Real estate transactions by listed companies fall 40% in April-June

  • Pre-quake transactions for 1st qtr of 2011 were 788.3 billion Yen
  • Post-quake transactions for 2nd qtr of 2011 fall to 246.4 billion Yen
  • Companies expecting fall in earnings and profits
  • Reduced supply of properties
  • Power shortages mean no recovery expected until at least September, 2011

The total value of real estate transactions made by publicly listed companies between April and June, 2011, fell 40% to 246.4 billion Yen. This is the lowest level for this quater since 2003. Following the March 11 Tohoku Disaster, many sales were postponed and the property market quickly descended into chaos. With the supply of properties also falling, the market is expected to take a while before bottoming out.

The Urban Research Institute Corporation, a part of Mizuho Financial Group, released data concerning transactions of publicly listed organizations including Real Estate Investment Trusts (REIT). Between April and June, the value of real estate purchases by REITs and other corporate investors fell 53% to 78.1 billion Yen, and purchases by real estate companies fell 61% to 59.9 billion Yen. With falling prices and slow activity, there is concern that corporate earnings will fall. Office rents are also falling and major companies are expecting across the board decreases in earnings and profits by the first quarter of 2012.

Prior to the disaster, REIT fundraising through public stock offerings was reaching a record high pace and many large-scale properties were acquired. The transaction value from January-March increased 20% from the previous year to 788.3 billion Yen. This was the highest level seen since the Lehman Shock in 2008.

However, after the disaster the market has completely changed. Directly following the earthquake, any activity by buyers or sellers quickly stagnated. As some time is involved in transaction procedures, the delay to buy or sell caused transaction numbers to fall. There were many examples of sales being delayed due to additional earthquake safety inspections.

Another cause for the current market conditions is the smaller supply of properties. Shortly after the Lehman Shock, low market prices caused many funds to delay the sale of properties.

From May, capital raising by REITS is expected to boost acquisitions. However, there is another risk – the electricity shortages are expected to delay the possible recovery until September.

The Nikkei Shimbun, July 5, 2011.

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