Residential and office rents remain high, corporate sentiment sinks to an 11-year low, and a foreign fund backs away from a 100 billion Yen acquisition plan. Below is a quick weekly summary of some of the recent goings-on in the Japanese real estate market.
Apartment rents up 5.4% in Tokyo
Tokyo Kantei reported that the average advertised rent of a condominium-type apartment in Tokyo’s 23 wards in May was up 5.4% from last year. Rents in Chiba City have seen a 5.5% drop from last year, while Nagoya City saw a 1.4% year-on-year decline. Yokohama has seen a 12.7% increase, while Osaka has seen a 2.3% increase.
Corporate bankruptcies reach lowest level in 50 years
According to Tokyo Shoko Research, the number of corporate bankruptcies (with debts over 10 million Yen) in May dropped 54.8% from last year to 314 cases. This is the lowest level seen since June 1964. The reason? Courthouses have limited their functions during the coronavirus pandemic, while some government relief measures have limited or delayed some bankruptcies. It is likely that numbers will return to high levels from summer onwards. Between February and June 8 there have been 225 bankruptcies attributed to the pandemic.
Corporate sentiment drops to lowest level since 2009
The corporate economic diffusion index (DI) released by the Ministry of Finance and Cabinet Office on June 11 was minus 47.6 for the April ~ June quarter. This is the second-lowest level seen since the global financial crisis where it reached minus 51.3 in the first quarter of 2009. For mid-sized companies, the DI was minus 54.1, and minus 61.6 for small-to-mid-sized companies. Both historic record lows. Voluntary shutdowns in April and May have had a huge impact on business activity and consumer spending.
Office vacancy rate in Tokyo increases for 3rd month
Miki Shoji reported the office vacancy rate for central Tokyo’s five wards has increased by 0.08 points from the previous month to 1.64% in May. Although new office space has been performing well, there has been a rise in the number of tenants in existing buildings that have been shrinking down their office space. In one month the total vacant office space increased by 22,800 sqm (245,000 sq.ft). Average office rents increased for the 77th month in a row. Osaka’s business district saw the vacancy rate grow by 0.18 points to 2.18% as tenants reduce office space and fewer new leases are signed.
Foreign fund postpones 100 billion Yen acquisition
UK-based Aberdeen Standard Investments is delaying its planned 100 billion Yen (US$930 million) acquisition of residential assets in Japan. As reported in Mingtiandi on June 13, the fund will be re-assessing opportunities post-COVID. The initial goal of the fund, as reported by the Nikkei Shimbun in June 2019, was to acquire older residential apartment buildings, aged-care housing, and corporate and student dormitories around Tokyo, Osaka and Nagoya, refurbish and then re-sell them.
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