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Recovery in investment interest trend continues: JREI

The results of the 22nd edition of the Japanese Real Estate Investor Survey were released by the Japan Real Estate Institute (JREI), a major appraisal firm. The number of investors who answered that they would "proactively make new investments" in the coming year has increased significantly, which made it very clear that investment interest is recovering. The ratio of respondents who would be willing to make new investments had hit the bottom at 45% in the second last survey conducted in April 2009, making a significant improvement to 60% in the last survey conducted in October 2009. Furthermore, the ratio increased to 73%, an increase of 13 points, in the latest survey. Meanwhile, 22% of respondents answered that they would "refrain from making new investments for the time being," down 9 points from the 31% marked in the previous survey. The survey was conducted on 220 companies involved in real estate investment, including pension funds, insurance companies, real estate companies, banks, asset managers, arrangers and appraisal organizations. A total of 124 companies responded. The expected cap rate and the market cap rate for Class A buildings in the Marunouchi and Otemachi areas in Tokyo were 4.5% and 4.2%, respectively, remaining unchanged from the past two surveys. In respect to ordinance-designated cities, the expected cap rates remained the same as the previous survey in all cities except for Nagoya, for which the expected cap rate reached 6.4% with an increase of 0.2 points. With respect to the future trend in office rents in Tokyo, fewer respondents expected a decline compared with the last survey. The most resounding response for the rent in the Marunouchi and Otemachi areas was that it had already bottomed out. Meanwhile, the expected rate of rent decline in ordinance-designated cities remained roughly at the same level as in the last survey. Expected cap rates for residential properties in Tokyo decreased for the first time in five periods (two and a half years) in the Joto area (Sumida-ku, Koto-ku), marking 6.2% with a 0.1 point drop for studio apartments and 6.3% with a 0.2 point drop for family residences. JREI also started a Global Real Estate Markets Survey from the latest survey. The survey was conducted in a similar manner on major cities in the U.S., the U.K., France, Germany, Australia, China and Korea and answers were collected from 81 companies, mainly foreign-based companies engaged in real estate investment. The expected cap rates and the forecast for the cap rates in six months (October 2010) for prime office buildings in each region were announced in the survey results. According to these results, for Class A office buildings, the expected cap rates were 7.3% in the Financial District in New York and 5.8% in the City District of London. The largest increase in the coming six months was predicted for the financial district in Beijing, where the rate is expected to rise from 6.5% to 6.9%.

Last updated: 09.25.2010 08:19 PM

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