Notwithstanding Big Ticket Deals by Overseas Investors, Volume Falls 25% y-o-y

Transcription

1 Japan Investment, Notwithstanding Big Ticket Deals by Overseas Investors, Volume Falls 25% y-o-y Total Value of Investment -25% y-o-y 10 YEAR JGB YIELD at the end of Jun % (+1.4bps q-o-q) EXPECTED NOI YIELD as of Jul % (-5bps q-o-q/otemachi Office) Source: CBRE,. Figure 1: Major Transaction Volume By Investor Type Transaction volume in fell 25% y-o-y to JPY 447 billion, led by drop in investment by J-REITs which fell 41% y-o-y to JPY 132 billion, the lowest second quarter total since. Geographical diversification continued. The ratio of investment in regional cities stood at 34% in 2017, higher than the same quarter last year (28%) as well as full-year (31%). CBRE's latest quarterly survey in July 2017 showed that expected NOI yields in had fallen to record lows for all asset types except hotels. NOI yields were down 10 bps q-o-q to 3.5 for retail (Ginza Chuo Dori) and fell below 3.55% for offices (Otemachi). Transaction volume for H totaled JPY 1.8 trillion, up 28% y-o-y. Funding conditions remain favorable and investor appetite remains high. However, rental upside for the major asset types in, offices in particular, is limited. With buyers taking a more cautious stance, transaction volume for full-year 2017 is unlikely to significantly exceed the previous year's level. (JPY bn) 6,000 5,000 4,000 3,000 2,000 1,000 0 Figure 2: J-REIT Acquisition Volume (JPY bn) 1,600 Domestic (J-REITs) Domestic (Others) Overseas Transactions of at least JPY 1bn, excluding acquisitions by J-REITs at IPO. Source : CBRE,. Q1 Q3 Q4 1,400 TRANSACTION VOLUME FALLS 25% Y-O-Y TO JPY 447 BILLION Transaction volume (including deals worth JPY 1 billion or more) fell by 25% y-o-y to JPY 447 billion in. After and, this was the third lowest second quarter transaction volume since CBRE surveys began in. 1,200 1, The value of transactions decreased y-o-y across all investor categories in. The largest Source : CBRE, CBRE, Inc. 1

2 JAPAN INVESTMENT drop was recorded for J-REITs, which fell 41% y-oy to JPY 132 billion, most likely due to the softening of J-REIT share prices during the period. Transaction volume fell by 12% y-o-y for non-j- REIT domestic investors, to JPY 217 billion, and declined by 24% y-o-y for overseas investors, to JPY 98 billion. The period saw several big ticket acquisitions by overseas investors including residential portfolios as well as large-scale office in secondary areas such as Higashi Shinagawa. INCREASE IN RESIDENTIAL AND RETAIL TRANSACTION VOLUMES Transaction volume increased y-o-y this quarter in the residential, retail and healthcare sectors. The largest increase was in residential, which rose by around 2.2 times y-o-y to JPY 77 billion. A residential portfolio acquired by Bayerische Versorgungskammer one of Germany s largest institutional investors from a Hong Kong investor accounted for almost half of residential transaction volume this quarter. The second largest increase was in retail, which rose 43% y-oy to JPY 77 billion. Transactions in this sector mainly comprised large suburban retail properties. Offices which remain the largest asset type by transaction volume accounted for JPY 167 billion, or 37% of the total. There were several transactions over JPY 10 billion involving overseas investors either as a seller or a buyer. These included GINZA SIX, which was acquired by an American investor, GreenOak Real Estate, for more than JPY 20 billion, according to media reports. Figure 3 : Major Transaction Volume By Sector Office Retail Industrial Residential Hotel Other Figure 4 : Major Transaction Volume By Region Figure 5 : J-REIT Deals By Asset Type Other : Healthcare and Data Centre Source : RCA, CBRE Covering transactions of at least JPY 1bn, excluding acquisitions by J-REITs, Central 5 wards 18 wards Greater Osaka Nagoya Regional cities Source : RCA, CBRE Covering transactions of at least JPY 1bn, excluding acquisitions by J-REITs,. Transactions in the regional cities (including Osaka and Nagoya, etc.) totaled JPY 133 billion. Although this represented a fall of 14% y-o-y, it still accounted for 34% of the total, higher than the same quarter last year (28%), as well as for full-year (31%) Office Retail Industrial Residential Hotel Other Other : Healthcare and Data Centre Source : CBRE, CBRE, Inc. 2

3 JAPAN INVESTMENT J-REIT MARKET OVERVIEW: VOLUME FALLS 42% Y-O-Y Capital raised through public equity offerings by existing J-REITs in totaled JPY 53 billion, a decline of 49% y-o-y, although there was five offerings, only one less than in. This marked the lowest quarterly level since CBRE started tracking them in. This was most likely due to the softening of J-REIT share prices. While the Nikkei average as of end-june was up 5% from the start of the year, the TSE REIT index was down 9% over the same period. Acquisitions by J-REITs (excluding deals done alongside IPOs) in was JPY billion, down 42% y-o-y. Asset types that saw y-o-y increases included hotels (+225%), retail (+47%), and residential (+1). Hotels not only saw the largest y-o-y increase, but also registered the largest transaction volume, accounting for JPY 62 billion, or 46% of the total. Several deals exceeding JPY 10 billion were recorded, including The St. Regis Osaka (Chuo-ku, Osaka; JPY 17.2 billion). Although total transaction volume by J-REITs fell sharply, transactions in Osaka was up 76% y-o-y to JPY 21.2 billion (of which JPY 17.2 billion was hotels and JPY 4 billion residential). Transaction volume in regional cities including Osaka and Nagoya accounted for 34% of the total, slightly lower than in the same period last year (37 %). EXPECTED NOI YIELDS: TOKYO HOTELS FLAT FOR THIRD QUARTER RUNNING, OTHER ASSET TYPES HIT RECORD LOWS CBRE's latest quarterly survey (as of July 2017) found that average expected yields in based on NOI* declined q-o-q for five sectors except hotels (which was flat q-o-q), recording the lowest level since CBRE s surveys began*. Retail (Ginza Chuo Dori) yields, which were in line with offices (Otemachi) in Q1 2017, dropped 10 bps q-o-q to 3.5, falling below the 3.55% figure ( 5 bps y-oy) for offices (Otemachi). Figure 6: J-REIT Deals By Region Central 5 wards 18 wards Greater Osaka Nagoya Regional cities Figure 7: Expected NOI Yield* 8% 7% 6% 5% 4% 3% Office (Otemachi, ) Figure 8: Expected NOI Yield Spread** 6% 5% 4% 3% 2% Multi-family Residential ( South, East) Retail (Ginza, ) Source : CBRE,. Studio-type apartment ( 5 wards) Industrial ( bay area) Hotel ( 5 wards, management contract) Office (Otemachi, ) Multi-family Residential ( South, East) Retail (Ginza, ) * Note: Average figure of the median of lowest/highest yield each. Source: CBRE Research Quarterly Survey,. Studio-type apartment ( 5 wards) Industrial ( bay area) Hotel ( 5 wards, management contract) ** Note : Spread over 10-year government bond yield. Source : CBRE Research Quarterly Survey, CBRE, Inc. 3

4 JAPAN INVESTMENT Expected yields for offices in regional cities also continued to decline in. Expected yields were lower for all surveyed cities. The lowest levels since CBRE's surveys began in 2003 were recorded in Osaka (5.08%), Sapporo (5.6), and Sendai (5.65%). The drop in cap rates was particularly notable for logistics facilities. Prologis Park Maishima 4 (Konohana-ku, Osaka), which Mitsui & Co., Realty Management Ltd. acquired from Nippon Prologis REIT, had an acquisition value of JPY 15.7 billion and a yield of 4.1% based on estimated NOI. Of note, in the Greater area, the logistics facility with the lowest cap rate so far is Soka Logistics Center (Soka, Saitama Prefecture), which was acquired during the previous quarter by Japan Logistics Fund from its sponsor. The property was acquired for JPY 8.1 billion at a cap rate of 4.4% based on estimated NOI. Investor appetite for logistics facilities is running high, backed by solid occupier demand, and cap rates are likely to decline further both in the Greater area and the Greater Osaka area. Meanwhile, yields were also down in regional cities where office rents continue to rise. Takeyama White Building (Kita-ku, Sapporo), which Kenedix Office acquired for JPY 1.8 billion from LoneStar this quarter, had a cap rate of 5. based on estimated NOI. Given heightened investor interest, yields in Sapporo could fall below 5%, as last seen before the financial crisis. H VOLUME UP 28% Y-O-Y Transaction volume in H totaled JPY 1.8 trillion, up 28% y-o-y. Transaction volume increased y-o-y across all sectors except hotels. Hotel transaction volume in H stood at JPY 110 billion, down 54% from JPY 239 billion in H1, which was the highest first half total since. There have been fewer large-scale hotel deals this year, with only six deals worth more than JPY 10 billion recorded, compared to 13 in. Acquisitions by non-j-reit domestic investors declined 87% y-o-y. Funding conditions remain favorable and investor appetite remains high. However, in which usually accounts for more than half of transaction volume every year rental growth for the major asset types, offices in particular, is expected to be limited. While this may lead to more investors looking to take profit on some of their earlier investments, buyers will probably become more cautious on the future prospects for cashflow. As a result, transaction volume this year is unlikely to be significantly higher than in or. * The survey started covering different asset types in different years 2003 for offices and residential; for retail, hotels, and industrial CBRE, Inc. 4

5 JAPAN INVESTMENT Figure 9 : Expected NOI Yield (%) q-o-q (bps) Office in regional cities (%) q-o-q (bps) Office (Otemachi, ) Studio-type apartment ( 5 wards) Multi-family Residential ( South, East) Industrial ( bay area) Retail (Ginza, ) Hotel ( 5 wards, management contract) 4.75 ±0 Source : CBRE,. Osaka Nagoya Sapporo Sendai Hiroshima Fukuoka Source : CBRE,. Figure 10: Selected Major Transactions () Date* Building Name Location Sector Seller Buyer Approximate Price (JPY Million) ** 39 Residential Properties Nationwide Residential PAG Investment Management May-17 Shinagawa Seaside TS Tower Ginza Six (8FL) Apr-17 Prologis Park Maishima 4 May-17 Ito Yokado Shin-Urayasu Zama Centre and Shiroishi Centre Apr-17 Tennozu Park Side Building (69%) Shinagawa-ku, Chuo-ku, Osaka-shi, Osaka Urayasu-shi, Chiba Kanagawa, Hokkaido Shinagawa-Ku, Office Takeda Pharmaceutical Real Estate CBRE Global Investors, Bayerische Versorgungskammer Korean investors, EGW Asset Management 35,000 30,000 Office Hulic GreenOak Real Estate 20,000 Industrial Nippon Prologis REIT Mitsui & CO Realty Management 15,700 Retail Mori Trust Sogo REIT a domestic business corporation 14,250 Industrial Mapletree Logistics Trust Management Godo Kaisha Asset Toshi Jigyo 4 Go 13,500 Office Nomura Real Estate Master Fund a domestic SPC 12,700 Apr-17 Residential Portfolio Residential Ascott Residence Trust Nikko Zenith GK9 12,000 Apr-17 Apr-17 Fukudaya Shopping Plaza Utsunomiya Aeon Minamisenju Utsunomiya-shi, Tochigi Suita-shi, Osaka Retail Fukudaya Department Stores GK Astro Japan Property 10,000 Retail Japan Escon Japan Escon 8,363 *Data of announcement or contract. ** Including shares of properties. Sources : Information disclosed by companies and information by RCA, media and others, compiled by CBRE,. Excluding transactions of J-REIT. Figure 11: J-REIT Major Transaction Records () Date Building Name Location Sector Seller Buyer (J-REIT) Price (JPY Million) May-17 Hommachi Garden City (47%) Sphere Tower Tennozu (67%) Hilton Narita Airport CENTRUM ROPPONGI Hotel Nikko Nara (63%) May-17 Apr-17 International Garden Hotel Narita Hotel MyStays Premier Hamamatsucho KDX Residence Toyosu LOGICITY Hisayama Osaka-shi, Osaka Shinagawa-ku, Tokyp Narita-shi, Chiba Minato-ku, Nara-shi, Nara Narita-shi, Chiba Minato-ku, Koto-ku, Kasuya-gun, Fukuoka Price/tsubo (JPY Thousand) Cap Rate (%) Hotel Sekisui House Sekisui House REIT 17,200 3, Office Angelo Gordon Premier 15,000 2, Hotel NRT Project Godo Kaisha Japan Hotel REIT 13, Office ORIX ORIX JREIT 12,400 8, Hotel JH Nara Bridge Fund Goudou Kaisha Japan Hotel REIT 10,373 1, Hotel IG Real Estate Hanbai Godo Kaisha Japan Hotel REIT 9,125 1, Hotel Fortress Investment Invincible 8,000 4, Residential Global Link Management Kenedix Residential 7,500 3, Industrial Fukuoka Jisho, Fukuoka REIT Fukuoka REIT 5, Source : CBRE, CBRE, Inc. 5

6 JAPAN INVESTMENT FOR MORE INFORMATION ABOUT THIS JAPAN INVESTMENT MARKETVIEW, PLEASE CONTACT JAPAN RESEARCH Hiroshi Okubo Head of Research Asuka Honda Associate Director CBRE OFFICES IN JAPAN TOKYO Meiji Yasuda Seimei Building Marunouchi, Chiyoda-ku, SHIBA PARK Shiba Park Building B Shibakoen, Minato-ku, OSAKA Osaka Kokusai Building Azuchimachi, Chuo-ku, Osaka-shi, Osaka To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at SAPPORO Hokkaido Building 4-1 Kitanijonishi, Chuo-ku, Sapporo-shi, Hokkaido SENDAI Sendai Mark One Chuo, Aoba-ku, Sendai-shi, Miyagi YOKOHAMA Yokohama ST Building Kitasaiwai, Nishi-ku, Yokohama-shi, Kanagawa KANAZAWA Aube II Building Kuratsuki, Kanazawa-shi, Ishikawa NAGOYA Miyuki Building Nishiki, Naka-ku, Nagoya-shi, Aichi HIROSHIMA Shishinyo Building 3-17 Fukuromachi, Naka-ku, Hiroshima-shi, Hiroshima FUKUOKA Fukuoka Center Building Hakata-Ekimae, Hakata-ku, Fukuoka-shi, Fukuoka Disclaimer: All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to CBRE. Information contained herein, including projections, has been obtained from materials and sources believed to be reliable at the date of publication. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. Readers are responsible for independently assessing the relevance, accuracy, completeness and currency of the information of this publication. This report is presented for information purposes only, exclusively for CBRE clients and professionals, and is not to be used or considered as an offer or the solicitation of an offer to sell or buy or subscribe for securities or other financial instruments. All rights to the material are reserved and none of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party without prior express written permission of CBRE. Any unauthorised publication or redistribution of CBRE research reports is prohibited. CBRE will not be liable for any loss, damage, cost or expense incurred or arising by reason of any person using or relying on information in this publication.