CBRE Releases Q3 2017 Japan Investment MarketView

Global Value of Commercial Real Estate Investment Transactions Increases y-o-y 2.2% to $228 Billion;

Japan Transaction Volume Falls 13% y-o-y to JPY 702 billion

Sharp Drop in Investment by Overseas Investors

Tokyo, November 14, 2017 - CBRE today released its 57th Quarterly Survey on Japanese real estate investment along with the Q3 2017 edition of its Japan Investment MarketView. The methodology of this survey is detailed on page 8 of this release.


  • At $228 billion, the global value of commercial real estate investment transactions increased by 2.2% in Q3 2017 compared to Q3 2016.
  • In Japan, transaction volume fell by 13% y-o-y to JPY 702 billion in Q3 2017. This was mainly due to a decrease in transaction volume by overseas investors.
  • CBRE's latest quarterly survey showed that expected NOI yields in Tokyo had fallen to record lows for all asset types, after a new low was set for apartments.
  • CBRE Tankan Survey: The Tokyo Grade A Offices Diffusion Index (DI) saw fewer respondents answer that sales prices have “increased.” Meanwhile, the DI for Large Multi-Tenant Logistics Properties saw a lower percentage of those responding they will increase investment or loans, with more than 60% of respondents expecting the status quo to be maintained.

Investment market

At $228 billion (JPY 25 trillion), the global value of commercial real estate investment transactions increased by 2.2% in Q3 2017 compared to Q3 2016. Both the EMEA and APAC markets maintained high levels of investment activity, with quarter-on-quarter growth of 21.6% and 21.0% respectively for this quarter. The Americas showed a 10.8% drop over the same period.

In Japan, transaction volume (including deals worth JPY 1 billion or more) fell by 13% y-o-y to JPY 702 billion in Q3 2017. By investor category, the largest decline was by overseas investors, which fell by 31% y-o-y to JPY 164 billion. While there were more deals by the overseas investors compared to the same quarter last year, none of them were large-scale deals (JPY50bn to JPY100bn), of which there were a couple in the previous year.

Among other investor types, transaction volume for J-REITs fell by 10% y-o-y to JPY 285 billion. The softening of J-REIT share prices since the beginning of the year continued this quarter, and has restrained their acquisitions. Meanwhile, transaction volume for non-J-REIT domestic investors rose by 2% y-o-y to JPY 253 billion.

Aggregate transaction volume by overseas investors from Q1 to Q3 2017 is still higher last year’s level, at JPY 751 billion, up 61% y-o-y, and in fact marks the highest since 2012. However, the two most recent quarters (Q2 2017 and Q3 2017) have both registered y-o-y declines, indicating that it is becoming increasingly difficult for investors to locate and acquire quality properties.

Investors continued to diversify by region during the quarter. The Tokyo 23 wards accounted for a 32% share of total transaction volume, lower than the 41% recorded in Q2 2017, and the second lowest level since CBRE's surveys started in 2005. Meanwhile, transaction volume for the Greater Tokyo area (excl. Tokyo 23 wards) rose by 116% y-o-y in Q3 2017, accounting for 36% of total transaction volume, marking the second highest level since CBRE's surveys began. A series of large deals, including the hotel in Urayasu and an office in Minato Mirai, helped push up the transaction volume during the quarter. Regional cities including Osaka and Nagoya accounted for 32% of total transaction volume, despite a 19% y-o-y fall, maintaining the same high level as that which was recorded in 2016.

Expected yields

CBRE's latest quarterly survey published in October 2017 found that average*  expected yields in Tokyo based on NOI*  declined 3–5 bps q-o-q for the two apartment types, while the other four asset types remained unchanged. Average expected yields for all asset types fell to their lowest levels since CBRE's surveys began* . Among expected yields for offices in regional cities, Sapporo, Sendai, and Osaka have fallen to the lowest levels since surveys commenced in 2003. Expected yields in Sapporo and Osaka fell even further from the previous quarter, to 5.58% (–2bps q-o-q) and 5% (–8bps), respectively.

CBRE Tankan survey

CBRE's October 2017 Tankan survey asked respondents to compare current conditions to three months ago (with results collected as Diffusion Indices* ). Topics were: 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 expected yields (which was unchanged from the previous quarter). The biggest drop was in "sales prices" (down 8 points q-o-q), with a decrease in respondents answering "increased." The next biggest drop was in "lending attitude of financial institutions", which was down 7 points q-o-q due to a reduction in those answering "lenient." While fewer investors are sensing a rise in sales prices, investor appetite appears to remain high overall, with no deterioration in "strategies for investment and loans."

Meanwhile, regarding the DI for current conditions (at the time of survey response) for Large Multi-Tenant Logistics Properties, there was a similar deterioration in all items except for "expected yields" (which, as with offices, was unchanged from the previous quarter). The biggest drop was seen in "strategies for investment and loans" (–10pts q-o-q), with only 26% of respondents saying that they were "increasing,” falling below 30% for the first time since the survey began in January 2012. As with offices, "lending attitude of financial institutions" also worsened by 8pts q-o-q. This was mainly due to a drop in those answering "lenient." Over 60% of respondents answered "maintaining the status quo" with regard to "stance on investment and loans." However, there has been a steady increase in those answering "reining in," surpassing 10% this quarter. This demonstrates concerns over the impact of soaring prices and high-volume supply.

There was a deterioration in "lending attitude of financial institutions" for both offices and logistics facilities this quarter. However, funding conditions arguably remain positive, given that the DI value for this item is the highest of all the items.

To download the Q3 2017 edition of the CBRE Japan Investment MarketView, please click on the link below.

*  Average: Average figure of the median of lowest/highest yield each
*  NOI:Net income before depreciation and income taxes; total revenues from real estate less total expenses (excluding depreciation).
*  The survey started covering different asset types in different years – July 2003 for offices and residential; January 2009 for retail, hotels, and industrial.
*  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

  • Questions asked about the position in the investment market cycle "now" (as of the survey date) and "one year from now" in sixteen stages, covering three criteria (trading volume, transaction prices, and NOI) for each sector in Tokyo and the Greater Tokyo area: office buildings (large), multi-family residential (studio-type), retail (city center stores), hotels (based on lease contract), and industrial (multi-tenant).

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 September 19 to October 6, 2017.
  3. Recipients surveyed and response rate
    ・Recipients:  191 individuals (172 corporations)
    ・Responses:  156 individuals (153 corporations)
    ・Response rate:  81.7% from individuals (89.0% 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
Q3 2017 Japan Investment MarketView​​
CBRE Quarterly Survey Vol 57

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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