CBRE Investor Survey – Investor confidence still high
CBRE Investor Survey – Investor confidence still high
February 20, 2014
Expected yields show another q-o-q drop
CBRE released today the latest results of its 42nd quarterly survey on Japan real estate investment. The objective of the survey is to collect and analyze data looking at the level of expected yields for real estate investments. The January 2014 survey polled 203 investors and had 145 respondents.
The average expected yield for offices, focused on the Otemachi, Tokyo submarket, declined by 5 basis points (bps) to 4.15% compared to the previous survey in October 2013
Expected yields for retail, hotels, and industrial facilities in the major Tokyo areas are at their lowest level since the survey began in 2009
The CBRE Tankan continues to show bullish investor sentiment for both Tokyo office buildings and large multi-tenant logistics facilities in the Greater Tokyo area
Expected yields: continue declining in major Tokyo submarkets
The latest quarterly survey, conducted in January 2014, showed expected yields (based on NOI*1in the major Tokyo submarkets continuing to decline in all sectors except for studio apartment buildings and hotels, which were flat quarter-on-quarter (q-o-q).
Office yields, focused on the Otemachi submarket, saw a 5bps q-o-q decline to an average of 4.15%, the lowest yield since October 2008. Retail yields, focused on Ginza’s Chuo Dori, averaged 4.40%. Yield for hotels based on management contracts averaged 6.25%. That for multi-tenant industrial facilities in the Tokyo Bay Area averaged 5.60%. The survey result for retail, hotel, and industrial yields were all at their lowest level since surveys began in January 2009.
The upper and lower limits of expected yields (based on NOI) for the highest class of new office buildings in the Greater Tokyo area both declined by 10bps q-o-q in Nihonbashi (averaging 4.55%), Shibuya (averaging 4.75%) and Yokohama (Nishi-guchi, averaging 5.75%). In central Tokyo, the second lowest expected yields after Otemachi was in the Hibiya/Uchisaiwaicho area (averaging 4.50%, which was flat q-o-q), while those for other areas were in the range of 4.5% to 5.0%.
CBRE Tankan: Investor sentiment continues to improve for Tokyo Grade A office buildings
The survey results for Grade A office buildings in Tokyo are collected as the CBRE Tankan Diffusion Indices*2. Compared to the previous survey, the responses (indicated in parentheses) for current conditions improved in five categories: trading volume (51), sales prices (84), NOI (24), expected yields (59), and the lending attitude of financial institutions (78). On future outlook, more than 80% of responses expected sales prices to rise over both the next three months and the next six months, suggesting that most investors expect the bullish trend in sales prices to continue.
CBRE Tankan: Sentiment also improves on non-Grade A Tokyo office buildings
For non-Grade A office buildings in Tokyo, the responses for current conditions (noted in parentheses) improved in all categories except stance on investment and loans (43). Expected yields (56) rose by 6 points, and NOI (2) also rose by 4 points, taking it into positive territory, with "rise" outnumbering "fall" for the first time since surveying began in January 2010. Trading volume (61) also rose by 7 points, with the DI for the future outlook exceeding the response for current conditions for three months from now (63) and six months from now (71). The DI for stance on investment and loans fell q-o-q, but this was due to a rise in the number saying "maintain current stance," while the number saying "reduce" fell q-o-q. With few Grade A office buildings coming onto the investment market, investor sentiment on non-Grade-A office buildings, which would account for a large portion of the investment market, seems to be improving steadily.
CBRE Tankan: Investor sentiment still bullish on Greater Tokyo Area LMT logistics facilities
A survey was administered for large logistics facilities in Greater Tokyo. The responses for current conditions deteriorated slightly compared to the previous survey in four categories: trading volume (67), sales prices (82), vacancy rates (13), and stance on investment and loans (51). With a large volume of new supply scheduled in 2014, investors exhibited a slightly more cautious attitude than for other asset types. Nevertheless, expected yields (65) declined by 5 points compared to the previous survey, and although trading volume and sales prices declined, they are still at high levels, suggesting that investor sentiment on logistics facilities still remains bullish.
*1 NOI：Net income before depreciation and income taxes; total revenues from real estate less total expenses (excluding depreciation).
*2 DI：Diffusion index (DI) subtracts the ratio (%) of respondents that expected a “contraction (fall)” from the ratio (%) of respondents that expected an “expansion (rise)” for all six items, including expected yields, selling price and trading volume, for office buildings in the major areas of Tokyo. A positive DI means that the number of respondents that answered “expansion (rise)” exceeded the number that answered “contraction (fall).” Topics of theoffice survey include: 1) real estate trading volume, 2) sales prices, 3) NOI, 4) expected yields, 5) the lending attitude of financial institutions, and 6) stance on investment and loans. Topics of the industrial survey include 1) real estate trading volume, 2) sales prices, 3) rents, 4) vacancy rates, 5) expected yields, 6) the lending attitude of financial institutions, and 7) stance on investment and loans.
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 (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.