Declining yields sought by investors are pushing up property prices

In May, real estate giant HULIC acquired the Grand Nikko Tokyo Daiba Hotel from Keikyu Corporation for a little over 60 billion Yen (approx. 584 million USD). The property provided a return in the 2% range. HULIC has plans to increase room rates and improve operating ratios, which could improve the cap rate.

In late 2013, Masayoshi Son, CEO of SoftBank, purchased the Kengo Kuma-designed Tiffany Ginza Building for 32 billion Yen, resulting in a cap rate of just 2.6%. This sale arguably triggered the onset of lower cap rates. Back in 2006, Japan’s REITs had expected returns in the 2% range. They had increased to the 4% range by early 2013, but are now back to the 2 ~ 3% range.Read more

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by Zoe Ward