Q2 2017 Transaction Volume Falls 25% y-o-y to JPY 447 billion

Overseas Investors Complete Several Big-Ticket Deals

Tokyo, August 16, 2017 - CBRE today released its 56th Quarterly Survey on Japanese Real Estate Investment along with the Q2 2017 edition of its Japan Investment MarketView. The methodology for the survey is detailed on page 8 of this release.


  • In Q2 2017 transaction volume fell 25% y-o-y to JPY 447 billion, mainly due to a drop in investments by J-REITs.
  • The top three big-ticket transactions all involved acquisitions by overseas investors.
  • CBRE's investor survey found that expected yields in Tokyo reached a record low in all asset types excluding hotels, with expected yields for retail falling below offices for the first time since the survey began in 2009.
  • CBRE Tankan Survey: The Tokyo Grade A Offices Diffusion Index (DI) worsened for NOI, with more limited scope for earnings improvement. Meanwhile, DI for Large Multi-Tenant Logistics Properties saw improvement in vacancy rates, trading volume, and sales prices.
  • CBRE began surveying expected yields (NOI) for data centers this quarter. Although the investment market for data centers is still at a very early stage, about 20% of investors said that they had either already invested in data centers, or were considering doing so.

Investment market

Transaction volume (including deals worth JPY 1 billion or more) fell by 25% y-o-y to JPY 447 billion in Q2 2017. After 2011 and 2012, this was the third lowest second quarter investment total since the CBRE surveys began in 2005. During the period, the value of transactions decreased y-o-y for all investor categories. The largest drop was for J-REITs, which fell 41% y-o-y to JPY 132 billion, most likely on the back of softening of J-REIT share prices. Transaction volume fell by 12% for non-J-REIT domestic investors to JPY 217 billion, and by 24% y-o-y for overseas investors to JPY 98 billion.

The top three transactions this quarter were all acquisitions by overseas investors. By sector, the largest increase was recorded in residential, which had more than doubled y-o-y to JPY 77 billion. This was mainly due to large portfolio trading by an overseas investor. Offices remained the largest asset type by transaction volume accounting for JPY 167 billion, or 37% of the total. There were several transactions over JPY 10 billion in Higashi Shinagawa involving overseas investors, either as sellers or buyers.

Investment in regional cities including Osaka and Nagoya amounted to JPY 133 billion in Q2 2017. Although this represented a fall of 14% y-o-y, it accounted for 34% of the total, higher than the same quarter last year (Q2 2016 = 28%) and for the full-year in 2016 (Y2016 = 31%).

Expected yields

CBRE's latest quarterly survey (as of July 2017) found that average*  expected yields in Tokyo based on NOI*  declined q-o-q for five out of six sectors (all sectors except hotels), falling to the lowest levels since CBRE’s surveys began*. Retail (Ginza Chuo Dori) yields, which were in line with offices (Otemachi) in Q1 2017, decreased 10 bps q-o-q to 3.50%, falling below the 3.55% figure (–5 bps y-o-y) for offices (Otemachi). Expected yields for offices in regional cities also continued to decline in Q2 2017, with Osaka (5.08%), Sapporo (5.60%) and Sendai (5.65%) all recording their lowest levels since CBRE's surveys began in 2003.

Investor interest in data centers is growing due to their relatively high yields and anticipated further growth in demand. This quarter CBRE started including data centers as an asset type in its surveys. It found that 18% of investors said that they had already invested in data centers or were considering doing so. In addition, 11% replied that they would increase investment in the next three years or would commence new investment. At the same time, expected yields (NOI basis) for data centers stood at 5.50% to 6.00% in the Tokyo suburban area, 100–230 bps higher than other asset types.

Currently, most data centers are owned by the operators themselves, and there are few instances of investor involvement. However, with demand for higher specs and rising construction costs, the ownership and operation of data centers is likely to gradually separate in future.

CBRE provides worldwide data center services (appraisal, consulting, project management, facility management, etc.) and will continue to contribute to increased market transparency and scale.

* The survey started covering different asset types in different years - 2003: offices and residential; 2009: retail, hotels, and industrial.

CBRE Tankan survey

CBRE's July 2017 Tankan survey asked respondents to compare current conditions to three months ago (with results collected as Diffusion Indices* ). Categorie include: 1) trading volume, 2) sales prices, 3) NOI (or rents and vacancy rates for logistics facilities), 4) expected yields, 5) lending attitude of financial institutions, and 6) strategies for investment and loans. For Grade A office buildings, the DI for current conditions worsened for all questions except trading volume. However, in all cases this was due to an increase in the proportion of those answering "no change from three months ago." The biggest fall in those answering "increased from 3 months ago" was for "NOI", which was down 7 points q-o-q to 37%. Although funding conditions remain favorable and investor appetite is high, fewer investors appear to be expecting further improvement in cash flow. Meanwhile, for large logistics properties (multi-tenant-type), there was no significant change in investor sentiment from the previous quarter. The DI for current conditions improved in three of the seven categories (vacancy rates, trading volume, sales prices), was flat in rents, and deteriorated for the other three categories including expected yields. However, in all cases there was little fluctuation in the response rates, with movement resulting mainly from an increase in the proportion of those answering "no change from six months ago." Funding conditions remain favorable and respondents continue to see that prices have risen.

The forward-looking DI declined for all questions in both asset types, led by sales prices, lending attitude of financial institutions and expected yields. However, this was mainly due to an increase in the proportion of those answering "no change expected".

To download the Q2 2017 edition of the CBRE Japan Investment MarketView, please click on the link below.

*1 Average: Average figure of the median of lowest/highest yield each
*2 NOI:Net income before depreciation and income taxes; total revenues from real estate less total expenses (excluding depreciation).
*3 DI: Diffusion index subtracts the ratio (%) of respondents that expected a “contraction (fall)” from the ratio (%) of respondents that expected an “expansion (rise).”


As the survey goes beyond the scope of this publication, full results are only provided to respondents. Please refer to the following list for all surveyed items.


*1 NOI Cap Rate / NCF Cap Rate / IRR

    • Minimum and Maximum of the range of Median, Average, Highest, Lowest and Standard deviation
    • Some of the questions include result by respondent type.

*2 Questions Polled

  • A survey was administered on future changes in rents, real estate prices and vacancy rates in the office and industrial markets. It asked about the market outlook up to 2019 in the Tokyo and Osaka areas.

Note to Editors:

Quarterly Survey

  1. Objective
    The objective of the survey is to collect and analyze data looking at the level of expected yields for real estate investments.
  2. Survey method and period
    Sent and received by e-mail primarily between June 20 to July 7, 2017.
  3. Recipients surveyed and response rate
    ・Recipients:  222 individuals (202 corporations)
    ・Responses:  152 individuals (149 corporations)
    ・Response rate:  68.5% from individuals (73.8% from corporations)
  4. Type of respondents
    Arrangers, Lenders (senior), Lenders (mezzanine), Developers, Real property lessors, Asset managers (mainly for J-REITs), Asset managers (mainly for non J-REITs), and Equity investors, among other respondents.
  5. Policy regarding the release of survey results
    ・This report is an excerpt of the results from our quarterly survey.

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Press Release
CBRE Quarterly Survey Vol 56
Japan Investment MarketView Q2 2017

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.  Please visit our website at

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