki KITAZAKI
Katsutoshi TAKEHANA
Author of Residential Market, Retail Property Market,
and Hotel Market
Author of Macro fundamentals of Japan
Mr. Kitazaki is engaged in consulting and research projects such as urban
and real estate development, business planning.
Mr. Takehana is engaged in consulting and research project such as macro
economic analysis, economic statistics, and financial market analysis.
Atsushi KOGUCHI
Yasuyuki ARAKI
Author of Logistics Property Market
Author of Macro fundamentals of Japan, and Data
Center Market
Mr. Koguchi is engaged in consulting and research projects such as business
strategies, management strategies, and market environment analysis. As a
consultant, his clients are infrastructure companies including real estate,
transportations.
Mr. Araki is engaged in consulting and research projects such as investment
environment analysis in real estate and infrastructure market, and planning
the business strategies.
Shoko KOISHIKAWA
Author of Overview of Real Estate Investment Market
in Japan, and Retail Property Market
Contact: Nomura Research Institute, Ltd.
Consulting Division
Ms. Koishikawa is engaged in consulting and research projects. Her resent
research theme is the analysis of investment market analysis in real estate and
infrastructure markets, and investment fund structures.
Copyright (C) 2012 Nomura Research Institute, Ltd. All rights reserved.
80