Investment volume declines 37% y-o-y due to fewer large deals

 

INVESTMENT VOLUME FALLS BY 37% Y-O-Y BUT ACTIVITY REMAINS UNAFFECTED BY LATEST STATE OF EMERGENCY

Commercial real estate investment volume fell by 37% y-o-y to JPY 512.0 billion in Q2 2021. The most significant factor behind this decline was due to fewer large transactions in comparison to the same quarter of the previous year, during which several large deals in excess of JPY 50 billion were completed, mostly by overseas investors. While investment volume for the quarter declined from Q2 2020, the number of transactions actually increased, suggesting that the state of emergency had little impact on real estate investment activity itself.

 

EXPECTED YIELDS FOR LOGISTICS FALL TO NEW LOW WHILE OFFICE YIELDS MAINTAIN RECORD LOW

CBRE’s latest quarterly cap rate survey showed that expected yields in Tokyo fell q-o-q for logistics (Tokyo bay area) and retail (Ginza Chuo-dori); remained unchanged q-o-q for offices (Otemachi), studio-type apartments, and hotels (management contract); and rose q-o-q for multi-room apartments. For logistics, expected yields fell to a new all-time low since the survey began in 2009, while offices and studio-type apartments remained at their current all-time low levels.

 

OFFICE YIELDS FALL IN CENTRAL TOKYO AND MAINTAIN LOW LEVELS IN REGIONS

During Q2 2021, an office building in Central Tokyo was sold at a lower yield than those seen prior to the pandemic. The investment market is currently seeing a decline in transactional yields for relatively large buildings in Central Tokyo properties with stable cash flow outlook (e.g. owing to long-term fixed leases, etc). At the same time, expected yields are also remaining low for large office buildings in regional cities. Investors anticipate that any loosening of the supply-demand balance will be less severe in the regional cities compared to Tokyo.