Domestic Investor Investments Doubling Yearly!
Commercial real estate transaction volume (transactions of JPY 1 billion or larger) fell by 9% y-o-y to JPY 945.0 billion in Q3 2023, largely because of an 80% drop in investment by foreign investors. The number of large transactions worth more than JPY 50 billion also slipped to just one third of the figure from the same quarter last year. However, investment volume for the quarter exceeded pre-pandemic Q3 levels from 2016 to 2019. Investment volume by J-REITs and non-J-REIT domestic were both 2.4x that of last year.
Retail attracted the bulk of investment volume this quarter, at JPY 321.0 billion, up by 111% y-o-y, reports CBRE. This was almost entirely due to Yodobashi Holdings’ purchase of a portfolio held by Fortress Investment Group. The portfolio includes the land currently occupied by Sogo & Seibu’s Ikebukuro department store and is reported as having cost approximately JPY 300 billion.
Hotels and logistics also registered y-o-y increases in investment volume. The most significant increase was seen in the former, where transaction volume reached JPY 195.0 billion, some 3.5x Q3 2022’s figure of JPY 56.0 billion. J-REITs were responsible for 75% of investment in the hotel sector, headlined by Invincible’s acquisition from its sponsor of a hotel in Okinawa, Fusaki Beach Resort Hotel & Villas, for JPY 40.3 billion (at a 5.6% yield based on actual NOI).
While acquisition volume in the office and residential sectors fell y-o-y, Q3 2023 did see several transactions with record low yields or large deals of more than JPY 10 billion. In the office sector, Japan Real Estate acquired Forecast Sakaisuji Honmachi at an estimated NOI of 3.5%, while in the residential sector, Singapore’s City Developments purchased a portfolio from Canada’s BentallGreenOak for JPY 35.0 billion.