the japanese real estate investment market 2017...the japanese real estate investment market 2017...

The Japanese Real Estate Investment Market 2017

October 2017

Otemachi Financial City Grand Cube,1-9-2 Otemachi, Chiyoda-ku, Tokyo 100-0004, Japan

Copyright（C） Nomura Research Institute, Ltd. All rights reserved.

Macro fundamentals of Japan

Overview of real estate investment market in Japan

Population movements in Japan

Residential market

Retail property market

Hotel market

Logistics property market

Real estate investment products

Office market

Copyright（C） Nomura Research Institute, Ltd. All rights reserved. 2


The decline in number of households was not confirmed by the national census in 2015. The population of people 65 years or older is expected to level off in 2025 and head downwards from 2040.

In 2015, depopulation was observed for the first time in Japan, based on the national census.

Population and households in Japan

Forecast →← ActualPopulation(thousand)

Households(thousand)

Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: Population forecast is based on the data of population census in 2015.Note 2: The solid line shows the actual households based on the population census and dotted line shows the predicted households based on the population census in 2010.Note 3: Median-fertility (median-mortality) projection is used in population and household forecast.

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065

65-

15-64

0-14

households



The population of foreigners is drastically increasing in Greater Tokyo and slightly increasing in the Aichi prefectures and prefectures with regional core cities.

The population is increasing only in Greater Tokyo, Aichi prefecture, Fukuoka prefecture and Okinawa prefecture. The same tendency can be seen in the increase/decrease of foreigners population.

Increase/decrease in population of each prefecture from FY 2010 to 2015.

50

-150

-100

-50

200

300

250

150

400

350

0

100

Hok

kaid

oAo

mor

iIw

ate

Ehim

eKo

uchi

Akita

Miy

agi

Fuku

oka

Nag

asak

i

Fuku

shim

aYa

mag

ata

Kum

amot

oO

ita

Toch

igi

Ibar

aki

Miy

azak

iKa

gosh

ima

Saita

ma

Gun

ma

Oki

naw

a

Toky

oC

hiba

Niig

ata

Kana

gaw

a

Ishi

kaw

aTo

yam

a

Osa

kaH

yogo

Yam

anas

hiFu

kui

Nar

aW

akay

ama

Gifu

Nag

ano

Totto

riSh

iman

e

Aich

iSh

izuo

ka

Oka

yam

aH

irosh

ima

Shig

aM

ie

Yam

aguc

hiTo

kush

ima

Kyot

o

Kaga

wa

Saga

Increase/decrease in population of foreigners

Increase/decrease in population of Japanese

Population(thousand)

Source: National Institution of Population and Social Security Research and MIC “Population Census”


0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Tokyo Kanagawa Saitama Chiba

Population movements in Greater Tokyo

It is anticipated that the population in the Greater Tokyo has reached to its peak level in 2015. On the other hand, the number of households is projected to increase until 2025.

In Greater Tokyo, the population has peaked out; however, the number of households is expected to increase for 10 years.

Population of Greater Tokyo

Forecast →← Actual Forecast →← Actual

Number of households in Greater TokyoPopulation(thousand)

Households(thousand)

Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: Median-fertility (median-mortality) projection is used for population forecast. Note 2: Forecast of population and the number of households are based on the “Population Census” in 2010. However, the data of 2015 is based on the population census in 2015.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Tokyo Kanagawa Saitama Chiba


71,934

100,105

-50,000

0

50,000

100,000

150,000

200,000

250,000

300,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

foreigners(by"Zairyu-Gaikokujin-Tokei") foreigners(by"Jumin-Kihon-Daicho") Japanese

Population movements in Greater TokyoThe population of Greater Tokyo area is rising, but 40% or more of increased population is accounted to foreigners. In the future, it seems that the population growth of Greater Tokyo will be supported by the foreigners.

Incremental population growth of foreign and Japanese residents in Greater Tokyo

Sources: “Statistics on Foreign national residents” compiled by Ministry of Justice and “Basic resident registers” compiled by Ministry of Internal Affairs and CommunicationsNote 1: The population of foreign national is based on the Statistics on Foreign national residents till 2011. In 2012 and later, population is based on the Basic resident registration.Note 2: The statistics of Foreign nationals used the data as of the end of December. Till 2012, the Basic resident registration used the data as of March 31 of the year. Since 2013, it uses the data of population as on January 1 of the following year.

The foreign population dipped temporarily due to the global financial crisis and aftermath of the 2011 earthquake, but has been rising in line with economic recovery.

Foreigners accounted for 38.6% of the population growth in this area.

41.8%

58.2%

Population


-150

-100

-50

0

50

100

150

200

250

Tokyo Kanagawa Chiba Saitama


The number of net inflows in 2016 recovered to the level of 2005 or 2006. The inflow is projected to continue.

The population influx into the Greater Tokyo is continuing. However, about 60% of population is the influx to Greater Tokyo. After an earthquake in 2016, the population influx to Greater Tokyo area fell below than previous year for the first time.

Net inflows of people to Greater Tokyo

Source: MIC “Jyumin Kihon Daichou Jinkou Idou Houkoku”

Net increase

Net decrease




However, the number of single-person households is expected to peak out in 2030. Households of couple with children will reduce from 2020, while the households of only couple or children with single

parent will slightly increase.

Amongst the number of households in Greater Tokyo, the tendency of single-person household to occupy higher ratio is expected to continue in the future.

Number of households by family composition in Greater Tokyo

Forecast →← ActualHouseholds(thousand)

Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: The solid line shows the actual value based on the population census. The dotted line shows the predicted value based on the data of population census in 2010.Note 2: Median-fertility (median-mortality) projection is used for household forecast.

One-person

Couple-only

Couple-and-child(ren)

One-parent-and-child(ren)

Other

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1995 2000 2005 2010 2015 2020 2025 2030 2035


Population movements in central Tokyo

Population is expected to increase in the Chuo, Koto, and Minato wards. The national census in 2015 confirmed the drastic increase in the population in the Chuo ward, Minato ward, Chiyoda ward and Taito

ward.

The population in Tokyo’s 23 wards is projected to increase over the longer term only in the three wards along Tokyo Bay.

←Actual Forecast→Ward 2010 2015 2020 2025 2030 2035 2040Chuo 100.0 114.9 115.3 116.6 116.8 116.1 114.4 Koto 100.0 108.1 104.4 106.8 108.2 108.8 108.5

Minato 100.0 118.7 107.0 107.9 107.8 107.0 105.2 Shinjuku 100.0 102.2 104.4 104.8 104.4 103.4 101.6 Nerima 100.0 100.8 105.1 105.3 104.5 102.9 100.6 Sumida 100.0 103.6 101.7 102.6 102.7 102.0 100.6 Arakawa 100.0 104.0 103.0 102.8 102.2 101.2 99.7 Chiyoda 100.0 123.8 106.9 106.1 104.6 102.2 99.3 Setagaya 100.0 102.7 102.7 102.4 101.5 100.0 97.9

Shinagawa 100.0 105.9 102.9 102.7 101.7 100.0 97.8 Edogawa 100.0 100.2 101.7 101.1 99.8 98.2 96.2 Bunkyo 100.0 106.4 101.9 101.3 100.1 98.2 95.7 Toshima 100.0 102.2 106.1 104.5 102.2 99.2 95.3

Ota 100.0 103.5 101.6 100.8 99.4 97.5 95.1 Itabashi 100.0 104.9 100.5 99.1 97.2 94.7 91.8 Meguro 100.0 103.6 100.2 98.8 96.8 94.1 91.1

Taito 100.0 112.8 99.5 97.7 95.4 92.6 89.4 Shibuya 100.0 109.9 98.8 96.6 93.9 90.9 87.4 Nakano 100.0 104.4 97.7 95.5 92.9 89.8 86.2

Kita 100.0 101.6 97.6 95.1 92.2 89.0 85.5 Suginami 100.0 102.8 97.6 95.1 92.0 88.5 84.5

Katsushika 100.0 100.2 95.7 92.4 88.7 84.8 80.8 Adachi 100.0 98.2 95.2 91.6 87.5 83.1 78.7

Population growth trends in the 23 wards of Tokyo (assuming the population of each ward is 100 in 2010)

Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: Forecast of population is based on the data of “Population Census” in 2010. Median-fertility (median-mortality) projection is used for population forecast.


Population aging in central Tokyo

In 2015, one in four people is over 65 years old in just 4 wards; however, the same situation will occur in 7 wards in 2025 and 21 wards in 2035.

Population aging by ward

←Actual Forecast→Ward 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Sumida 13.1% 15.5% 18.1% 20.2% 21.4% 21.9% 21.1% 21.6% 22.7% 24.8% 28.1%Arakawa 13.7% 16.5% 18.9% 20.8% 21.9% 23.4% 23.8% 23.5% 24.1% 25.6% 28.4%

Koto 9.4% 12.2% 15.2% 17.3% 19.1% 20.5% 20.0% 20.5% 21.7% 24.5% 28.5%Shinjuku 12.6% 15.3% 17.1% 18.7% 19.1% 21.0% 21.6% 22.0% 23.4% 25.7% 29.3%Edogawa 8.1% 9.9% 12.8% 15.4% 18.1% 20.6% 21.4% 21.7% 23.3% 26.1% 29.5%

Shinagawa 11.6% 14.5% 17.4% 18.0% 19.4% 21.5% 22.4% 22.8% 24.1% 26.7% 30.8%Bunkyo 13.9% 16.4% 17.9% 18.3% 18.9% 20.9% 21.7% 22.6% 24.6% 27.3% 31.0%

Ota 11.6% 14.1% 16.3% 18.4% 20.4% 23.0% 24.1% 24.6% 26.0% 28.4% 31.7%Setagaya 11.1% 13.4% 16.1% 17.3% 18.3% 20.3% 21.2% 22.3% 24.6% 27.9% 31.8%

Taito 15.9% 18.8% 21.1% 23.1% 23.6% 25.1% 25.4% 25.2% 26.0% 28.3% 32.2%Kita 12.7% 16.0% 19.3% 21.6% 24.0% 26.7% 27.7% 27.6% 28.2% 29.8% 32.8%

Chiyoda 16.6% 20.2% 20.9% 20.2% 19.2% 19.7% 20.5% 21.7% 24.3% 27.9% 32.8%Itabashi 10.0% 12.7% 16.3% 19.3% 21.3% 24.3% 25.8% 26.4% 27.8% 29.8% 33.1%Chuo 15.4% 17.6% 18.3% 16.3% 15.9% 16.9% 17.9% 19.0% 22.0% 26.8% 33.4%

Meguro 12.5% 14.8% 17.4% 18.6% 19.6% 22.2% 23.3% 24.4% 26.6% 29.5% 33.5%Nakano 12.1% 14.6% 16.3% 18.2% 19.9% 22.5% 23.8% 24.8% 26.8% 29.7% 33.8%Toshima 12.8% 15.7% 18.4% 21.1% 19.3% 19.8% 21.6% 23.1% 25.5% 29.0% 34.3%Minato 13.7% 16.3% 17.9% 17.8% 17.2% 18.3% 19.5% 21.0% 24.0% 28.4% 34.3%

Katsushika 10.6% 13.2% 16.6% 19.9% 22.0% 24.8% 26.1% 26.8% 28.4% 31.1% 34.5%Shibuya 12.6% 15.2% 16.9% 18.5% 19.6% 21.9% 23.3% 24.6% 27.3% 31.0% 35.6%Adachi 9.3% 11.9% 15.9% 19.9% 22.2% 25.4% 26.8% 27.3% 28.9% 31.8% 35.7%Nerima 9.5% 12.2% 15.4% 20.3% 19.3% 23.1% 25.5% 27.7% 30.8% 34.6% 39.0%

Suginami 11.8% 14.4% 16.8% 18.8% 23.1% 26.3% 28.2% 29.8% 32.4% 35.6% 39.6%Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: Forecast of population is based on the data of “Population Census” in 2010. Median-fertility (median-mortality) projection is used for population forecast.


Percentage of foreigners in central Tokyo

The percentage of foreigners in Tokyo are increasing, and there is a ward where the ratio is over 10%.

Percentage of foreigners in the 23 wards of Tokyo (top 5)

The percentage in Shinjuku (over 10%) is the highest in Tokyo, and the percentages of Toshima and Arakawa are over 8%.

In the other hand, the 23 wards as a whole have foreigners as 4.2% of their total population, indicating that the situation of each ward is quite different.

Source: MICOn January 1 of every year

23 wards

Shinjuku

Toshima

ArakawaMinato

Taito

0%

2%

4%

6%

8%

10%

12%

14%

2013 2014 2015 2016 2017


Population movement in central Tokyo

The increase in Tokyo’s population has consistently outpaced estimates

Actual and projected population movement in Tokyo

1995 2000 2005 2010 2015

10,000

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Forecast in 2010Forecast in 2005Forecast in 2000

Actual data


Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: Median-fertility (median-mortality) projectionNote 2: Forecast of population and the number of households are based on the “Population Census” in 2010, while the preliminary data in the “Population Census” in 2015 is basis for 2015.

Copyright (C) 2014 Nomura Research Institute. All rights reserved.




Residential market


Hotel market



Office market


India

KoreaUK

0

5,000

10,000

15,000

20,000

25,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(Billion USD)

US

China

Japan


Entering the 2020s, Japan will remain at third place globally in nominal GDP, ahead of developing countries such as India.

Japan remains one of the largest economies in the world and should not be ignored as an investment target

Source: Compiled by NRI from IMF “World Economic Outlook Database (2017 Apr.)” data

Nominal GDP of major countries

Forecast →←Actual


China

India

Japan

KoreaUKUS

-10.0

-5.0

0.0

5.0

10.0

15.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

（％）


IMF forecasts estimate Japan’s GDP growth rate at around 0.5% for the next 5 years.

Japan’s economic growth is low compared to other major economies and high growth going forward looks unlikely

Real GDP growth rate of major economies

←Actual Estimate→




Steady trend of private consumption and capital investment is the factor of uplifting.

Recently, positive growth continued over several periods and domestic demand is driving that positive growth.

(%)

Quarterly real GDP growth and contributions to changes (seasonally adjusted series, YoY)

Source: Compiled by NRI from Cabinet Office “SNA (National Accounts of Japan)” data

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

2010 2011 2012 2013 2014 2015 2016 2017

Private Consumption

Private Investment

Public Demand

Exports

Imports

Real GDP Growth



On the other hand, inflation rate has become stagnant and prices are rising slowly.

Although the core CPI turned positive from a year earlier, Bank of Japan core CPI excluding the fresh foods and energy continues to decline. Most recently, it shifted to negative territory.

Sources: Compiled by NRI from Ministry of Internal Affairs and Communications “Consumer Price Index (CPI)”

Inflation targetset by BOJ

Year-on-year comparison for the same month of the consumer price index



Since quantitative and qualitative easing in April 2013, the BOJ has been massively expanding the money supply and purchasing JGBs.

The Bank of Japan continues a large-scale qualitative and quantitative accommodating policy

YoY change of money supply (Average balance) BOJ’s holdings of JGBs

Source: Compiled by NRI from Bank of Japan “Monetary Base” data

(Trillion Yen)

Source: Compiled by NRI from Bank of Japan “BOJ Accounts” data

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60% Monetary Base Money Stock

0

100

200

300

400

500


In continuation of the negative interest rate policy of January 2016, the Bank of Japan introduced a long-term interest rate policy on September 2016 and announced a policy to buy long-term bond that shifts the long-term interest rate to 0%.

Although the short-term interest rates are still negative, the long-term interest rates are shifting towards positive territory.

Short-term interest rate (unsecured call rate) (Each end of the month) Long-term interest rate (10y-JGB) (Each end of the month)

Source: Compiled by NRI from Bank of Japan “Short-term Money Market Rates” data Source: Compiled by NRI from MOF “JGBs Interest Rate” data

-0.20

-0.10

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

-0.50

0.00

0.50

1.00

1.50

2.00

2.50 (%) (%)




Recent yen strength reflects mainly fading perceptions of a US rate hike, a risk-off mode by investors, and a Japanese current account surplus

In the middle of 2016, the exchange rate of yen is continuously moving without any sense of direction.

Yen-dollar exchange rate (each end of the month)

(USDJPY=X)

Source: Compiled by NRI from IMF “Exchange Rate Data” data



In the first half of 2017, the current account surplus was at the highest for the first time in 10 years.

Trade balance return to its basic profitable tendency and the current account surplus tends to expand.

Current account balance

Source: Compiled by NRI from MOF “Balance of Payments” data



The government debt to GDP ratio has becoming flat in recent years due to a reduction in the primary balance deficit and restraint of interest payments due to monetary easing as well as the increase in nominal GDP that is the denominator of the ratio.

Government debt has plateaued at high level, while a primary fiscal balance surplus is not in sight.

Government debt to GDP ratio Primary balance to GDP ratio

Estimate →←Actual Estimate →←Actual-12

-10

-8

-6

-4

-2

0

2

4（％） Japan United States United Kingdom




Tokyo continues to be the world’s largest city in terms of population and GDP.

Population/GDP forecast for 2025 (Top 15 cities in terms of population or GDP)

Source：Compiled by NRI based on UN “World Urbanization Prospects” and Euromonitor data.

2025 nominal GDPby city

(in billion USD)

2025 populationby city

( in thousands)

*No data for GDP of Dhaka and Kinshasa

Tokyo

Delhi

ShanghaiBeijing

Mumbai

Dhaka

Mexico CitySão Paulo

CairoKarachi

Osaka

Lagos

New York

Kolkata

Kinshasa0

500

1000

1500

2000

2500

0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000


Beijing, 56

Tokyo, 36

Paris, 17

New York, 15

London, 14

Seoul, 12Shanghai, 8

Osaka, 7HongKong, 6

Houston, 5Others, 324


Tokyo has the second largest concentration of world-class enterprises.

Number of HQ of Fortune Global 500 companies by city (2017) Fortune Global 500 companies in Tokyo (within top 200)

Source： Compiled by NRI from Fortune “Fortune Global 500 (2017)” data.

Rank Company Revenue(Mil. USD)

29 Honda Motor 129,198

33 Japan Post Holdings 122,990

50 Nippon Telegraph & Telephone 105,128

71 Hitachi 84,558

72 SoftBank Group 82,892

105 Sony 70,170

116 Marubeni 65,792

127 JXTG Holdings 63,629

142 Dai-ichi Life Holdings 59,590

145 Mitsubishi 59,303

164 Mitsubishi UFJ Financial Group 55,185

167 Seven & I Holdings 53,858

185 Tokyo Electric Power 49,446

188 MS&AD Insurance Group Holdings 49,239

193 Tokio Marine Holdings 48,292





Residential market


Hotel market



Office market


611 305 676 8951,772 2,031 1,679

628 439 604 7921,555

2,237 2,080 2,066 2,3190

2,236

3,307

4,439

5,159

6,242 7,205

2,2101,359 539

1,549

1,791

2,1563,433 3,302 2,510

0

2,000

4,000

6,000

8,000

10,000

FY20

01

FY20

02

FY20

03

FY20

04

FY20

05

FY20

06

FY20

07

FY20

08

FY20

09

FY20

10

FY20

11

FY20

12

FY20

13

FY20

14

FY20

15

FY20

16

Others J-REIT

Acquisitions of securitized real estate decreased in two consecutive years.

Although it was on a recovery trend after the bankruptcy of Lehman brothers, the complexity level of acquisition was going up along with the rise in prices of real estate, and it seems that it turned to a declining trend.


Acquisitions of securitized real estatebillion yen

Source: Compiled by NRI from MLIT “Real Estate Securitization” data


Office, 38.2%

Residential, 14.3%

Retail, 16.0%

Logistics, 15.4%

Hotel, 8.6%

Health care, 1.0%

composite facilities,

2.4%

Others, 4.1%

1,611710

1,516 1,7282,194 2,124 2,503

891 556 768 5121,092 1,501

2,3281,803 1,598

267

552

686808

1,293 1,5891,321

348235

441406

550603

784

614564161

270

404

835

7901,107 981

479

289252

309

452

788

758

773730615

746

550

770

419662

0

2,000

4,000

6,000

8,000

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

Office Residential Retail Logistics Hotel Health care composite facilities Others

Structure in which office, residential, commercial and logistics occupy the 80% of transaction value will continue.

Because of the sudden increase in the inbound marketing, the hotel investment is also becoming popular as one of the main objectives.


Acquisitions of securitized real estate by asset classbillion yen

Allocation of securitized real estate by asset classin the past 5 years

Source: Compiled by NRI from MLIT “Survey of the Current State of Real Estate Securitization” dataNote: Because the usage of securitizations that require actual TMK is unclear, they have not been included after 2001. Because of this, the yearly totals and amounts will not match up with the documents

cited for this entry.


41.9%

51.9%

53.0%

66.0%

58.8%

47.9%

51.9%

45.9%

33.8%

38.0%

12.1%

12.7%

10.5%

11.8%

12.0%

15.3%

15.8%

17.5%

17.3%

18.1%

10.5%

8.8%

8.4%

6.9%

8.0%

9.5%

10.0%

10.2%

13.8%

12.9%

6.4%

5.5%

6.9%

4.0%

5.1%

3.7%

5.8%

5.1%

6.9%

23.1%

17.4%

17.2%

12.0%

14.9%

19.9%

15.2%

17.0%

26.0%

20.8%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014

FY2015

FY2016

Tokyo Greater Tokyo Osaka Nagoya Fukuoka Others

The ratio of Greater Tokyo area was on a declining trend after FY2010.However, It has increased its number since FY2016.

About the two-third of securitized properties focused on Greater Tokyo in FY 2010. However, it declined to about the one third of it in FY 2015.

Composition ratio of Tokyo reversed in FY 2016 and has gone up by 4%.


Number of properties securitized by region

Source: Compiled by NRI from MLIT “Survey of the Current State of Real Estate Securitization” dataNote: Securitization of TMK properties is not included because their use is unknown.


4.1 Total Return

13.8

-7.5

8.8

7.2

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

2002

/12

2003

/6

2003

/12

2004

/6

2004

/12

2005

/6

2005

/12

2006

/6

2006

/12

2007

/6

2007

/12

2008

/6

2008

/12

2009

/6

2009

/12

2010

/6

2010

/12

2011

/6

2011

/12

2012

/6

2012

/12

2013

/6

2013

/12

2014

/6

2014

/12

2015

/6

2015

/12

2016

/6

2016

/12

The total return peaked at 8.8% at the end of 2015 and then, it started declining.

After the recovery from the bankruptcy of Lehman Brothers and the total return gone up through the Abenomics, the real estate investment market is moving to the next cycle.


Source: MCI Real Estate - IPD

Performance trend in Japan

Transition of total return in Japan


3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Oct

-03

Apr-

04

Oct

-04

Apr-

05

Oct

-05

Apr-

06

Oct

-06

Apr-

07

Oct

-07

Apr-

08

Oct

-08

Apr-

09

Oct

-09

Apr-

10

Oct

-10

Apr-

11

Oct

-11

Apr-

12

Oct

-12

Apr-

13

Oct

-13

Apr-

14

Oct

-14

Apr-

15

Oct

-15

Apr-

16

Oct

-16

Apr-

17

Office Tokyo CBD Office Osaka CBD Retail Tokyo Residential Tokyo Logistics Tokyo Multi

On the other hand, the cap rate is declining.


Cap rates in Japan for major investment areas

Source: Compiled by NRI from Japan Real Estate Institute “Japanese Real Estate Investor Survey” data.

Office TokyoRetail Tokyo

Residential TokyoLogistics Tokyo MultiOffice Osaka


-40

-30

-20

-10

0

10

20

30

2000

/320

00/9

2001

/320

01/9

2002

/320

02/9

2003

/320

03/9

2004

/320

04/9

2005

/320

05/9

2006

/320

06/9

2007

/320

07/9

2008

/320

08/9

2009

/320

09/9

2010

/320

10/9

2011

/320

11/9

2012

/320

12/9

2013

/320

13/9

2014

/320

14/9

2015

/320

15/9

2016

/320

16/9

2017

/3

Loose

Tight

Fierce competition among commercial banks continues to help boost prices.

Banks’ lending attitude toward the real estate industry is the most lenient since 2000 and the standard of the time of the global financial crisis in 2007 is exceeded. Many people in Japan believe there are too many banks, and spreads continue to fall with covenants loosening.

Along with mega-banks and other major banks, regional mid-tier banks are entering the market, so conditions look unlikely to change over the near term.


Financial institutions’ lending attitude DI toward the real estate industry

Source:Compiled by NRI from BOJ“TANKAN (Figures by Industry)” data.

Copyright（C） 2017 Nomura Research Institute, Ltd. All rights reserved.



Office market

Residential market


Hotel market





Office floor space shares by major region

Office market

Tokyo area holds 61% of Japan’s office rental market.

Japan has a stock of around 106 million ㎡ of available office rental space. The Tokyo area holds an overwhelming share of the market at 64 million ㎡, comprising 61% of the total.

Source: JREI “The Annual Japanese Office Buildings Survey”Note: Data is as of January 2016.Note: The survey focuses on the central area of each city.Note: Properties less than 3,000 square meters are excluded.

61.0%

4.6%1.0% 1.8%

14.5%

1.7% 1.0%5.5%

3.2% 2.3% 2.0% 1.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Tokyo Yokohama Saitama Chiba Osaka Kobe Kyoto Nagoya Fukuoka Sapporo Sendai Hiroshima

(5.00million ㎡)

(63.94million ㎡)

(1.03million ㎡)(1.95million ㎡)

(15.91million ㎡)




(1.72million ㎡)

Tokyo Metropolitan Area67.4％

12 major cities106.73million ㎡

Osaka Area17.7％


Tokyo’s CBD has an accumulation of office buildings and is concentrated in an area of 5km square, concentrated in Chiyoda, Chuo, Minato, Shibuya, and Shinjuku wards.

Tokyo’s Central Business District (CBD) is concentrated in five wards

30 km

30 km

Tokyo13.22 million people

Kanagawa9.07 million people

Saitama7.15 million people

Chiba6.15 milion people

SetagayaMinato

ItabashiKita

Adachi

Katsushika

Edogawa

Koto

SumidaTaito

ArakawaToshima

Bunkyo

Shibuya

ShinjukuChiyoda

Chuo

Meguro

Shinagawa

Ohta

Nakano

Nerima

Suginami

Office market


Monthly (Jan 2013 –Jan 2017)

Source: Miki Shoji Co., Ltd.

Office market

Vacancy rates in the Tokyo office market have been improving for over four consecutive years.

Yearly (1998 - 2016)Vacancy rate movement in Tokyo CBD

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Chiyoda

Chuo

Minato

Shinjyuku

Shibuya

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Jan-

13Ap

r-13

Jul-1

3O

ct-1

3Ja

n-14

Apr-

14Ju

l-14

Oct

-14

Jan-

15Ap

r-15

Jul-1

5O

ct-1

5Ja

n-16

Apr-

16Ju

l-16

Oct

-16

Jan-

17

Chiyoda

Chuo

Minato

Shinjyuku

Shibuya


Monthly (Jan 2013 – Jan 2017)


Note: One tsubo is 3.3 square meters.

Office market

Rents entered an upward phase from around 2013 in all 5 Tokyo wards.

Yearly (1999 – 2017)Rent trends in Tokyo CBD (yen/tsubo per month)

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

（yen/tsubo）

Chiyoda

Chuo

Minato

Shinjuku

Shibuya

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

Jan-

13M

ay-1

3Se

p-13

Jan-

14M

ay-1

4Se

p-14

Jan-

15M

ay-1

5Se

p-15

Jan-

16M

ay-1

6Se

p-16

Jan-

17

（yen/tsubo）

Chiyoda

Chuo

Minato

Shinjuku

Shibuya


3,818 3,8353,660

3,461

3,243

2,020 1,988

1,884

1,467 1,474 1,415

3,648 3,643 3,565 3,498

2,083 2,078 2,035 1,998

1,5391,533 1,501 1,473

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1990 1995 2000 2005 2010 2015 2020 2025

23区

5区

3区

（千人）

The number of Tokyo’s office workers is declining at a fast rate than published forecasts.

Trend and forecast of office worker numbers in Tokyo

Office market

Central 3 wards(Chiyoda, Chuo, Minato)

Central 5 wards(Chiyoda, Chuo, Minato, Shibuya, Shinjuku)

23 wards

(1,000 people)

Forecast compiled in December 2010 (same for 5 and 3 wards)

Data announced in October 2013 (same for 5 and 3 wards)

Source: MIC “Population Census” and Tokyo Metropolitan Government “Shugyosha no Yosoku”


14.8%

15.8%16.4%

11.8% 11.8%11.6%

13.5%

15.0%

15.6%

8.9% 8.7% 8.4%

6.2% 6.2% 6.1%

15.4%

15.3% 15.3%

11.5% 11.4% 11.3% 11.3%

15.2% 15.4%

15.5% 15.5%

8.6% 8.6% 8.6% 8.6%

6.3% 6.4% 6.4% 6.4%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2000 2005 2010 2015 2020 2025

千代田区

港区

中央区

新宿区

渋谷区

Chiyoda and Minato have been increasing their share of office workers, while Chuo and Shibuya have been flat and Shinjuku has been losing share

Trend of office worker share in Tokyo’s CBD （23 wards ＝100%）

Office Market

Minato

Shibuya

Chuo

Chiyoda

Shinjuku

Source: MIC “Population Census” and Tokyo Metropolitan Government “Shugyosha no Yosoku”


56 55

83

100108104

114118

183

92

119

74

99

36

72

91

125

216

121

77

154

119

65

86 85

117

175

58

87

10997

73

140

97

163

40

0

10

20

30

40

50

60

70

0

50

100

150

200

250

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

# of buildingsSupplied f loor area

(1,000 ㎡)

Office supply area

Number of building supplied

Office space supply in Tokyo’s 23 wards

Source: Mori Building Company “Market Trend Survey of Large-Scale Office Buildings in Tokyo's 23 Wards”

Office market

Despite the dwindling number of office workers, new office supply will likely continue to grow.

forecast


Tokyo office market cap rate trend

Source: Japan Real Estate Institute “Real Estate Investor’s Survey”

Office market

The cap rates have continuously been declining since 2012, and it has reached to the lower level of in 2007.

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

Oct

-03

Apr-

04O

ct-0

4Ap

r-05

Oct

-05

Apr-

06O

ct-0

6Ap

r-07

Oct

-07

Apr-

08O

ct-0

8Ap

r-09

Oct

-09

Apr-

10O

ct-1

0Ap

r-11

Oct

-11

Apr-

12O

ct-1

2Ap

r-13

Oct

-13

Apr-

14O

ct-1

4Ap

r-15

Oct

-15

Apr-

16O

ct-1

6Ap

r-17

Chiyoda(Marunouchi) Chuo(Nihonbashi) Minato(Toranomon)

Shinagawa Shinjuku Shibuya

ShinjukShinagawaShibuyaMinato(Toranomon)Chuo(Nihonbashi)Chiyoda(Marunouchi)


8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

(yen/tsubo)

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Office rent trend in ex-Tokyo market


Office market

The vacancy rates have also been recovering in the local office market. However, the number of rent has not increased so much.

Office vacancy trend in ex-Tokyo market

Sendai

Fukuoka

NagoyaYokohama

SapporoOsaka

Tokyo

Tokyo

OsakaNagoyaYokohamaFukuokaSendaiSapporo


3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

Oct

-03

Apr-

04O

ct-0

4Ap

r-05

Oct

-05

Apr-

06O

ct-0

6Ap

r-07

Oct

-07

Apr-

08O

ct-0

8Ap

r-09

Oct

-09

Apr-

10O

ct-1

0Ap

r-11

Oct

-11

Apr-

12O

ct-1

2Ap

r-13

Oct

-13

Apr-

14O

ct-1

4Ap

r-15

Oct

-15

Apr-

16O

ct-1

6Ap

r-17

Ex-Tokyo office market cap rate trend


Office market

Liquidity is growing in ex-Tokyo as well as the real estate investment market rises and becomes overheated.

As property acquisition becomes more difficult in Tokyo, investment money must look to regional markets.

SendaiSapporoFukuokaNagoyaYokohamaOsaka




Office market

Residential market


Hotel market





Residential market

About 20% 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 3.34 million in 1988, increased by about 2.6 times to 9.96 million (about 20% of all households) in 2013.

Source: MIC “Housing and Land Survey”

3,7604,097

4,4214,716

4,9895,238

1,411 1,578 1,682 1,724 1,783 1,857

334 490 650 750 879 996

9%

12%

15%16%

18%20%

0%

5%

10%

15%

20%

25%

0

1,000

2,000

3,000

4,000

5,000

6,000

'88 '93 '98 '03 '08 '13

Ratio of Households Living in Private Rental &

Apartm

ent House (non-w

ood)

Num

ber o

f Hou

seho

lds (

unit:

10,0

00)

Households Living in HousingHouseholds Living in Rental HousesHouseholds Living in Private Rental & Apartment Houses (non-wood)Ratio of Households Living in Private Rental & Apartment Houses (non-wood)

Own House63%

Private Rental House,

Apartment House (non-

wood)20%

Private Rental Housing, Others

9%

Public Rental House

6%

Company Housing

2%

Breakdown of all households by housing type (2013) Number of households by housing type 1988 - 2013


Residential market

The total number of moving households has decreased, but the ratio of households moving to non-public rental apartments is trending upwards.

The number of moving households peaked out in 1994-98 and decreased to about 77% of the peak-time level in 2009-13 . The number of households moving to non-public rental apartments is also on a decreasing trend, although its ratio to the total number

of moving households is trending upwards.

Housing choices of moving households 1984 - 2013

1,1031,186 1,221

1,1351,039

939

782884 868

778698

639

427532 557 502 466 447

39%

45% 46% 44% 45%48%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0

200

400

600

800

1,000

1,200

1,400

1,600

84-88 89-93 94-98 99-03 04-08 09-13

Ratio of Households Living in Private Rental &

Apartm

ent Houses

Num

ber o

f Mov

ing

Hou

seho

lds

(Uni

t:10,

000)

Number of Moving Households in Past 5 YearsNumber of Households Moved into Rental HousesNumber of Households Moved into Private Rental (Apartment) HousesRatio of Households Moved into Private Rental (Apartment) Houses



Residential market

The majority of households moving to 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 that moved within the same city were greater in number than those that moved in from outside the city.

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

28 30 28 31 32 28 27 33

165 157 148 13756 57 55 55 73 61 53 50 27 27 23 22 47 46 41 48

50 46 48 55 25 24 24 27

266207 197 200

58 54 51 58105

86 77 7336 37 32 30

45 47 49 54

0

50

100

150

200

250

300

350

400

450

500

94-9

899

-03

04-0

809

-13

94-9

899

-03

04-0

809

-13

94-9

899

-03

04-0

809

-13

94-9

899

-03

04-0

809

-13

94-9

899

-03

04-0

809

-13

94-9

899

-03

04-0

809

-13

94-9

899

-03

04-0

809

-13

Sapporo Sendai Tokyo 23 Wards

Nagoya Osaka Hiroshima Fukuoka

Brea

kdow

n of

In-F

low

Hou

seho

lds M

oved

inPr

ivat

e Re

ntal

Hou

ses (

non-

woo

d) (U

nit:1

,000

)

Household moving in a cityHousehold moving out a city



Residential market

The supply of non-public rental apartment units has increased more sharply than total housing stock.

The growth of rental apartments (public and non-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%.

Housing stock by type 1988-2013


Housing growth rates by type

39 44

50 54

58 61

16 18 20 21 22 23

12 14 15 16

0

10

20

30

40

50

60

70

'88 '93 '98 '03 '08 '13

Hous

ing

Stoc

k (U

nit:1

mill

ion)

Number of HousesNumber of RentalHousesNumber of Rental & Apartment Houses (non-wood)

100

107

114

119

103 108

112 112

124

130

80

90

100

110

120

130

140

'98 '03 '08 '13

Grow

th R

ate

(198

8 =

100)

Number of HousesNumber of RentalHousesNumber of Rental & Apartment Houses (non-wood)


In 2016, the number of new construction housing increased by 58,000 houses since 2015 and reached to about 97000 houses. The number of new construction for rental houses increased by about 40,000 houses from 2015 to 2016.

Residential market

The number of new constructions for rental houses keeps increasing.

New housing supply trend: 1991-2016 Breakdown of new rental housing construction by region

Source: MLIT “Survey of Construction Work Started”


The construction of rental apartment increased for avoiding tax with the basic deduction's of an inheritance tax being reduced from January, 2015.

Because of number increasing in apartment supply due to the factors besides the actual demand, vacancy rates increased suddenly centering on the suburb part with the high apartment ratio occupied in a rental apartment.

Residential market

Since 2015, the vacancy rates in Kanagawa prefecture have gone up suddenly.From the end of 2016, the vacancy rates are rising in Tokyo as well.

Vacancy Rates of Rental Housing (non-wood) in Major Cities

Source: TAS Corp. and At Home Co., Ltd. “Report on Rental Housing Market”

Vacancy Rates of Rental Housing in Tokyo Metropolitan Area


0%

5%

10%

15%

20%

25%

Sapporo Sendai Tokyo23 Wards

Nagoya Osaka Hiroshima Fukuoka

Vaca

ncy

Rate

of R

enta

l Hou

sing

(non

-woo

d) (U

nit:

%) '98 '03 '08 '13


Residential market

Rent standard is still on a declining trend.

The rent level of non-public rental housing rose steadily from 1990, after which it gradually declined since 2000. This trend has continued not even changed recently.

Source: MIC “Consumer Price Index”

Rents in the private sector (annual average) – nationwide and central Tokyo


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Jan

May Sep

Jan

May Sep

Jan

May Sep

Jan

May Sep

Jan

May

2012 2013 2014 2015 2016

Mon

thly

Ren

t Lev

el (U

nit：

Yen/

m2 )

Tokyo 3 centraldistrictsTokyo 23 districts

Nagoya city

90%

92%

94%

96%

98%

100%

Jan

May Sep

Jan

May Sep

Jan

May Sep

Jan

May Sep

Jan

May

2012 2013 2014 2015 16年

Occ

upan

cy R

ate

(Uni

t:%)

Tokyo 3 centraldistrictsTokyo 23 districts

Nagoya city

The operating ratio of Nagoya city and Fukuoka city hits the ceiling. The rent standard remains stable or decrease.

Residential market

The operating ratio of REIT case housing and the private placement fund has been at the highest level, and the rent standard in downtown 3 ward and Tokyo 23-ku‘s has continue to rise slowly.

Occupancy rates of REIT-owned and private fund-owned properties Monthly rents of REIT-owned and private fund-owned properties

Source: Association for Real Estate Securitization of Japan “ARES J-REIT Property Database”


Residential market

The rate of housing ownership, which has a negative impact on rental housing demand, has shown a downward trend with the 40-49 age group.

Housing ownership rate in Japan by age group

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1998 2003 2008 2013

70+

60-69

50-59

40-49

30-39

-29





Office market

Residential market


Hotel market






The number of locations for large stores has been on a downtrend in recent years.

New retail space supply vs. number of development projects

Note: The reported numbers for the fiscal years 2002 and 2008 include stores without floor space indication.Source: METI “Large-scale Retail Chain Site Expansion Report”


30.6 30.4 31.5 33.1 34.6 36.5 38.0 42.1 42.7 44.2 45.7 46.4 47.9 49.8 50.8 51.7

11.8 11.6 12.1 12.4 12.8 13.2 13.6 14.1 14.2 14.5 14.8 15.0 15.3 15.7 15.9 16.1

0

2

4

6

8

10

12

14

16

18

0

10

20

30

40

50

60

70

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Floor area per shopping centerO

vera

ll flo

or a

rea

(year)

Overall floor area Floor area per SC(in 1 million m2) (in 1000m2/store)


For shopping centers, the total floor area for all stores and the floor area per store are both on the rise.

Overall floor area and per-store floor area for shopping centers

Note: In the old SC standard, only shopping malls with more than 10 retail tenants were considered.In the new SC standard, the shopping center must have more than 10 tenants including food stalls, service centers and retail outlets.On the same note, the shopping center must have more than 1,500 m2 retail space.

Source: Council of Shopping Centers “SC White Book”

Old SC Standard

New SC Standard



In 2016, the annual sales of existing shopping centers declined -1.1% compared to the previous year.

YoY comparison of existing shopping centers’ annual sales

Source: Council of Shopping Centers “Overall Sales Statistics Report”



Abenomics has not changed consumer outlook dramatically.

Consumer outlook index chart

Source: Cabinet Office “Consumer Trends Survey”

Note: Consumer outlook index calculation methodology:

Consumers are asked to rate their outlook for the next 6 months for the following 4 categories: “Lifestyle”, “Income”, “Job environment” and “Determining when to purchase consumer durables” using a 5-scale index.

Each of the 5 scales is assigned a value: +1 for “Will get better,” +0.75 for “Will get somewhat better,” +0.5 for “Won’t change,” +0.25 for “Will get somewhat worse,” and +0 for “Will get worse”. This numerical index is used to provide a component ratio for each of the answers, from which the results are calculated.

To illustrate, a value of 50 will be produced if all participants answer “Won’t change” for all available items.

▼ Dec. 2012Liberal Democratic Party

becomes the ruling party again



Compared to other areas, rent levels in Ginza, Omotesando, and Shinjuku are still high.

1st floor rent ranking in 13 principal business areas (yen/month/tsubo)

Source: Japan Real Estate Institute, BAC Urban Projects, and Attractors Lab “Retail Chain Rental Trends”Note1: Rent in Yokohama is shown to have spiked in the early half of 2012, but this can be attributed to the extremely small sample sizeNote 2: Rent in Shinjuku is shown to have spiked in the late half of 2012, but this can be attributed to a sample bias toward small, high-rent propertiesNote 3: Rent in Ikebukuro is shown to have dived in the early half of 2013, but this can be attributed to a sample bias toward low-rent properties in unfavorable locations

Tokyo Metropolitan

Area

Provincial Areas

※2

※1 ※3



Cap rates have been falling from around 2011, and hit a record low in metropolitan Tokyo.

Commercial establishment cap rates (expected yield)


Definition:Metropolitan high-class specialty stores:

Length of time after construction -or- large-scale repair/improvement: less than 5 years

Tenants: Mainly retailers of high-class brands.Rent system: Mainly fixed-term, variable rental schemes based on the

revenue.Areas: Along Chuodoori in Ginza’s Chuo district.

Along Omotesando in Shibuya’s Omotesando district.

Suburban shopping centers:Sales floor area: around 20,000m2

Key tenants: Prominent general merchandise stores (GMS)Rent system: Mainly fixed-term, fixed-charge rental schemesAreas: Along main thoroughfares within about an hour from

metropolitan Tokyo.

Stores for areas outside Tokyo follow similar locational conditions as above.




Office market

Residential market


Hotel market






The truck-based transport volume (in tons), which forms the bedrock of Japan’s cargo industry, has continued to decline in recent years.

Truck-based (automobile) transport is the primary transport method that constitutes a large share of Japan’s freight traffic. In recent years, the volume of cargo transported via automobile has declined due to the downturn in the quantity of trucks sold for

private use.

Cargo quantity by transport method (FY2014) Automobile cargo quantity movement

Note: The chronological continuity of data from prior to 2009 could not be guaranteed due to the changes made to the tallying methodology in the middle of 2010.Source: MIC “Transport quantity by transport method” and MLIT “Automobile Transport Statistics Survey”

(Unit: 1 million tons)


As the movement to smaller logistics lots progresses across the whole industry, the quantity distributed has increased to a yearly rate of 4.0% based on the number of reported instances.

The increased quantity of distribution in warehouses is remarkably high. This increase is propelled by the increase in distribution quantity using small lots that are less than 0.1 tons.


As the movement to smaller logistics lots progresses, the quantity distributed in such lots appears to be in upward trend based on the number of instances.

Industry-wide (except warehousing) distribution quantity by lot size(unit: number of instances)

Warehousing distribution quantity per lot size(number of instances)

Source: MLIT “Logistics Census”

CAGR4.5%

CAGR3.7 %

CAGR7.3%

CAGR12.6%

CAGR-5.3 %

CAGR-1.4%



Small-lot consignments increase, due partly to the expansion of e-commerce, which is expected to continue growing hereafter.

Market size of Business-to-Consumer e-Commerce is expected to surpass 20 trillion yen in 2019.

Market size of B-to-C e-Commerce

Note: Business -to-consumer e-commerce: sale of products and services to consumers in general via the InternetSource: NRI

0

5

10

15

20

25

30

202120202019201820172016201520142013

(trillion JPY)


The number of supplied warehouse buildings fell to roughly 23% of the peak level in 1991 (12,000 buildings/year) which has stabilized in recent years.

The number of supplied warehouse buildings for the transport industry is dwindling at a more relaxed pace compared to the rest of the industry (see figure below left), but the floor space per building is on an upward trend (below right).

This explains the increased need for SCM support for generic enterprises and new/large-scale logistics facilities for logistics consolidation.


While new supply has stopped dwindling, facilities are growing larger due to businesses consolidating their logistics capabilities.

Nationwide number of supplied warehouses including warehouses for transport and transport industry share

Floor space per warehouse building

Source: MLIT “Construction Statistics”



In response to the growing demand of logistics used by e-commerce, the volume of order to build warehouses/logistics facilities has been increasing.

Order volume for construction of warehouses/logistics facilities by ordering industry

Note: Only contracts worth 500 million yen and above are includedSource: MLIT “Construction Order Trends, Statistics and Survey”



Major foreign-based logistics property players and Japanese real estate developers are gearing up for roadside development ahead of new expressway construction.

Narita Airport

Haneda Airport

Ken-OEXPWY

Gaikan EXPWY

Joban EXPWY

ChuoEXPWY

Tomei EXPWY

ExpresswayExpressway (planned)New devts

28

Source: Compiled by NRI from companies’ respective websites

22

29 30

16

25

02

18

21

2623

14

11

12

31

05

13

04

24

03

06

17

15

1009

08

27

07

1920

Kan-etsuEXPWY

Tohoku EXPWY

MFLP Prologis Park Kawagoe01

Logi-Square Kawagoe03

Prologis Park Higashi-Matsuyama04

Hasuda Logistics Center05

Logi-Square Kasukabe06

Kuki Distribution Center07

DPL Satte

Prologis Park Furukawa 3

GLP Goka

08

09

10

MUCD Kawasaki 1 extension11

SOSiLA Yokohama-Kohoku12

Prologis Park Ebina 213

MUCD Zama14Logiport Sagamihara 2GLP Sagamihara Project15

MFLP Atsugi 216MFLP Atsugi 3Hiratsuka Higashi-Yawata L. Center17

Tokyo Railgate East18Distribution B Bldg.DynaBASE19

MFLP Haneda20

MFLP Kawasaki 121

DLP Kawaguchi-RyoukeMFLP Kawaguchi 122

DLP Nagareyama 1GLP Nagareyama 1GLP Nagareyama 2GLP Nagareyama 3

23

Prologis Park Tsukuba 124

MFLP Tsukuba25

DLP Tsukuba-Ami26Goodman Business Park Stage 1Goodman Business Park Stage 227

Prologis Park Ichikawa 3Ichikawa Distribution Center28

MFLP Funabashi 229

Logi-Cross Narashino30

Chiba Wakamatsu-Cho L. Center31

No. Project

MFLP Prologis Park Kawagoe02

01


# Name of Project Name of Developer Map No. Completion Scale (Total floor area)1 DPL Tsukuba-Ami Daiwa House Industry 26 2017.7 62,567 ㎡ **2 Distribution B bldg. Tokyo Ryutsu Center 19 2017.7 about 171,30 ㎡3 SOSiLA Yokohama-Kohoku Sumitomo Corp. 12 2017.9 about 87,000 ㎡4 Hiratsuka Higashi-Yawata Logistics Center LaSalle Investment Management 17 2017.10 9,690 ㎡5 Prologis Park Ichikawa 3 ProLogis 28 2017.12 64,406 ㎡6 Logiport Sagamihara 2 LaSalle Investment Management 15 2017 Winter 45,500 ㎡7 Prologis Park Ebina 2 ProLogis 13 2017 38,057 ㎡8 MCUD Zama Mitsubishi Corp. Urban Development 14 2018.1 18,200 ㎡9 Goodman Business Park Stage 1 East Goodman Japan 27 2018.1 116,000 ㎡ *10 Goodman Business Park Stage 2 Goodman Japan 27 2018.1 125,000 ㎡ *11 DPL Kawaguchi-Ryouke Daiwa House Industry 22 2018.2 71,448 ㎡12 Prologis Park Higashi-Matsuyama ProLogis 04 2018.2 about 71,348 ㎡13 Logi-Square Kawagoe CRE 03 2018.2 7,453 ㎡14 GLP Nagareyama 1 GLP 23 2018.2 131,236 ㎡15 DPL Nagareyama 1 Daiwa House Industry 23 2018.2 144,005 ㎡16 MFLP Atsugi 2 Mitsui Fudosan 16 2018.3 14,700 ㎡17 MFLP Tsukuba Mitsui Fudosan 25 2018.3 about 25,500 ㎡18 Logi-Cross Narashino Mitsubishi Estate 30 2018.3 about 39,100 ㎡19 GLP Nagareyama 2 GLP 23 2018 95,841 ㎡20 GLP Nagareyama 3 GLP 23 2018.5 93,223 ㎡21 Hasuda Logistics Center ORIX 05 2018 Spring 23,510 ㎡ **22 MFLP Atsugi 3 Mitsui Fudosan 17 2018.6 about 43,400 ㎡23 MCUD Kawasaki 1 Extension Mitsubishi Corp. Urban Development 11 2018.6 48,921 ㎡24 Logi-Square Kasukabe CRE 06 2018.6 22,187 ㎡25 DynaBASE Japan Motor Terminal 19 2018.7 97,000 ㎡26 Prologis Park Furukawa 3 ProLogis 09 2018.8 31,256 ㎡27 Prologis Park Tsukuba 1 ProLogis 24 2018.8 about 70,000 ㎡28 Kuki Distribution Center ESR (ex-Redwood Group) 07 2018.9 155,853 ㎡29 MFLP Prologis Park Kawagoe Mitsui Fudosan／ProLogis 02 2018.10 about 130,800 ㎡30 GLP Goka GLP 10 2018.10 140,000 ㎡31 Ichikawa Distribution Center ESR (ex-Redwood Group) 28 2019.1 229,715 ㎡32 MFLP Kawaguchi 1 Mitsui Fudosan 22 2019.4 about 54,100 ㎡33 GLP Niiza GLP 01 2019 Spring about 31,000 ㎡34 MFLP Haneda Mitsui Fudosan 20 2019.6 about 84,400 ㎡35 MFLP Kawasaki 1 Mitsui Fudosan 21 2019.9 about 41,500 ㎡36 MFLP Funabashi 2 Mitsui Fudosan 29 2019.10 about 225,000 ㎡37 Tokyo Railgate EAST Mitsui Fudosan 18 2021.10 about 161,000 ㎡38 GLP Sagamihara Project GLP 15 After 2022 655000 ㎡39 DPL Satte Daiwa House Industry 08 unknown 115,600 ㎡ **40 Chiba Wakamatsu-cho Logistics Center ITOCHU Corp. 31 unknown about 10,478 ㎡

Note) * Total leasable area, ** Site areaSource: Compiled by NRI from companies’ respective websites



While the supply of logistics properties is increasing, vacancy rates are rising since 2016.On the other hand monthly rent offers are also rising in Greater Tokyo.

Monthly rent offers and vacancy rates of logistics properties

Note: Logistics facilities which have a total lot area or total floor area of 10,000m2Source: Ichigo Real Estate Information Service “Survey on the Logistics Facilities Rental Market”

Rent offer

Vacancy rates



Cap rates have been falling since 2012, with Tokyo hitting all-time low.

Single tenant Multi-tenant

Note: Single tenant: 2-3 floors; total floor area of around 10,000m2

Multi-tenant: 3-4 floors; total floor area of around 50,000m2





Office market

Residential market


Hotel market





15.4 14.8 15.0 15.4 13.9 15.8 15.9

5.1 5.0 4.4 4.84.5

4.6 4.91.1 0.8 1.1 1.4

2.03.5 3.7

21.6 20.6 20.5 21.6 20.423.9 24.6

0.0

5.0

10.0

15.0

20.0

25.0

30.0

'10 '11 '12 '13 '14 '15 '16

Japanese Stay Travel Japanese Day Trip Foreigners Travel

Hotel market

Foreign travelers in 2016 accounted for c15% of total domestic travel expenditure

Domestic travel expenditure in 2016 was the largest in the last 7 years, driven by an increased number of foreigner travelers to Japan.

Trends in domestic travel expenditure

(trillion yen)

Sources: Compiled by NRI from Japan Tourism Agency “Ryokou・Kankou Sho-hi Doukou Chosa” and “Consumption Trend Survey for Foreigners Visiting Japan” daｔa

-Consumption tax increase

-:Great East Japan earthquake

＋:depreciation of yen progress

＋：”Silver Week”Start

＋：the number of national holidays is the most


318 314 316 320 297 313 323

314 299 297 311298 292 315

632 613 613 631595 605

638

0

100

200

300

400

500

600

700

'10 '11 '12 '13 '14 '15 '16

Stay Travel Day Trip

Hotel market

The number of travelers among Japanese residents has edged sideways.

Cumulative domestic traveler numbers (Overnight Travel/Day Trip）

(Million)

Source: Compiled by NRI from Japan Tourism Agency “Ryokou ・Kankou Sho-hi Doukou Chosa” dataNote: Cumulative domestic traveler numbers do not include foreign travelers to Japan.

Cumulative domestic traveler numbers（by trip objective）

(Million)

372 360 368 383 349 365 386

143 145 138 141134 130 143

117 108 107 107112 109

108

632 613 613 631595 605

638

0

100

200

300

400

500

600

700

'10 '11 '12 '13 '14 '15 '16Sightseeing/Recreations Homecoming/Friend VisitBusiness Trip


China, 637, 27%

Korea, 509, 21%Taiwan,

417, 17%

Hong Kong, 184,

8%

Thailand, 90, 4%

U.S., 124, 5%

Others, 442, 18%

0.0

10.0

20.0

30.0

40.0

50.0

60.0

'05'06'07'08'09'10'11'12'13'14'15'16'17'18'19'20 '25 '30

China Others

Hotel market

Measured by departure country, Chinese visitors will account for about 53% of the total in 2030.

Conversely, the number of travelers to Japan increased rapidly and reached about 24 million, thanks to the weak yen

and relaxed visa criteria. NRI projects the number of travelers to Japan rising about 50 million in 2030

No. of foreigner travelers to Japan（by departure country)

Sources: Compiled by NRI from (Actual numbers) JNTO(Forecast numbers) UNWTO and UN dataNote: Chinese economy doesn't fall into a panic and remains stable. As premise, Asian tourists choosing Japan as a travel destination rises slightly from the current level owing to relaxed visa standards and LCC expansion.

No. of foreigner travelers to Japan by departure country (2015)

Source: Compiled by NRI from JNTO data

(Million)

←Actual Forecast→

China53.0%

※ Assumes the base scenario below

2,404 Ten thousand

(Ten thousand visitors)

Four neighboring countries in Asia account for about 72%.


106 106 106 103 106 103

61 65 69 68 72 74

160 170 184 194 211 207

62 67 73 75 80 788 9 10 9

26 24417 439 466 474504 494

0

100

200

300

400

500

600

'11 '12 '13 '14 '15 '16

Japanese-Style Hotel Resort HotelBusiness Hotel City HotelLodging House Company/Group Loidging

417 413 432 429 438 423

18 26 33 45 66 71417 439466 474

504 494

0

100

200

300

400

500

600

'11 '12 '13 '14 '15 '16

Domestic Customer Foreign Customer

Hotel market

Viewed by facility type, the rise in foreign travelers is impacting growth in business hotels.

Foreigner visitors accounted for 14.3% of all stays in 2016.This ratio continues to rise in tandem with the increase in overseas visitors

Domestic accommodation(Domestic/Foreign)

(Million)

Source: Compiled by NRI from Japan Tourism Agency “Syukuhaku Ryokou Toukei” data

Domestic stays (by accommodation type)

(Million)

※Business Hotel：Budget Hotel


Hotel market

The total number of the accommodation facilities remains stable.By type, however, the proportion of hotels continues to rise

Trend in number of guest rooms

Source: Compiled by NRI from MHLW “Report of Health Administration and Services” data

(Thousand rooms)

(Fiscal year)

756 781 798 803 814 815 827 835 846

823 808 792 764 761 741 735 710 702

1,579 1,588 1,590 1,568 1,576 1,556 1,562 1,545 1,548

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

'07 '08 '09 '10 '11 '12 '13 '14 '15

Japanese-Style Hotel Hotel


1,2021,298

1,4671,639

1,550

2,224

0

300

600

900

1,200

1,500

1,800

2,100

2,400

'11 '12 '13 '14 '15 '16

327 345419 412

547

819

393 448615 675

848

1,822

02004006008001,0001,2001,4001,6001,8002,000

0

200

400

600

800

1,000

'11 '12 '13 '14 '15 '16Number of Ridge(Left Axis)

Floor Space(Right Axis)

Hotel market

Floor space per building is 1.25 times higher than 2011, as large buildings are being built

The number of accommodation facilities and area of floor space both suddenly rose in 2016 owing to a stable economic environment and growing demand for accommodations.

Accommodation facilities※

No of buildings and floor space

Source: Compiled by NRI from MLIT “Statistics on Construction Undertaken” data

Accommodation facilities ※ Floor space per building

※Accommodations assume a hotel.Surveyed buildings are those built with steel framed reinforced concrete, ferroconcrete and steel frame

(Buildings) (thousand ㎡)(㎡)


Hotel market

c16,000 rooms are expected to open in Tokyo over the next 3 years

Operator Area Opening year

Number of rooms

APA Group Akasaka 2018 500Asakusa 2018 306Ueno 2018 124Kanda 2018 142Komagome 2018 143Shinjuku 2018 176Nishi-Shinjuku 2018 710Shintomicho 2018 140Nagatacho 2018 500Nihonbashi-Bakurocho 2018 153Nihonbashi-Bakurocho 2018 193Nihonbashi-Bakurocho 2018 127Otuska 2019 613Shinjuku 2019 166Ryogoku 2019 1065Roppongi 2019 875Higashi-Shinjuku 2020 819Roppongi undecided 670

Mitsui Fudosan Hotel Management

Kanda 2018 190Ginza 2019 330Otemachi 2020 190Toyosu 2020 200Yaesu 2021 undecided

Mitsui Fudosan Gotanda 2018 372Nihonbashi-Muromachi 2018 260

Daiwa Royal Ariake 2018 undecidedShinbashi 2018 undecidedKyobashi 2019 about 200

Main new hotel development projects in Tokyo※ 1/2

Source: Compiled by NRI from Ohta Publications Co., Ltd. ”Weekly HOTERES” dataNote: A hotel development project is chosen as the area where weekly HOTERES investigated.


Number of rooms

Daiwa House Industry Kanda 2018 113Toyosu 2019 330

Mori Trust Ginza 2020 100Toranomon 2020 about 200Akasaka 2022 undecided

Toyoko Inn Inagi 2018 259Shinjuku-Gyoen 2018 undecided

Daiichi Realter Asakusabashi 2018 undecidedKanda 2018 130Shinonome 2018 undecided

nest Hotel Japan Shinjuku 2018 106Hanzomon 2018 100

Sankei Building Kyobashi 2018 205Ginza undecided undecided

Hulic Ginza 2018 about 160Tsukiji 2018 undecided

ES-CON JAPAN Hayabusacho 2018 102Ginza 2019 190

JR East Japan Railway Company

Akihabara 2019 196Takeshiba undecided 200-300

JR Kyushu Railway Company Shinbashi 2019 267JR West Japan Railway Company Via Inn Iidabashi 2018 295Apple Real Estate Service Akabane 2018 74

Toyosu 2018 65


Hotel market

c16,000 rooms are expected to open in Tokyo over the next 3 years

Main new hotel development projects in Tokyo※ 2/2


Number of rooms

Hankyu Hanshin Hotels Kyobashi 2019 270Higashinihon Toshikaihatsu Narihira undecided 43VISTA Hotel Management Akasaka 2018 140Felice Akasaka 2018 167Hotel Keihan Tsukiji 2018 298Manyo Club Toyosu 2019 undecidedCrowded House Area Arrangeing Realization Confarence

Kamata undecided undecided

Mitsubishi Estate Nishi-Asakusa 2018 166Mori Building Daiba undecided undecidedKoen Shoji Ikebukuro undecided 160Yasuda Real Estate Nihonbashi-Hamacho 2018 108Yamaguchi Fudosan Otuska 2018 undecidedYomiuri Shimbun Company Ginza 2019 undecidedRyumeikan Shinbashi 2018 60Route Inn Japan Asakusabashi 2018 200Royal Park Hotels & Resorts Ginza 2019 125Lotte Kasai undecided undecidedMeitetsu Inn Ginza 2018 223Super Hotel Ginza 2019 undecidedTachihi Holdings, Nippon View Hotel Tachikawa undecided undecidedTexas Ginza 2018 105Tokyu Hotels Shibuya 2018 180Keikyu EX Inn Hamamatsucho 2019 135


Number of rooms

NREG Toshiba Building Ueno 2018 undecidedAihara Building Nihonbashi undecided 119Asahi Shimbun Company Ginza 2018 164Inutsuka Manufacturing Shinagawa undecided undecidedMG Leasing Omori 2018 300Kyoritsu Maintenance Ginza 2019 undecidedGreat Eagle Holdings (Hong-Kong) Roppongi undecided 270Keihan Electric Railway Ginza 2019 undecidedCosmos Initia Ueno 2018 undecidedSamty Nihonbashi-Nakasu 2018 undecidedJST Iriya 2018 undecidedJUJapan Asakusabashi 2018 undecidedMitsui Fudosan Kasumigaokacho 2019 undecidedSumitomo Realty & Development Haneda 2020 154SENKO Group Holdings Shiomi 2019 230Sotetsu Inn Kanda 2018 115Daiwa Land Okachimachi 2018 63Tsukada Global Holdings Nishi-Shinjuku 2019 180Tokyu Corp Daikanyama 2018 undecidedTokyu Land Takeshiba undecided undecidedTokyo Tatemono Ginza 2018 200TOSEI Ueno 2019 undecidedTOWA-SOGO System Shinjuku 2019 undecidedNakano Ward Nakano 2025 UndecidedNomura Real Estate Development Nishi-azabu 2022-24 undecided

Source: Compiled by NRI from Ohta Publications Co., Ltd. ”Weekly HOTERES” dataNote: A hotel development project is chosen as the area where weekly HOTERES investigated.


Hotel market

Over 10,000 rooms are expected to open in Osaka as well over the next 3 years


Number of rooms

Jowa Holdings Osaka 2018 220Osaka 2018 225Osaka 2018 130Osaka 2019 291Osaka 2021 487

APA Group Osaka 2018 240Osaka 2019 917

Daiwa House Industry Osaka 2018 undicidedOsaka 2019 undicided

Daiwa Resort Osaka 2018 150Osaka 2018 223

Sotetsu Inn Osaka 2018 244Osaka 2018 176Osaka 2019 276

AB Hotel Osaka 2019 168JR West Japan Railway Company Via Inn Osaka 2018 88JR West Japan Railway Hotel Development Osaka 2018 400WBF Izumisano 2020 813Osaka Prefecture Osaka 2019 undicidedORIX Group Osaka undicided undicidedKyoritsu Maintenance Osaka 2018 undicidedKeihan Electric Railway Osaka undicided undicidedKuretakeso Osaka 2018 110Sanco Inn Osaka 2018 115Ship Healthcare Holdings Suita undicided undicidedSumitomo Warehouse Osaka undicided about 300

Main new hotel development projects planned in Osaka prefecture※

Note: A hotel development project is chosen as the area where weekly HOTERES investigated.

Source: Compiled by NRI from Ohta Publications Co., Ltd. ”Weekly HOTERES” data


Number of rooms

Tokyo Tatemono Osaka 2018 300Toyoko Inn Osaka 2018 undicidedNippon View Hotel Osaka 2018 170Japan Unist Osaka 2018 undicidednest Hotel Japan Osaka 2019 250Pacifica Capital Osaka 2018 185Hankyu Hanshin Hotels Osaka 2019 250Felice Osaka 2018 216Bellco Namba 2019 150Hoshino Resort Group Osaka 2022 608Hotel Monterey Osaka 2018 undicidedMitsubishi Estate Osaka 2018 216Yodobashi Camera Osaka 2019 1000Route Inn Japan Kishiwada 2018 210Royal Park Hotels & Resorts Osaka 2020 352Waqoo Project Osaka undicided undicidedFJHotels Osaka 2019 200Tokyu Hotels Osaka 2019 350


84 79

71 71 70 68 68 67 66 66 64 62 61 59 58 58 58 57 57 57 56 55 54 54 53 53 52 52 52 51 51 51 51 51 50 50 49 49 48 47 46 46 45 44 41 41 36

0102030405060708090

100

Osa

kaTo

kyo

Chib

aKy

oto

Aich

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kuok

aKa

naga

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Saita

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Oki

naw

aIs

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Hiro

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kkai

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Miy

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Hyog

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Nag

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Hotel market

Occupancy rates at hotels in Osaka and Tokyo have risen to c80% are approaching full capacity.

Guest room occupancy rates vary widely by prefecture


Average occupancy rate by prefecture

(%)


48

89 85 88

6276

84 81

4754

85 88

29

6476 82

32

55

77 80

0102030405060708090

100

Japa

nese

-Sty

le H

otel

Reso

rt H

otel

Busin

ess H

otel

City

Hot

el

Japa

nese

-Sty

le H

otel

Reso

rt H

otel

Busin

ess H

otel

City

Hot

el

Japa

nese

-Sty

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Reso

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Busin

ess H

otel

City

Hot

el

Japa

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-Sty

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Reso

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otel

Busin

ess H

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City

Hot

el

Japa

nese

-Sty

le H

otel

Reso

rt H

otel

Busin

ess H

otel

City

Hot

el

Osaka Tokyo Chiba Kyoto Aichi

Hotel market

Looking at the type of accommodation in the top 5 prefectures, the occupancy rates in hotels often exceeds 70%.On the other hand, the occupancy rates of Japanese-style inns is less than 50% excluding the Tokyo area.

Average occupancy rate in top 5 prefectures (by type of accommodation)


(%)


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1月 5月 9月 1月 5月 9月 1月 5月 9月 1月 5月 9月 1月 5月 9月 1月 5月 9月 1月 5月 9月

10年 11年 12年 13年 14年 15年 16年

Month

ly r

ent

stan

dar

d

Unit: y

en/ts

ubo※

23 wards of Tokyo Nationwide

Hotel market

Hotel REIT earnings are expanding due to high occupancy rates

Rents at hotel REITs

Source: Compiled by NRI from ARES “J-REIT Property Database” data.

Note: 1tsubo=About 3.3㎡



Overview of real estate investment market in japan

Office market

Residential market


Hotel market





16.2 15.6

2.2

15.7

0.0 0

4

8

12

16

20

Listed REIT Private Fund Private REIT RMBS CMBS

(¥tn)

Unlisted open-ended private REITs were offered in November 2010, and the size of the private REITs market is growing rapidly.

Real estate investment instruments

An overall perspective of the Japanese real estate market

Equity type Debt type

Listed Unlisted

Close-ended Open-ended

Residentialmortgage

Commercialmortgage

Overview of real estate investment instruments in Japan and AUM

Note: Listed REIT figure is updated as of end of Jun 2017, private fund figure is updated as on end of Dec 2016, private REIT figure is updated as of end of Jun 2017, RMBS/CMBS figure is updated as of end of Mar 2017.

Sources: Compiled by NRI from Association for Real Estate Securitization, Sumitomo Mitsui Trust Research Institute Co., Ltd., and the Japan Securities Dealers Association data


J-REITs began trading on the stock market in September 2001 with two companies and a market capitalization of 250 billion yen.

As of end of July 2017, there were 58 J-REITs traded worth approximately 11.6 trillion yen.


Launched in September 2001, J-REIT market capitalization has reached approximately 12 trillion yen.

J-REIT market cap and number of J-REITs

Source: Compiled by NRI from ARES “ARES J－REIT Databook” data.



c75% of real estate owned by J-REITs is in the Tokyo metropolitan area. In recent years, J-REITs have become more diversified in type of property owned, and a healthcare REIT was

launched in November 2014.

c75% of J-REIT assets are located in the Tokyo metropolitan area and 45% are portfolios of office properties.

Asset mix of J-REITs by area and asset class

Greater Tokyo Area73.0%

Approx.16.2

trillion yen

Approx.16.2

trillion yen

Source: Compiled by NRI from ARES data

Note: As of the end of June 2017


The TSE REIT index dropped sharply from its peak in May 2007, but has recovered rapidly from late 2012.


The TSE REIT index surged in late 2012 and remain firm.

TSE REIT Index, TOPIX, and the TOPIX Real Estate Sector Index

Source: Compiled by NRI from Thomson Reuters data


Yield spreads are currently around 4%


J-REIT dividend yields rapidly increased to around 8%, but are currently down to around 4%.

J-REIT dividend yield and JGB 10-year yield

Sources: Compiled by NRI from Thomson Reuters and MoF data


According to the index based on actual performance of core funds invested in domestic real estate, the performance of real estate investments in Japan recovered to positive territory in terms of capital return and has been firm since.


Capital return is firm.

ARES Japan Property Index (AJPI) and ARES Japan Fund Index (AJFI)

Sources: Compiled by NRI from ARES “ARES Japan Property Index” and “ARES Japan Fund Index” data.


9,743

14,81516,935

32,44730,260

21,282

16,276 16,81112,217

7,93511,113

8,787 8,34111,287

15,06412,030 11,148 9,894 10,760 9,465 8,235

10,42513,562 13,614

17,83415,423

3,470

1,994

6,937

4,234 7,418

7,352

8,7559,879

1,964

1,303

980

45 138

258

563

0 1400 5

00

0

0 10

04

0

10,000

20,000

30,000

40,000

50,000

60,000

20041stHalf

20042ndHalf

20051stHalf

20052ndHalf

20061stHalf

20062ndHalf

20071stHalf

20072ndHalf

20081stHalf

20082ndHalf

20091stHalf

20092ndHalf

20101stHalf

20102ndHalf

20111stHalf

20112ndHalf

20121stHalf

20122ndHalf

20131stHalf

20132ndHalf

20141stHalf

20142ndHalf

20151stHalf

20152ndHalf

20161stHalf

20162ndHalf

(¥100m)

RMBS CMBS CDO Lease Consumer Loan Shopping Credit Accounts receivable/Commercial Bills Others


Most recently, about 75% of residential mortgage-backed securities were originated by the Japan Housing Finance Agency.

CMBS issuance has decreased drastically since 2008, and at present only RMBS are issued on a ongoing basis.

Asset backed securities breakdown by type of backing and RMBS breakdown by originator

Source: Compiled by NRI from Japan Securities Dealers Association data

0% 20% 40% 60% 80% 100%

2004FY 1H2004FY 2H2005FY 1H2005FY 2H2006FY 1H2006FY 2H2007FY 1H2007FY 2H2008FY 1H2008FY 2H2009FY 1H2009FY 2H2010FY 1H2010FY 2H2011FY 1H2011FY 2H2012FY 1H2012FY 2H2013FY 1H2013FY 2H2014FY 1H2014FY 2H2015FY 1H2015FY 2H2016FY 1H2016FY 2H

Housing Finance Agency Banks/Trust Banks Regional Banks Non-bank Others


Authors

Contact：Nomura Research Institute, Ltd.Consulting [email protected]

亀井敬太Keita KAMEIConsultantSection in Charge

Office market, Retail property market, Real estate investment productsExpertise

Real estate, residential loan and infrastructure business strategy and research.

村上慧悟Keigo MURAKAMIConsultantSection in Charge

Hotel marketExpertise

Residential, real estate and inbound business strategy and research.

荒木康行Yasuyuki ARAKIConsultantSection in Charge

Macro fundamentals of JapanExpertise

Real estate, urban infrastructure business strategy and research. Especially, International market research, business planning and entry support.

大道亮Akira DAIDOConsultantSection in Charge

Overview of real estate investment market in Japan, Residential market, Logistics Property marketExpertise

Residential, real estate and energy business strategy and research.

沼田悠佑Yusuke NUMATAConsultantSection in Charge

Population movements in JapanExpertise

Real estate and energy business strategy and research. In addition, industrial policy planning and monitoring.

the japanese real estate investment market 2017...the japanese real estate investment market 2017...

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