APPENDIX Real Estate Market in Japan

APPENDIXReal Estate Market in Japan

Japan Investment Briefing13 November 2012 | London

Market outlook

Sector Space Market Capital Market

Office Bottomed outConcentrated on

prime buildings

Residential Relatively stable Dominated by REITs

Retail Sluggish retail salesWide gap between

prime area and others

Logistics Strong demand Severe competition

Hotel Recovered Not many transactions

APPENDIX

Opportunity in 2013 by sector

2

REIT market

J-REIT Index (2010-2012)

800

850

900

950

1,000

1,050

1,100

1,150

1,200A

ug

-20

10

Oct

-20

10

Dec

-20

10

Feb

-20

11

Ap

r-20

11

Jun

-20

11

Au

g-2

011

Oct

-20

11

Dec

-20

11

Feb

-20

12

Ap

r-20

12

Jun

-20

12

Au

g-2

012

Oct

-20

12

3.11 Earthquake

Source: Tokyo Stock Exchange

3

APPENDIX

Tokyo New York - Midtown Singapore

Frankfurt London - City Hong Kong

Yr/Mo Yr/Mo Yr/Mo

Yr/Mo Yr/Mo Yr/Mo

Tokyo is keeping stable and high yield gap.

Source: Colliers International, Deutsche Securities

Yield gap

APPENDIX

4

Office market

Average Asking Rent

Source: CBRE

Vacancy Rate

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012

Nagoya

Tokyo CBD

Osaka6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012

Tokyo CBD

Osaka

Nagoya

(JPY/tsubo)

Office Space Market

5

APPENDIX

Office market

Source: CBRE Vacancy rates and average rents in Tokyo CBD March 2001 – June 2011

Vacancy declineswith lower rent

ren

t

Vacancy Rate

①

②③

④

←H

igh

Low→

←Low High →

current

Rent declines withhigher vacancy

Rent rises withlower vacancy

Vacancy rises withhigher rent

Cycle8-9 years2.0%, 14,160

2.0%, 12,8107.6%, 13,680

3.6%, 14,120

4.5%, 13,970

6.1%, 13,750

5.9%, 13,410

5.4%, 13,040

3.2%, 12,700

6.9%, 13,290

3.8%, 14,400

12,000

13,000

14,000

15,000

0% 1% 2% 3% 4% 5% 6% 7% 8%

Vacancy Rate [%]

Avera

ge a

skin

g r

ent [J

PY

/ T

subo]

2011/3

2010/3

2009/3

2008/3

2007/3

2006/3

2005/3

2004/3

2003/3

2002/3

2001/3

2012/3

Cycle of Tokyo Office Market

6

APPENDIX

7Office market

15,000

20,000

25,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

(円/坪)

0%

2%

4%

6%

8%

10%

Asking rent per tsubo and Vacancy rate (Office, Tokyo central 5 wards, monthly)

Vacancy rate [RHS]

16,675 JPY/tsubo (Sep. 2012)

22,901 JPY/tsubo (Aug. 2008)

17,529 JPY/tsubo (Oct. 2004)

Source: Miki Shoji Co., Ltd.

(JPY/tsubo/month)

• Past : Rent decreased and vacancy rate increased

• Now : Rent decreases and vacancy increases have slowed down

APPENDIX

Japanese unit1 Tsubo= 3.30578 sqm= 35.58 sqf

10,000 JPY/Tsubo/month= 30.25 EUR/sqm/month= 42.15 USD/sqf/year= 25.94 GBP/sqf/year

Average rent [LHS]

8.9%

20%6%2%54%84%83%74%36%25%

62%88%98%32%6%17%26%50%60%

-14-14-14-14

-35-35-35-35

48484848

66666666

78787878

22222222

-96-96-96-96

-82-82-82-82

-42-42-42-42

-100-80-60-40-20020406080100

2003年 2004年 2005年 2006年 2007年 2008年 2009年 2010年 2011年 -100-80-60-40-20020406080100

上昇した割合下落した割合成約賃料DI

ほとんどのビルで上昇上昇と下落が同程度ほとんどのビルで下落下落したビルが多い上昇したビルが多い上昇した割合

（%）

下落した割合（%）

Office market

Rent DI (properties managed by Xymax, Tokyo 23 wards)

Source: Xymax Real Estate Marketing Institute

Taking Rent DI （= increases – decreases)Increase Decrease

Ratio of increased rent (%)

Rent increased from the year before

All the rental contracts

Ratio of decreased rent (%)

Rent decreased from the year before

All the rental contracts

Decrease = Increase

Decrease > Increase

Decrease < Increase

Decreased in nearly all buildings

Increased in nearly all buildings

Rent decreases have also slowed

8

APPENDIX

Office market 9

APPENDIX

Global comparison : average cap rate

Residential market

TSE Home Price Indices (Existing Condominiums)

Source: Tokyo Stock Exchange

60

70

80

90

100

200 2001 200 200 200 200 200 200 200 200 2010 2011 2012

Tokyo

Kanagawa

Chiba

Saitama

(Jan. 2000 = 100)

10

APPENDIX

Retail market

Source: Ministry of Economy, Trade and Industry

(2002 = 0)

-20

-15

-10

-5

0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Overall Japan

Tokyo

Japan Tokyo

2002 22,033 3,736

2003 21,759 3,646

2004 21,467 3,591

2005 21,328 3,576

2006 21,145 3,547

2007 21,199 3,564

2008 20,951 3,490

2009 19,776 3,189

2010 19,579 3,129

2011 19,593 3,027

Annual Sales in JPY billion

Annual Sales of Department Stores and Supermarkets

11

APPENDIX

Logistics market

Vacancy Rate(Large Multi-tenant Properties in Tokyo Metropolitan Area)

Asking Rent(Medium and Large Properties in Tokyo Metropolitan Area)

Source: CBRE

TokyoChibaSaitamaKanagawa

12

APPENDIX

Logistics market

Source: CBRE quarterly survey vol. 35

Expected NOI Cap Rate for Multi-tenant Property in Tokyo’s Waterfront

13

APPENDIX

Logistics market

Major Developments of Multi-tenant Lease PropertiesProject Name Developer City

Prefecture

Inland or Waterfront

Land Area (sqm)

Gross Floor Area (sqm)

Completion

Prologis Park Zama 2 Prologis Zama

Kanagawa

Inland 49,821 115,952 Aug. 2012

Logiport Kitakashiwa LaSalle Investment Management Kashiwa

Chiba

Inland 53,486 127,164 Oct. 2012

GLP Misato III Global Logistic Properties Misato

Saitama

Inland 38,901 93,831 May 2013

Tokorozawa Logistics Center Orix Real Estate Miyoshi

Saitama

Inland 51,820 72,126 April 2013

Kawagoe Logistics Center Orix Real Estate Kawagoe

Saitama

Inland 25,501 54,888 May 2013

SGH Logistics Kashiwa MLT2 SG Realty (Sagawa Express) Kashiwa

Chiba

Inland 103,734* 122,000 June 2012

D Project Sagamihara Logistics Center

Daiwa House Sagamihara

Kanagawa

Inland 41,777 104,201 June 2012

Prologis Park Narashino 4 Prologis Narashino

Chiba

Waterfront 46,168 108,500 Aug. 2013

Ichikawa Shiohama Project Global Logistic Properties and

Mitsui Fudosan

Ichikawa

Chiba

Waterfront 52,921 121,086 Dec. 2013

GLP Atsugi Global Logistic Properties Atsugi

Kanagawa

Inland 44,511 107,657 Dec. 2013

Logiport Sagamihara LaSalle Investment Management

and Mitsubishi Estate

Sagamihara

Kanagawa

Inland 94,197 210,826 Aug. 2013

Source: CBRE

14

APPENDIX

Hotel market

Occupancy Rate of Hotels in Japan

Source: Japan City hotel Association

15

APPENDIX

Hotel market

Buyers and Cap Rate by Hotel Types

16

APPENDIX

Hotel market

Cap Rate of Full-service Hotels

Source: Japan City hotel Association

17

APPENDIX

Hotel market

Major Transactions of Hotels in Tokyo (2011)

Month Hotel Guest rooms

Seller Buyer Price

(mil. JPY)

Mar. Hotel Avanshell Akasaka 71 Lone Star Mitsubishi Estate -

Mar. Hotel Ascent Shinjuku 63 Leopalace 21 Daiwa House Industry -

Apr. Comfort Hotel Tokyo Higashi Nihonbashi

259 Maya Investment Godo Kaisha

Japan Hotel Fund 3,746

Jun. Art Hotels Hamamatsucho 120 City Group Fortress Investment Group

-

Jun. Art Hotels Omori 220 City Group Fortress Investment Group

-

Jul. Ofu Hotel Kamata 92 Araigumi Aoki -

Aug. Hotel Monterey Sanno 166 Sanno Estate Mitsubishi Corp. -

Nov. Chisan Ground Akasaka 136 Lone Star Sotetsu Holdings -

Dec. Asakusa Vista Hotel 136 Galileo Japan Trust Tokai Kanko 1,050

Dec. JAL City Yotsuya 185 Tokyo Tatemono United Urban Investment Corp.

4,200

Compiled by Jones Lang LaSalle based on public data

18

APPENDIX

Finance market

Legal Final Maturity of CMBS(in JPY millions)

Compiled by Sumitomo Mitsui Trust Research Institute Co., Ltd. based on data by Japan Securities Dealers Association

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

19

APPENDIX

Finance market

Changes in new loans for real estate and lending index of financial institutions

New loans for capital expenditures of real estate industry (% change from same quarter previous year) (left side)

Lending attitude DI (all industry, large companies) (right side)

Lending attitude DI (real estate, large companies) (right side)

Source: Compiled by RREEF Research based on data by Bank of Japan

20

APPENDIX

Finance market

Source: Compiled by RREEF Research based on data by Bank of Japan, Urban Research Institute Corporation, and Real Capital Analytics

Real estate transaction volume and real estate lending index of financial institutions

(in trillion JPY)Transaction volume (12 month total, left) Lending attitude (6 months before, right)

21

APPENDIX

Development

Construction Cost

Earthquake

Reconstruction

Shortage of materials, skilled labours

Increase in construction cost

22

APPENDIX

Development

147,719

126,783

344,355

176,361

134,681

210,813

258,820

133,976

215,859

236,573

214,600

145,300

145,300

145,300

145,300

327,500

327,500

327,500

327,500

183,558

0

200,000

400,000

600,000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

0%

2%

4%

6%

8%

10%

Large new supply in 2012 but halved in 2013

Largest supply after 2003

Source: CBRE ( -2012), Xymax Real Estate Marketing Institute (2013- )

New supply of office buildings (Tokyo 23 wards, annual)

About half of 2012 will be supplied in

2013

Vacancy rate % (right)（坪）

23

APPENDIX

Unique Features: Medium-sized office buildings

0

5,000,000

10,000,000

15,000,000

Net Rentable Area

below 50 tsubo

50-100 tsubo

100-200 tsubo

over 200 tsubo

(tsubo)

Total: 12,671,256 tsubo

0

5,000

10,000

15,000

20,000

25,000

Number of Buildings

Total: 22,022 buildings

size of typical floor plate

Large buildings

Small and mediumbuildings

Compiled by Xymax Real Estate Marketing Institute based on Public statistics

Office Buildings in Tokyo CBD

24

APPENDIX


Companies in Japan

Small and Medium4,198,000

(99.7%)

Large12,000(0.3%)

Number of Companies

(including private business establishments)

4,210,000 companies

Large12,290,000

(31%)

Small and Medium27,840,000

(69%)

Number of Employees

(including private business establishments)

40,130,000 employees

Source: Statistics of business establishments and companies (2006), Ministry of Internal Affairs and Communications

Definitions of small- and Medium-size companiesManufacturer: capital less than JPY 300 million, or employees less than 300Wholesaler: capital less than JPY 100 million, or employees less than 100Retailer: capital less than JPY 50 million, or employees less than 50Service: capital less than JPY 50 million, or employees less than 100

25

APPENDIX


60

70

80

90

100

110

120

Jan-2000

Jan-2001

Jan-2002

Jan-2003

Jan-2004

Jan-2005

Jan-2006

Jan-2007

Jan-2008

Jan-2009

Jan-2010

Jan-2011

Jan-2012

Large buildings (typical floor plate: over 200 tsubo)

More volatile

OverallLess volatile

Jan. 2000 = 100

Compiled by Xymax Real Estate Marketing Institute based on data by Sanko Real Estate

Office Market Index (Vacancy Rate X Asking Rent)

26

APPENDIX

Medium size buildings supposed to be more stable

Unique Features: Medium-sized office buildings 27

APPENDIX

Volatility of office rent by floor plate size

Unique Features: Two years leases

Distribution of 4,306 tenants as of April 2012

517

560

491

333

282

313

299

284

213

160

854

0 100 200 300 400 500 600 700 800 900

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Year 11 and up


Occupancy Period of Offices Managed by Xymax

Average Occupancy Period(as of April each year)

(years)

5.50

6.00

6.50

7.00

2008 2009 2010 2011 2012

28

APPENDIX

Unique Features: Earthquake protection

1971 1981 1995

1978（S53）Miyagi Pref. Earthquake

1995（H7）Great Hanshin Earthquake

1966（S41）Tokachioki Earthquake

◆◆◆◆Revision of Building Standard Act

Reinforcement ofColumns

◆◆◆◆Revision of Building Standard Act

New standards established:For Medium quake, minor cracks only

For Large quake, avoid collapse

Old seismic standards New seismic standards

Old standards New standards

No particularregulations

Avoid collapse

Minor cracks only

History of seismic standards

29

APPENDIX


Source: Japan Institute of Architect 1995

Damage by building age

・Special attentions should be paid to the buildings constructed under the old seismic standards (before 1971). Such buildings had severe damage and were not able to repair.・Damage was also observed in buildings constructed under the new seismic standards. However, in terms of saving human life (avoid total collapse and secure spaces to live until being rescued), such buildings were much better than those constructed under the old seismic standards.

Building damage in Great Hanshin Earthquake

Year ofconstruction

Before 1971

1972-1980

After 1981

Little or no damage

Minor repair is required

Large-scale repair is required

Total collapse or partial collapse (impossible to repair)

30

APPENDIX


Source: Ministry of Land, Infrastructure, Transport and Tourism

Building damage in Great Hanshin Earthquake

Comparison of damage by earthquake

Buildings constructed before 1981 (before the new seismic standards) and after

Built Before 1981

Built After 1982

Little or no damage Severe damageMinor or moderate damage

Little or no damageMinor or

moderate damage

Severe damage

31

APPENDIX


Purpose of relocation (Interviews with tenants of buildings managed by Xymax, Tokyo 23 wards)


Tenants places greater emphasis on seismic safety

32

APPENDIX

0%5%10%15%20%25%30%35%40%

人員増コスト削減耐震強化・設備改善拠点統合建物取り壊しによ

る立地改善人員減経営統合定借期間終了その他

2009-2010(n=47)2011-(n=54)In

cre

ase

of

wo

rke

rs

Co

st r

ed

uct

ion

Be

tte

r se

ism

ic c

apac

ity,

b

ett

er

bu

ildin

g

spe

cifi

cati

on

s

Co

nso

lidat

ion

of

loca

tio

ns

Bu

ildin

g

de

mo

litio

n

Be

tte

r lo

cati

on

De

cre

ase

of

wo

rke

rs

Me

rge

r,

man

age

me

nt

inte

gra

tio

n

Ex

pir

atio

n o

f fi

xe

d-t

erm

leas

e

Oth

er


Less quake-resistant buildings consist 34%

Source: MLIT

595,080

(61.1%)

29,340

(3.0%)

327,600

(33.6%)

8,930

(0.9%)

13,390

(1.4%)

Compliant to new seismic standards

Not compliant to new standards or

not being confirmed

Unknown

Constructed after 1981

Unknown date of construction

Total:

974,000

buildings

(100%)

Buildings constructed

before 1981

356,940 (37.6%)

33

APPENDIX

Unique Features: Free rent

Free Rent Period of Offices Managed by Xymax

Tokyo

3%

83%80%

81%

57%

46%

56%

71%

77%76%

52%

46%

25%10%21%40%47%57%28%15%

68% 68% 74%

0%

12%

6% 1% 0% 0% 1%

13%

31%

52%

0.8 months

1.2 months1.2 months

0.8 months

1.7 months

2.5 months 3.0 months

0.6 months

4.7 months

2.0 months

3.8 months

0

1

2

3

4

5

6

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Avera

ge F

ree R

en

t P

eriod

(m

onth

s)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Ra

tio o

f te

na

nts

with f

ree

re

nt

(%)

Ratio of tenants with free rent (%) 2 months and more (%)

6 months and more (%) Average free rent period (months)


34

APPENDIX

Japanese units 35

1.00 Tsubo = 3.30578 sqm

= 35.5831 sqf

10,000 JPY/Tsubo/month = 30.25 EUR/sqm/month

= 42.15 USD/sqf/year

= 25.94 GBP/sqf/year

1.00 USD = 80 JPY

1.00 GBP = 130 JPY

1.00 EUR = 100 JPY

“Tsubo” : Japanese traditional unit to measure area

APPENDIX

Appendix 1 :

Details of “Tokyo Mid Office Fund”• This presentation was created as a reference material for internal consideration within your company (or for discussion with your company),

and does not assure that the content can be realized.

• The content of this presentation was accurately created based on information and materials presently received, but does not guarantee the truth or accuracy of numbers, terms, etc.

• Xymax is engaged in the Building Lots and Building Transactions Business, Investment Management Business, Investment Advisory and Agency Business , Type II Financial Instruments Business as a part of its ordinary business. If you engage in the transactions proposed this time based on this proposal, Xymax may receive certain benefits from transactions other than from transactions through agreements with your company, as a result of this presentation.

Global Marketing Department

1-1-1 Akasaka Minato-ku, Tokyo

Japan 107-0052

Tel: +81-3-5544-6840

Fax: +81-3-5544-6841

www.xymax.co.jp/english

Thank You

APPENDIX Real Estate Market in Japan

Documents

Transcript of APPENDIX Real Estate Market in Japan