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
News
The headwinds for yen are getting stronger and threaten to push the currency to a six-year low against the dollar. A spike in global commodity prices spurred by Russia’s invasion of Ukraine is likely to worsen Japan’s trade deficit as the country is a net oil importer and may push the yen to 120 per dollar this year, said Mitsubishi UFJ Morgan Stanley Securities. Mizuho Bank Ltd. and TD Securities both predict the currency will weaken to 117 by the end of June, from 114.82 on Friday.
Investors/Business
News
Japan’s housing sector has been flat for years. But if dwellings are plentiful and attainable, why should that be a bad thing? These days, when Japan’s property market makes the headlines at all, it’s usually for the wrong reasons: The millions of homes sitting empty across the country, perhaps, or the notoriously poor investment that buying a house can prove. But look at it from the perspective of housing as a roof over people’s heads rather than a store of a value, and Japan starts to look like a success. Even in these post-Covid times, the country faces no affordability crisis. Rents are stable — one key reason that inflation is so comparatively low — and housing can be found for almost any budget.
Holiday/Home Makers, Investors/Business
Information
A common concept in Japan is known as mottainai, which essentially means that things should not be wasted. You might be thinking the same if you own a vacation property in Japan, but don’t spend enough time there. Have you been throwing around the idea of renting it out on AirBNB or another online listing site. Due to the COVID-19 pandemic, some have not been able to travel in and out of the country, and may be wishing to instead use their properties for lodgers in the meantime. Is it possible and if so, how?
General, Holiday/Home Makers, Investors/Business
News
Japan is set to more than double the number of people it will allow into the country and may scrap the need for a negative Covid-19 test to enter, as the last rich economy with stringent entry requirements still in place looks to join the rest of the world in easing pandemic curbs.