Investors Watch Japan's Property Market as Office Vacancy Rates Drop in Tokyo

The rate of offices standing empty in central Tokyo in November dropped for the first time since the pandemic began, an early signal that the worst could be over for the capital’s property market. Vacancies fell by 0.12 percentage points to 6.35% in Tokyo’s five main business districts, real estate brokerage Miki Shoji Co. said on Thursday. Since hitting 1.49% in February 2020, the lowest since the country’s economic bubble burst in the early 1990s, vacancies have surged.

The pandemic and uncertainty over the future of the conventional work environment led tenants to cancel existing leases or postpone signing new ones. After the most recent virus state of emergency was lifted at the end of September, Japan has seen a recovery in activity, with COVID-19 cases and deaths among the lowest in the world. However, it remains to be seen if November’s data is the start of a new trend or a blip, with Miki Shoji pointing to the lack of major new buildings being opened in November among the reasons for the decline.

The vacancy rate tends to broadly move with the state of the economy. Having recovered during the early 2000s following the dot-com bubble, the rate soared to a record 9.43% in 2012 following the global financial crisis, and stayed above 8% until the impact of Prime Minister Shinzo Abe’s Abenomics program triggered a yearslong decline.

The pandemic coincided in 2020 with the opening of several major buildings intended to open alongside the Tokyo Olympics before they were postponed. Multiple large development projects are also scheduled to open in 2022, including the nearly 300,000 square meter Tokyo Midtown Yaesu being built near Tokyo Station by Mitsui Fudosan Co.

“The market is skeptical about whether the vacancy rate will continue to drop in the future, due to economic uncertainty and firms reviewing how they use their offices,” Mitsubishi UFJ Morgan Stanley analyst Toshiyuki Anegawa wrote in a note on Wednesday. “While the improvement might support real estate stocks, it’s not quite enough to be a catalyst for them to rise.”

Real estate stocks have been choppy this week, with index events, Chinese property movements and news on mortgage tax breaks posited among the reasons for a sudden drop on Wednesday. The Topix Real Estate Index dipped 0.4% on Thursday.

(Source: The Japan Times | Pic: Tokyo Storefront | NipponTradings)

Related Articles

General, Holiday/Home Makers, Investors/Business
News
Japan's sluggish economy, already weakened before the pandemic, faces the possible collapse of its national currency. The Japanese government is walking back years of harsh travel restrictions as the yen collapses in value due to a stagnant economy and weak trade. Japan until recently has all but completely rejected foreigners seeking entry or re-entry into the country. What can it do to get back on its feet? "Amid the weakening yen, [incoming tourism] will have the greatest effect," Kihara said, according to the Japan Times. "And there are the autumn leaves and powder snow. There are many foreign visitors who want to come visit Japan."
General, Investors/Business
News
Fears of a global economic slowdown cloud the outlook for the export-reliant economy, which is just emerging from the coronavirus pandemic. Corporate capital expenditure plans for the current fiscal year stayed strong, the Bank of Japan's "tankan" survey showed, thanks in part to the boost to exporters from the weak yen. What does it have to say about increasing capital expenditure and inflation expectations?
Investors/Business
Information
While Japanese tenants, from a landlord perspective, are normally extremely docile and headache free, and while tenancies are generally long and stable as a rule - there is one issue that, while not unique only to Japan, is more common here due to the country's status as the world's fastest ageing society - as landlords in Japan, our tenants are often elderly - which means that the likelihood of them becoming severely ill or passing away during their tenancy is higher than in most other countries.
General
News
The number of applications by Japanese citizens for the nation’s “Reverse 60” reverse mortgage loan program grew by 458 units year-over-year during the period of October-December 2021, coming out to a 44% increase, according to data released this month by the Japan Housing Finance Agency (JHF), a government-affiliated mortgage financial institution, and reported on by Tokyo real estate website Rethink Tokyo.