The Japanese Real Estate Investment Market 2018
November 2018
Otemachi Financial City Grand Cube,1-9-2 Otemachi, Chiyoda-ku, Tokyo 100-0004, Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Population movements in Japan
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Office market
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Population movements in Japan
The decline in number of households was not confirmed by the national census in 2015; hence, the rise is expected to continue. The population of people 65 years or older is expected to level off in 2025 and head downwards from 2040.
In 2015, depopulation was observed for the first time in Japan, based on the national census.
Population and households in Japan
Forecast →← ActualPopulation(thousand)
Households(thousand)
Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: Population forecast is based on the data of population census in 2015.Note 2: The solid line shows the actual households based on the population census and dotted line shows the predicted households based on the population census in 2010.Note 3: Median-fertility (median-mortality) projection is used in population and household forecast.
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065
65-
15-64
0-14
households
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Population movements in Japan
Compared to the forecast on number of households based on the 2010 National Census, the peak will shift from 2019 to 2023 and number of households will increase by 2.25 million in 2030 (National Institute of Population and Social Security Research)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
5,500
4,950
5,350
0
5,100
5,000
5,050
5,150
5,200
5,300
5,400
5,250
5,450
5,333
5,419
5,290
5,307
5,348
5,123
+225(4.4%)
+43(0.8%)
Forecasted and actual number of households
Forecast based on 2010 National Census(Estimated for 2013)
Forecast based on 2015 National Census(Estimated for 2018)
Households(thousand)
Source: National Institution of Population and Social Security Research and MIC “Population Census”
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Population movements in Japan
Single-person households have been holding the major share since 2010 and cross 20 million after 2030. Couple and child households will continue to decrease, whereas couple-only households will continue to increase.
0
500
1,000
1,500
2,000
2,500
1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Single person(2018 estimate)
Single person(2013 estimate)
Others(2018 estimate)
Couple only(2018 estimate)Couple and child(2018 estimate)
Couple only(2013 estimate)Couple and child(2013 estimate)Others(2013 estimate)
Forecasted and actual number of households (by family type)
Households (thousand)
Source: National Institution of Population and Social Security Research and MIC “Population Census”
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Population movements in Japan
The population of foreigners is drastically increasing in Greater Tokyo and slightly increasing in the Aichi prefectures and prefectures with regional core cities.
The population is increasing only in Greater Tokyo, Aichi prefecture, Fukuoka prefecture and Okinawa prefecture. The same tendency can be seen in the increase/decrease of foreigners population.
Increase/decrease in population of each prefecture from FY 2010 to 2015.
50
-150
-100
-50
200
300
250
150
400
350
0
100
Hokk
aido
Aomo
riIw
ate
Ehim
eKo
uchi
Akita
Miya
gi
Fuku
oka
Naga
saki
Fuku
shim
aYa
maga
ta
Kuma
moto
Oita
Toch
igiIba
raki
Miya
zaki
Kago
shim
a
Saita
maGu
nma
Okina
wa
Toky
oCh
iba
Niiga
taKa
naga
wa
Ishika
waTo
yama
Osak
aHy
ogo
Yama
nash
iFu
kui
Nara
Wak
ayam
a
Gifu
Naga
no
Totto
riSh
iman
e
Aich
iSh
izuok
a
Okay
ama
Hiro
shim
a
ShigaMi
e
Yama
guch
iTo
kush
ima
Kyoto
Kaga
wa
Saga
Increase/decrease in population of foreigners
Increase/decrease in population of Japanese
Population(thousand)
Source: National Institution of Population and Social Security Research and MIC “Population Census”
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Population movements in Greater Tokyo
It is anticipated that the population in the Greater Tokyo will continue to rise till 2020. On the other hand, the number of households is projected to increase until 2025.
The population and number of households in the Greater Tokyo will continue to rise together, and it is expected that they would reach their peak in 2020 and 2025 respectively.
Population of Greater Tokyo Number of households in Greater Tokyo
Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: Median-fertility (median-mortality) projection is used for population forecast. Note 2: Forecast of population and the number of households are based on the “Population Census” in 2010. However, the data of 2015 is based on the population census in 2015.
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Tokyo Kanagawa Saitama Chiba
Population(thousand)
Households(thousand)Forecast →← Actual Forecast →← Actual
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Tokyo Kanagawa Saitama Chiba
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Population movements in Japan
Although there is no change in the forecast and actual population of the elderly in 2013, young and working age population is rising.
Comparison on age-wise population forecast of the Tokyo area
Households (thousand)
Source: National Institution of Population and Social Security Research and MIC “Population Census”
0
5,000
30,000
10,000
15,000
20,000
25,000
2010 2015 2020 2025 2030 2035 2040 2045
0-14 (2018)
Above 65 (2018)15-64 (2018)
15-64 (2013)0-14 (2013)
Above 65 (2013)
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Population movements in Greater Tokyo
The population of Greater Tokyo area is rising, but a little less than 50% of the increased population is accounted to foreigners. In the future, it seems that the population growth of Greater Tokyo will be supported by the foreigners.
Incremental population growth of foreign and Japanese residents in Greater Tokyo
Sources: “Statistics on Foreign national residents” compiled by Ministry of Justice and “Basic resident registers” compiled by Ministry of Internal Affairs and CommunicationsNote 1: The population of foreign national is based on the Statistics on Foreign national residents till 2011. In 2012 and later, population is based on the Basic resident registration.Note 2: The statistics of Foreign nationals used the data as of the end of December. Till 2012, the Basic resident registration used the data as of March 31 of the year. Since 2013, it uses the data of population as on January 1 of the following year.
The foreign population dipped temporarily due to the global financial crisis and aftermath of the 2011 earthquake, but has be en rising in line with economic recovery.
Foreigners accounted for 38.6% of the population growth in this area.
Population (thousand)
40
-40
260
140
60
-20
120
0
160
220
20
180
100
200
80
240
20152002 2017
172
2007
23
2009
252
2003
173
1997 20161998 1999 2000
82(52.2%)
2001
207
59(35.0%)
2004
158
185
2005
171
40(29.8%)
2006 2008
241
2010 2011 2012
17(16.6%)
84(83.4%)
2013
94(70.2%)
75(47.8%)
109(65.0%)
72(41.8%)
100(58.2%)
189
101 100
19
2014
233
213211
250240
134
168
191
JapaneseForeigners (by “Jumin-Kihon-Daicho”)foreigners (by “Zairyu-Gaikokujin-Tokei”)
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Population movements in Greater Tokyo
The number of net inflows in 2017 recovered to the level of 2005 or 2006. The inflow is projected to continue.
Population inflow to Tokyo has been decreasing continuously since 2016, whereas population in the Greater Tokyo area is increasing owing to population inflow to three peripheral prefectures in 2017.
Net inflows of people to Greater Tokyo
Source: MIC “Jyumin Kihon Daichou Jinkou Idou Houkoku”
Population(thousand)
Net increaseNet decrease
140
100
120
-80
40
-60
20
220
-40
260
160
180
200
240
-20
0
60
80
2007
1991
1990
1999
2012
1993
2008
116.8
1992
65.7
1994
2017
2010
1995
1996
1997
1998
2000
2016
2001
2002
-5.0
74.3
2003
-16.9
76.0
2004
76.7
2005
2006
2009
84.2
2011
107.9
2013
119.4
2014
2015
73.1(58.3%)
125.3
62.4
155.2
1.2
43.3
18.339.7
88.0100.9
114.7132.0
95.0
117.5
92.8
62.867.2
96.5
116.0127.6 125.5
151.7
TokyoKanagawaChibaSaitama
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Population movements in Greater Tokyo
However, the number of single-person households is expected to peak out in 2030. Households of couple with children will reduce from 2020, while the households of only couple or children with single parent will slightly
increase.
Amongst the number of households in Greater Tokyo, the tendency of single-person household to occupy higher ratio is expected to continue in the future.
Number of households by family composition in Greater TokyoHouseholds(thousand)
Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: The solid line shows the actual value based on the population census. The dotted line shows the predicted value based on the data of population census in 2010.Note 2: Median-fertility (median-mortality) projection is used for household forecast.
Forecast →← Actual
1995 2000 2005 2010 2015 2020 2025 2030 2035
7,000
5,000
6,000
4,000
0
1,000
2,000
3,000
One-personCouple-onlyCouple-and-child(ren)One-parent and child(ren)Other
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Population movements in central Tokyo
In 2045, only Adachi is expected to have a decrease in population by more than 10% compared to 2015. It is expected that population will continue to rise over the next 30 years in 18 wards excluding Nakano, Kita, Edogawa, Kats ushika and
Adachi.
Out of the 8 wards among the 23 wards of Tokyo, the population is projected to rise by more than 10% over the next 30 years
Population growth trends in the 23 wards of Tokyo (assuming the population of each ward is 100 in 2010)
Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: Forecast of population is based on the data of “Population Census” in 2015. Median-fertility (median-mortality) projection is used for population forecast.
>110
105-110
100-105
100
90-100
<90
← Actual Forecast →Ward 2010 2015 2020 2025 2030 2035 2040 2045Chuo 87.0 100.0 110.4 118.7 125.2 129.9 133.1 134.9 Minato 84.3 100.0 111.0 119.4 125.8 130.2 132.9 134.4 Chiyoda 80.7 100.0 111.3 120.0 126.2 130.0 132.1 132.8 Koto 92.5 100.0 105.6 109.8 112.9 115.0 116.2 116.7 Taito 88.8 100.0 104.6 108.6 111.9 114.3 115.8 116.4 Shinagawa 94.4 100.0 104.5 108.2 110.9 112.8 113.8 114.2 Bunkyo 94.0 100.0 105.1 108.8 111.3 112.9 113.5 113.3 Nerima 99.2 100.0 103.8 106.5 108.4 109.8 110.3 110.1 Itabashi 95.4 100.0 103.7 106.1 107.8 108.7 109.0 108.6 Shibuya 91.1 100.0 102.6 105.1 107.0 108.2 108.6 108.3 Meguro 96.7 100.0 103.1 105.3 106.9 108.0 108.4 108.2 Arakawa 95.8 100.0 102.8 104.9 106.5 107.5 108.0 107.9 Sumida 96.6 100.0 102.0 103.7 104.8 105.4 105.6 105.4 Suginami 97.4 100.0 101.6 103.3 104.7 105.3 105.2 104.6 Ota 96.7 100.0 102.4 104.1 105.0 105.4 105.2 104.6 Shinjuku 97.8 100.0 102.0 102.9 103.3 103.2 102.5 101.3 Setagaya 97.1 100.0 101.2 101.9 102.5 102.6 102.1 101.2 Toshima 97.8 100.0 100.2 100.6 101.0 101.5 101.5 100.9 Nakano 95.9 100.0 100.2 100.1 100.1 100.2 100.0 99.2 Kita 98.4 100.0 100.7 101.0 100.9 100.4 99.7 98.6 Edogawa 99.7 100.0 99.4 98.0 96.3 94.6 92.9 91.0 Katsushika 99.9 100.0 99.1 97.8 96.2 94.5 92.8 91.0 Adachi 102.0 100.0 98.2 96.0 93.7 91.5 89.5 87.4
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Population aging in central Tokyo
In 2015, the whole 23 wards of Tokyo had become super-aged society, and in 2040, all the wards will turn into a super-aged society
Population aging by ward
Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: Forecast of population is based on the data of “Population Census” in 2015. Median-fertility (median-mortality) projection is used for population forecast.
← Actual Forecast→1990 1995 1800 2005 2010 2015 2020 2025 2030 2035 2040 2045
23 wards 11.2% 13.7% 16.4% 18.6% 20.0% 21.8% 22.1% 22.1% 22.9% 24.6% 27.0% 28.6%Nerima 9.5% 12.2% 15.4% 20.3% 19.3% 22.1% 23.9% 25.5% 27.7% 30.3% 33.0% 34.9%Suginami 11.8% 14.4% 16.8% 18.8% 23.1% 22.6% 23.6% 24.2% 25.6% 27.7% 30.6% 32.9%Setagaya 11.1% 13.4% 16.1% 17.3% 18.3% 21.5% 22.5% 23.4% 25.2% 27.6% 30.3% 32.2%Adachi 9.3% 11.9% 15.9% 19.9% 22.2% 25.1% 25.7% 25.4% 26.0% 27.7% 30.2% 31.4%Katsushika 10.6% 13.2% 16.6% 19.9% 22.0% 24.6% 25.1% 24.9% 25.7% 27.3% 29.5% 30.5%Shibuya 12.6% 15.2% 16.9% 18.5% 19.6% 20.6% 21.3% 21.7% 23.0% 25.1% 27.8% 29.9%Itabashi 10.0% 12.7% 16.3% 19.3% 21.3% 23.4% 23.9% 23.7% 24.3% 25.6% 27.9% 29.5%Nakano 12.1% 14.6% 16.3% 18.2% 19.9% 21.2% 21.9% 22.3% 23.3% 24.9% 27.1% 28.9%Taito 15.9% 18.8% 21.1% 23.1% 23.6% 23.8% 23.0% 22.0% 22.1% 23.7% 26.5% 28.6%Ota 11.6% 14.1% 16.3% 18.4% 20.4% 22.5% 22.7% 22.5% 23.1% 24.7% 26.9% 28.3%Edogawa 8.1% 9.9% 12.8% 15.4% 18.1% 20.7% 21.1% 20.9% 21.9% 23.9% 26.3% 27.3%Toshima 12.8% 15.7% 18.4% 21.1% 19.3% 20.0% 20.4% 20.5% 21.3% 22.8% 25.1% 26.9%Kita 12.7% 16.0% 19.3% 21.6% 24.0% 25.8% 25.4% 24.2% 23.7% 24.1% 25.6% 26.7%Koto 9.4% 12.2% 15.2% 17.3% 19.1% 21.3% 21.1% 20.4% 20.6% 22.2% 24.9% 26.7%Arakawa 13.7% 16.5% 18.9% 20.8% 21.9% 23.4% 22.8% 21.8% 21.7% 22.6% 24.5% 26.0%Minato 13.7% 16.3% 17.9% 17.8% 17.2% 17.6% 17.2% 17.3% 18.6% 20.8% 23.7% 26.0%Bunkyo 13.9% 16.4% 17.9% 18.3% 18.9% 19.8% 19.5% 19.3% 20.1% 21.7% 24.0% 25.8%Shinagawa 11.6% 14.5% 17.4% 18.0% 19.4% 20.9% 20.5% 19.9% 20.2% 21.6% 24.0% 25.8%Chiyoda 16.6% 20.2% 20.4% 20.2% 19.2% 18.1% 17.4% 17.2% 18.2% 20.2% 23.1% 25.3%Sumida 13.1% 15.5% 18.1% 20.2% 21.4% 22.9% 22.4% 21.3% 21.1% 22.0% 23.9% 25.2%Meguro 12.5% 14.8% 17.4% 18.6% 19.6% 20.0% 19.5% 19.1% 19.8% 21.1% 23.1% 24.7%Shinjuku 12.6% 15.3% 17.1% 18.7% 19.1% 20.1% 19.7% 19.3% 19.7% 20.9% 22.9% 24.4%Chuo 15.4% 17.6% 18.3% 16.3% 15.9% 16.1% 15.4% 15.0% 16.0% 18.1% 21.0% 23.3%
>30%
21-30%
17.5-21%
14-17.5%
7-14%
Super-aged society
Aged society
Aging society
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Percentage of foreigners in central Tokyo
The percentage of foreigners in Tokyo are increasing, and there is a ward where the ratio is over 10%.
Percentage of foreigners in the 23 wards of Tokyo (top 5)
The percentage in Shinjuku (over 10%) is the highest in Tokyo, and the percentages of Toshima and Arakawa are over 8%. In the other hand, the 23 wards as a whole have foreigners as 4.2% of their total population, indicating that the situation o f each ward is quite
different.
Source: MICOn January 1 of every year
0%
2%
4%
6%
8%
10%
12%
14%
2013 2014 2015 2016 2017 2018
Toshima
Minato
23 wards
Shinjuku
Arakawa
Taito
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Macro fundamentals of Japan
Overview of real estate investment market in Japan
Population movements in Japan
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Office market
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China
Japan
India
KoreaUK
US
0
5,000
10,000
15,000
20,000
25,000
30,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
(Billion USD)
Macro fundamentals of Japan
Entering the 2020s, Japan will remain at third place globally in nominal GDP, ahead of developing countries such as India.
Japan remains one of the largest economies in the world and should not be ignored as an investment target
Source: Compiled by NRI from IMF “World Economic Outlook Database (2017 Apr.)” data
Nominal GDP of major countries
Forecast →←Actual
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China
India
Japan
KoreaUKUS
-10.0
-5.0
0.0
5.0
10.0
15.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
(%)
Macro fundamentals of Japan
IMF forecasts estimate Japan’s GDP growth rate at around 0.5% for the next 5 years .
Japan’s economic growth is low compared to other major economies and high growth going forward looks unlikely
Real GDP growth rate of major economies
←Actual Estimate→
Source: Compiled by NRI from IMF “World Economic Outlook Database (2017 Apr.)” data
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Macro fundamentals of Japan
Main factor is that domestic demand, including personal consumption, capital investment and housing investment is poor.
There has been a positive growth for past two years, but most recently it has turned negative.
Quarterly real GDP growth and contributions to changes (seasonally adjusted series, YoY)
Source: Compiled by NRI from Cabinet Office “SNA (National Accounts of Japan)” data
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
2010 2011 2012 2013 2014 2015 2016 2017 2018
(%)
Private Consumption
Private Investment
Public Demand
Exports
Imports
Real GDP Growth
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-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0(%) Core CPI BOJ's Core CPI
Macro fundamentals of Japan
Inflation rate has become stagnant and prices are rising slowly.
Although the core CPI turned positive from a year earlier, Bank of Japan core CPI excluding the fresh foods and energy contin ues to decline. Most recently, it shifted to negative territory.
Sources: Compiled by NRI from Ministry of Internal Affairs and Communications “Consumer Price Index (CPI)”
Inflation targetset by BOJ
Year-on-year comparison for the same month of the consumer price index
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Macro fundamentals of Japan
However, growth in money supply has slowed and JGB purchases by the BOJ is showing a downward trend.
The Bank of Japan continues a large-scale qualitative and quantitative accommodating policy.
YoY change of money supply (Average balance) BOJ’s holdings of JGBs
Source: Compiled by NRI from Bank of Japan “Monetary Base” data
(Trillion Yen)
Source: Compiled by NRI from Bank of Japan “BOJ Accounts” data
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60% Monetary Base Money Stock
0
100
200
300
400
500
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In continuation of the negative interest rate policy of January 2016, the Bank of Japan introduced a long-term interest rate policy on September 2016 and announced a policy to buy long-term bond that shifts the long-term interest rate to 0%.
Although the short-term interest rates are still negative, the long-term interest rates are shifting towards positive territory.
Short-term interest rate (unsecured call rate) (Each end of the month) Long-term interest rate (10y-JGB) (Each end of the month)
Source: Compiled by NRI from Bank of Japan “Short-term Money Market Rates” data Source: Compiled by NRI from MOF “JGBs Interest Rate” data
Macro fundamentals of Japan
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Macro fundamentals of Japan
Recent yen strength reflects mainly fading perceptions of a US rate hike, a risk -off mode by investors, and a Japanese current account surplus
In the middle of 2018, the exchange rate of yen is continuously moving without any sense of direction.
Yen-dollar exchange rate (each end of the month)
Source: Compiled by NRI from IMF “Exchange Rate Data” data
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Macro fundamentals of Japan
Current account surplus continues to be at a high level.
Trade balance return to its basic profitable tendency and the current account surplus tends to expand.
Current account balance
Source: Compiled by NRI from MOF “Balance of Payments” data
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-12
-10
-8
-6
-4
-2
0
2
4(%) Japan United Kingdom United States
0
50
100
150
200
250
300(%)
Japan US UK
Japan US UK
Macro fundamentals of Japan
The government debt to GDP ratio has becoming flat in recent years due to a reduction in the primary balance deficit and rest raint of interest payments due to monetary easing as well as the increase in nominal GDP that is the denominator of the ratio.
Government debt has plateaued at high level, while a primary fiscal balance surplus is not in sight.
Government debt to GDP ratio Primary balance to GDP ratio
Estimate →←Actual Estimate →←Actual
Source: Compiled by NRI from IMF “World Economic Outlook Database (2017 Apr.)” data
net debt
gross debt
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Macro fundamentals of Japan
Tokyo continues to be the world’s largest city in terms of population and GDP.
Population/GDP forecast for 2025 (Top 15 cities in terms of population or GDP)
Source:Compiled by NRI based on UN “World Urbanization Prospects” and Euromonitor data.
2025 nominal GDPby city
(in billion USD)
2025 populationby city
( in thousands)
*No data for GDP of Dhaka and Kinshasa
Tokyo
Delhi
Shanghai
DhakaCairo
São Paulo
Mexico City
Beijing
Mumbai
New York
Osaka
ChongqingKarachi
KinshasaLagos0
500
1000
1500
2000
2500
0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000
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Macro fundamentals of Japan
Tokyo has the second largest concentration of world-class enterprises.
Number of HQ of Fortune Global 500 companies by city (2018) Fortune Global 500 companies in Tokyo (within top 200)
Source: Compiled by NRI from Fortune “Fortune Global 500 (2018)” data.
Rank Company Revenue(Mil. USD)
30 Honda Motor 138,64645 Japan Post Holdings 116,61655 Nippon Telegraph & Telephone (NTT) 106,50079 Hitachi 84,55985 Softbank Group 82,66597 Sony 77,11699 JXTG Holdings 76,629
129 Mitsubishi 68,301130 Marubeni 68,057145 Dai-ishi Life Holdings 63,522177 Mitsubishi UFJ Financial Group 54,769179 Seven & I Holdings 54,217186 Tokyo Electric Power 52,809192 Sumitomo Mitsui Financial Group 52,026198 Nippon Steel & Sumitomo Metal 51,164
Beijing (CHN), 53
Tokyo (JPN), 36
Paris (FRA), 16
New York (USA), 16
London (GBR), 13
Seoul (KOR), 13
Hong Kong, 8Shenzhen (CHN), 7
Shanghai (CHN), 7Osaka (JPN), 7
Houston (USA), 6Nagoya (JPN), 5
Others, 313
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Macro fundamentals of Japan
Overview of real estate investment market in Japan
Population movements in Japan
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Office market
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 27
611 305 676 8951,772 2,031 1,679
628 439 604 7921,555
2,237 2,080 2,066 2,3191,833
0
2,236
3,307
4,439
5,159
6,242 7,205
2,210
1,359539
1,549
1,791
2,1563,433 3,302 2,510
2,934
0
2,000
4,000
6,000
8,000
10,000FY
2001
FY20
02
FY20
03
FY20
04
FY20
05
FY20
06
FY20
07
FY20
08
FY20
09
FY20
10
FY20
11
FY20
12
FY20
13
FY20
14
FY20
15
FY20
16
FY20
17
Others J-REIT
Acquisitions of securitized real estate decreased in three consecutive years.
Although it was on a recovery trend after the bankruptcy of Lehman brothers, the complexity level of acquisition was going up along with the rise in prices of real estate, and it seems that it turned to a declining trend.
Overview of real estate investment market in Japan
Acquisitions of securitized real estatebillion yen
Source: Compiled by NRI from MLIT “Real Estate Securitization” data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 28
Office, 38.8%
Residential, 13.4%
Retail, 15.5%
Logistics, 15.2%
Hotel, 9.9%
Health care, 1.0%
composite facilities,
2.3%
Others, 3.9%
1,611710
1,516 1,7282,194 2,124 2,503
891 556 768 5121,092 1,501
2,3281,803 1,598 1,785
267
552
686808
1,293 1,5891,321
348235
441406
550603
784
614564 541161
270
404
835
7901,107 981
479
289252
309
452
788
758
773730 542615
746
550
770683 778
419662
494 525
0
2,000
4,000
6,000
8,000
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017
Office Residential Retail Logistics Hotel Health care composite facilities Others
Structure in which office, residential, commercial and logistics occupy the 80% of transaction value will continue.
Because of the sudden increase in the inbound marketing, the hotel investment is also becoming popular as one of the main objectives.
Overview of real estate investment market in Japan
Acquisitions of securitized real estate by asset classbillion yen
Allocation of securitized real estate by asset classin the past 5 years
Source: Compiled by NRI from MLIT “Survey of the Current State of Real Estate Securitization” dataNote: Because the usage of securitizations that require actual TMK is unclear, they have not been included after 2001. Because of this, the yearly totals and amounts will not match up with the documents cited for this entry.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 29
41.9%
51.9%
53.0%
66.0%
58.8%
47.9%
51.9%
45.9%
33.8%
38.0%
39.9%
12.1%
12.7%
10.5%
11.8%
12.0%
15.3%
15.8%
17.5%
17.3%
18.1%
20.9%
10.5%
8.8%
8.4%
6.9%
8.0%
9.5%
10.0%
10.2%
13.8%
12.9%
8.7%
6.4%
5.5%
6.9%
4.0%
5.1%
3.7%
5.8%
5.1%
6.9%
5.4%
23.1%
17.4%
17.2%
12.0%
14.9%
19.9%
15.2%
17.0%
26.0%
20.8%
20.1%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
FY2007
FY2008
FY2009
FY2010
FY2011
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
Tokyo Greater Tokyo Osaka Nagoya Fukuoka Others
The ratio of Greater Tokyo area was on a declining trend after FY2010.However, it has increased its number after FY2016.
About the two-third of securitized properties focused on Greater Tokyo in FY 2010. However, it declined to about the one third of it in FY 2015.
Composition ratio of Tokyo reversed in FY 2016 and has gone up by 4%, and the ratio of Tokyo increased in FY 2017 also.
Overview of real estate investment market in Japan
Number of properties securitized by region
Source: Compiled by NRI from MLIT “Survey of the Current State of Real Estate Securitization” dataNote: Securitization of TMK properties is not included because their use is unknown.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 30
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Oct
-03
Apr-
04
Oct
-04
Apr-
05
Oct
-05
Apr-
06
Oct
-06
Apr-
07
Oct
-07
Apr-
08
Oct
-08
Apr-
09
Oct
-09
Apr-
10
Oct
-10
Apr-
11
Oct
-11
Apr-
12
Oct
-12
Apr-
13
Oct
-13
Apr-
14
Oct
-14
Apr-
15
Oct
-15
Apr-
16
Oct
-16
Apr-
17
Office Tokyo CBD Office Osaka CBD Retail Tokyo Residential Tokyo Logistics Tokyo Multi
Cap rate is continuously declining
Overview of real estate investment market in Japan
Cap rates in Japan for major investment areas
Source: Compiled by NRI from Japan Real Estate Institute “Japanese Real Estate Investor Survey” data.
Office Tokyo
Retail Tokyo
Residential TokyoLogistics Tokyo MultiOffice Osaka
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 31
-40
-30
-20
-10
0
10
20
30
2000
/320
00/9
2001
/320
01/9
2002
/320
02/9
2003
/320
03/9
2004
/320
04/9
2005
/320
05/9
2006
/320
06/9
2007
/320
07/9
2008
/320
08/9
2009
/320
09/9
2010
/320
10/9
2011
/320
11/9
2012
/320
12/9
2013
/320
13/9
2014
/320
14/9
2015
/320
15/9
2016
/320
16/9
2017
/320
17/9
2018
/3
Loose
Tight
Fierce competition among commercial banks continues to help boost prices.
Banks’ lending attitude toward the real estate industry is the most lenient since 2000 and the standard of the time of the global financial crisis in 2007 is exceeded. Many people in Japan believe there are too many banks, and spreads continue to fall with covenants loosening.
Along with mega-banks and other major banks, regional mid-tier banks are entering the market, so conditions look unlikely to change over the near term.
Overview of real estate investment market in Japan
Financial institutions’ lending attitude DI toward the real estate industry
Source:Compiled by NRI from BOJ“TANKAN (Figures by Industry)” data.
Copyright (C) 2014 Nomura Research Institute. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 33
Office floor space shares by major region
Office market
Tokyo area holds 61% of Japan’s office rental market.
Japan has a stock of around 106 million ㎡ of available office rental space. The Tokyo area holds an overwhelming share of the market at 64 million ㎡, comprising 61% of the total.
Source: JREI “The Annual Japanese Office Buildings Survey”Note: Data is as of January 2016.Note: The survey focuses on the central area of each city.Note: Properties less than 3,000 square meters are excluded.
61.2%
4.6%0.9% 1.8%
14.3%
1.7% 1.0%5.5%
3.2%2.3% 2.0% 1.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Tokyo Yokohama Saitama Chiba Osaka Kobe Kyoto Nagoya Fukuoka Sapporo Sendai Hiroshima
(5.12million ㎡)
(68.55million ㎡)
(1.06million ㎡)(1.99million ㎡)
(16.01million ㎡)
(1.85million ㎡)(1.09million ㎡)
(6.18million ㎡)(3.58million ㎡)
(2.55million ㎡)(2.25million ㎡)
(1.69million ㎡)
Tokyo Metropolitan Area68.5%
Osaka Area16.9%
12 major cities111.92million ㎡
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 34
Tokyo’s CBD has an accumulation of office buildings and is concentrated in an area of 5km square, concentrated in Chiyoda, Chuo, Minato, Shibuya, and Shinjuku wards.
Tokyo’s Central Business District (CBD) is concentrated in five wards
30 km
30 km
Tokyo13.52 million people
Kanagawa9.13 million people
Saitama7.27 million people
Chiba6.22 million people
SetagayaMinato
ItabashiKita
Adachi
Katsushika
Edogawa
Koto
SumidaTaito
ArakawaToshima
Bunkyo
Shibuya
ShinjukuChiyoda
Chuo
MeguroShinagawa
Ohta
Nakano
Nerima
Suginami
Office market
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 35
Monthly (Jan 2013 – May 2018)
Source: Miki Shoji Co., Ltd.
Office market
Vacancy rates in the Tokyo office market have been improving for more than five consecutive years.
Yearly (1998 - 2017)Vacancy rate movement in Tokyo CBD
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Chiyoda
Chuo
Minato
Shinjyuku
Shibuya
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Jan-
13Ap
r-13
Jul-1
3O
ct-1
3Ja
n-14
Apr-
14Ju
l-14
Oct
-14
Jan-
15Ap
r-15
Jul-1
5O
ct-1
5Ja
n-16
Apr-
16Ju
l-16
Oct
-16
Jan-
17Ap
r-17
Jul-1
7O
ct-1
7Ja
n-18
Apr-
18
Chiyoda
Chuo
Minato
Shinjyuku
Shibuya
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 36
Monthly (Jan 2013 – May 2018)
Source: Miki Shoji Co., Ltd.
Note: One tsubo is 3.3 square meters.
Office market
Rents entered an upward phase from around 2013 in all 5 Tokyo wards.
Yearly (1999 – 2017)Rent trends in Tokyo CBD (yen/tsubo per month)
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
26,000
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
(yen/tsubo)
Chiyoda
Chuo
Minato
Shinjuku
Shibuya
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
26,000
Jan-
13Ju
n-13
Nov
-13
Apr-
14Se
p-14
Feb-
15Ju
l-15
Dec-
15M
ay-1
6O
ct-1
6M
ar-1
7Au
g-17
Jan-
18
(yen/tsubo)
Chiyoda
Chuo
Minato
Shinjuku
Shibuya
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 37
2000 2005 2010 2015
250
0
100
50
150
300
200
350
400
146.7
23区
324.3
366.0
141.5
202.0
346.1
198.8
147.4
188.4
316.8
189.2
142.25区
3区
From 2010 to 2015, the office workers decreased in 23 wards, whereas they slightly increased in 5 or 3 wards
Trend and forecast of office worker numbers in Tokyo
Office market
Central 3 wards(Chiyoda, Chuo, Minato)
Central 5 wards(Chiyoda, Chuo, Minato, Shibuya, Shinjuku)
23 wards
(1,000 people)
Source: MIC “Population Census”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 38
26.8 27.5 28.3 28.7
21.4 20.6 19.9 19.1
24.426.0
26.9 27.4
16.215.1 14.4 14.6
11.2 10.8 10.5 10.2
0
5
10
15
20
25
30
2000 2005 2010 2015
渋谷区
千代田区
中央区
港区
新宿区
Since 2000, Chiyoda and Minato have been increasing their share of office workers.
Trend of office worker share in Tokyo’s CBD (23 wards =100%)
Office Market
Minato
Shibuya
Chuo
Chiyoda
Shinjuku
Source: MIC “Population Census”
(%)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 39
56 55
83
100108104
114118
183
92
119
74
99
36
72
91
125
216
121
77
154
119
65
86 85
117
175
58
87
10997
69
146
99
168
5242
0
10
20
30
40
50
60
70
0
50
100
150
200
250
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
# of buildingsSupplied floor area
(1,000 ㎡)
Office supply areaNumber of building supplied
Office space supply in Tokyo’s 23 wards
Source: Mori Building Company “Market Trend Survey of Large-Scale Office Buildings in Tokyo's 23 Wards”
Office market
Despite the dwindling number of office workers, new office supply will likely continue to grow.
forecast
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 40
Tokyo office market cap rate trend
Source: Japan Real Estate Institute “Real Estate Investor’s Survey”
Office market
The cap rates have continuously been declining since 2012, and it is currently at its lowest level.
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
Oct
-03
Apr-
04O
ct-0
4Ap
r-05
Oct
-05
Apr-
06O
ct-0
6Ap
r-07
Oct
-07
Apr-
08O
ct-0
8Ap
r-09
Oct
-09
Apr-
10O
ct-1
0Ap
r-11
Oct
-11
Apr-
12O
ct-1
2Ap
r-13
Oct
-13
Apr-
14O
ct-1
4Ap
r-15
Oct
-15
Apr-
16O
ct-1
6Ap
r-17
Oct
-17
Apr-
18
Chiyoda(Marunouchi) Chuo(Nihonbashi) Minato(Toranomon)
Shinagawa Shinjuku Shibuya
ShinjukuShinagawaShibuyaMinato(Toranomon)Chuo(Nihonbashi)Chiyoda(Marunouchi)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 41
Office rent trend in ex-Tokyo market
Source: Miki Shoji Co., Ltd.
Office market
The vacancy rates have also been recovering in the local office market and the rent has started rising.
Office vacancy trend in ex-Tokyo market
Tokyo
Osaka
Nagoya
Sapporo
Sendai
Yokohama
Fukuoka
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
(yen/tsubo)
Tokyo
OsakaYokohama
FukuokaSendaiSapporo
Nagoya
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 42
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Oct
-03
Apr-
04O
ct-0
4Ap
r-05
Oct
-05
Apr-
06O
ct-0
6Ap
r-07
Oct
-07
Apr-
08O
ct-0
8Ap
r-09
Oct
-09
Apr-
10O
ct-1
0Ap
r-11
Oct
-11
Apr-
12O
ct-1
2Ap
r-13
Oct
-13
Apr-
14O
ct-1
4Ap
r-15
Oct
-15
Apr-
16O
ct-1
6Ap
r-17
Oct
-17
Apr-
18
Ex-Tokyo office market cap rate trend
Source: Japan Real Estate Institute “Real Estate Investor’s Survey”
Office market
Liquidity is growing in ex-Tokyo as well as the real estate investment market rises and becomes overheated.
As property acquisition becomes more difficult in Tokyo, investment money must look to regional markets.
SendaiSapporoFukuokaNagoyaYokohamaOsaka
Copyright(C) Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 44
Residential market
About 20% of all households in Japan are living in non-public rental apartments, and the percentage is trending upwards.
Households living in non-public rental apartments (excluding wooden apartments; hereafter the same in this section), which numbered 3.34 million in 1988, increased by about 2.6 times to 9.96 million (about 20% of all households) in 2013.
Source: MIC “Housing and Land Survey”
3,7604,097
4,4214,716
4,9895,238
1,411 1,578 1,682 1,724 1,783 1,857
334 490 650 750 879 996
9%
12%
15%16%
18%20%
0%
5%
10%
15%
20%
25%
0
1,000
2,000
3,000
4,000
5,000
6,000
'88 '93 '98 '03 '08 '13
Ratio of Households Living in Private Rental &
Apartm
ent House (non-w
ood)
Num
ber o
f Hou
seho
lds (
unit:
10,0
00)
Households Living in HousingHouseholds Living in Rental HousesHouseholds Living in Private Rental & Apartment Houses (non-wood)Ratio of Households Living in Private Rental & Apartment Houses (non-wood)
Own House63%
Private Rental House,
Apartment House (non-
wood)20%
Private Rental Housing, Others
9%
Public Rental House
6%
Company Housing
2%
Breakdown of all households by housing type (2013) Number of households by housing type 1988 - 2013
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 45
Residential market
The total number of moving households has decreased, but the ratio of households moving to non-public rental apartments is trending upwards.
The number of moving households peaked out in 1994-98 and decreased to about 77% of the peak-time level in 2009-13 . The number of households moving to non-public rental apartments is also on a decreasing trend, although its ratio to the total number of moving households is
trending upwards.
Housing choices of moving households 1984 - 2013
1,1031,186 1,221
1,1351,039
939
782884 868
778698
639
427532 557 502 466 447
39%
45% 46% 44% 45%48%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
200
400
600
800
1,000
1,200
1,400
1,600
84-88 89-93 94-98 99-03 04-08 09-13
Ratio of Households Living in Private Rental &
Apartm
ent Houses
Num
ber o
f Mov
ing
Hou
seho
lds
(Uni
t:10,
000)
Number of Moving Households in Past 5 YearsNumber of Households Moved into Rental HousesNumber of Households Moved into Private Rental (Apartment) HousesRatio of Households Moved into Private Rental (Apartment) Houses
Source: MIC “Housing and Land Survey”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 46
Residential market
The majority of households moving to non-public rental apartments moved within the same city.
Looking at the former locations of households moving into non-public rental apartments in seven major cities, those that moved within the same city were greater in number than those that moved in from outside the city.
Tokyo’s 23 wards and Osaka saw a decline in households moving into non-public rental apartments from outside the city, while major regional cities saw no change.
Location choices of moving households
28 30 28 31 32 28 27 33
165 157 148 13756 57 55 55 73 61 53 50 27 27 23 22 47 46 41 48
50 46 48 55 25 24 24 27
266207 197 200
58 54 51 58105
86 77 7336 37 32 30
45 47 49 54
0
50
100
150
200
250
300
350
400
450
500
94-9
899
-03
04-0
809
-13
94-9
899
-03
04-0
809
-13
94-9
899
-03
04-0
809
-13
94-9
899
-03
04-0
809
-13
94-9
899
-03
04-0
809
-13
94-9
899
-03
04-0
809
-13
94-9
899
-03
04-0
809
-13
Sapporo Sendai Tokyo 23 Wards
Nagoya Osaka Hiroshima Fukuoka
Brea
kdow
n of
In-F
low
Hou
seho
lds M
oved
inPr
ivat
e Re
ntal
Hou
ses (
non-
woo
d) (U
nit:1
,000
)
Household moving in a cityHousehold moving out a city
Source: MIC “Housing and Land Survey”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 47
Residential market
The supply of non-public rental apartment units has increased more sharply than total housing stock.
The growth of rental apartments (public and non-public combined) outpaced the growth of overall housing as well as the more modest rise of rental housing in general.
As a result, the ratio of rental apartments to total rental houses increased from 60 to 70%.
Housing stock by type 1988-2013
Source: MIC “Housing and Land Survey”
Housing growth rates by type
39 44
50 54
58 61
16 18 20 21 22 23
12 14 15 16
0
10
20
30
40
50
60
70
'88 '93 '98 '03 '08 '13
Hous
ing
Stoc
k (U
nit:1
mill
ion)
Number of HousesNumber of RentalHousesNumber of Rental & Apartment Houses (non-wood)
100
107
114
119
103 108
112 112
124
130
80
90
100
110
120
130
140
'98 '03 '08 '13
Grow
th R
ate
(198
8 =
100)
Number of HousesNumber of RentalHousesNumber of Rental & Apartment Houses (non-wood)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 48
In 2017, the number of new constructions decreased by 3,000 houses since 2016 and reached to a level of 960 thousand houses. The number of new constructions for rental houses is 420 thousand, which remained at the same level as in 2016.
Residential market
The number of new constructions for rental houses remained high until 2017.
New housing supply trend: 1991-2017 Breakdown of new rental housing construction by region
Source: MLIT “Survey of Construction Work Started”
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Ratio of Rental Houses
Num
ber o
f Con
stru
ctio
n St
arts
(U
nit:
1,00
0)
Own House Rental House Company House
House Built for Sale Ratio of Rental House
0
100
200
300
400
500
600
700
800
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
New
Ren
tal H
ousi
ng C
onst
ruct
ion
by R
egio
n(U
nit:1
,000
)
Provincial RegionKinki RegionChuubu RegionMetropolitan Region
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 49
The construction of rental apartment increased for avoiding tax with the basic deduction's of an inheritance tax being reduced from January, 2015. Because of number increasing in apartment supply due to the factors besides the actual demand, vacancy rates increased suddenly centering on the suburb part
with the high apartment ratio occupied in a rental apartment.
Residential market
Since 2015, the vacancy rates in Kanagawa prefecture have gone up suddenly.From the end of 2016, the vacancy rates are rising in Tokyo as well.
Vacancy Rates of Rental Housing (non-wood) in Major Cities
Source: TAS Corp. and At Home Co., Ltd. “Report on Rental Housing Market”
Vacancy Rates of Rental Housing in Tokyo Metropolitan Area
Source: MIC “Housing and Land Survey”
0%
5%
10%
15%
20%
25%
Sapporo Sendai Tokyo23 Wards
Nagoya Osaka Hiroshima Fukuoka
Vaca
ncy
Rate
of R
enta
l Hou
sing
(non
-woo
d) (U
nit:
%) '98 '03 '08 '13
8
9
10
11
12
13
14
15
16
17
18
Jan
May Sep
Jan
May Sep
Jan
May Sep
Jan
May Sep
Jan
May Sep
Jan
May Sep
Jan
2012 2013 2014 2015 2016 2017 2018
Rent
al H
ousi
ng V
acan
cy R
ate
(Uni
t: %
)All Tokyo areas23 Tokyo districtsTokyo citiesKanagawa
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 50
Residential market
Rent standard is still on a declining trend.
The rent level of non-public rental housing rose steadily from 1990, after which it gradually declined since 2000. This trend has continued not even changed recently.
Source: MIC “Consumer Price Index”
Rents in the private sector (annual average) – nationwide and central Tokyo
85.0
90.0
95.0
100.0
105.0
110.0
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Priv
ate
(Ann
ual A
vera
ge) R
ent I
ndex
(Bas
e Ye
ar 2
010)
Japan
Tokyo 23 Wards
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 51
90%
92%
94%
96%
98%
100%
Jan
May Sep
Jan
May Sep
Jan
May Sep
Jan
May Sep
Jan
May Sep
Jan
May Sep
2012 2013 2014 2015 2016 2017
Occ
upan
cy R
ate
(Uni
t:%)
Tokyo 3 central districtsTokyo 23 districtsNagoya cityOsaka cityFukuoka city
The operating ratio of Nagoya city and Fukuoka city hits the ceiling. The rent standard remains stable or decrease.
Residential market
The operating ratio of REIT case housing and the private placement fund has been at the highest level, and the rent standard in downtown 3 ward and Tokyo 23-ku‘s has continue to rise slowly.
Occupancy rates of REIT-owned and private fund-owned properties Monthly rents of REIT-owned and private fund-owned properties
Source: Association for Real Estate Securitization of Japan “ARES Japan Property Index”
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Jan
Jun
Nov Ap
rSe
pFe
b Jul
Dec
May Oct
Mar
Aug
Jan
Jun
2012 2013 2014 2015 2016 2017
Mon
thly
Ren
t Lev
el (U
nit:
Yen/
m2 )
Tokyo 3 central districtsTokyo 23 districtsNagoya cityOsaka cityFukuoka city
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 52
Residential market
The rate of housing ownership, which has a negative impact on rental housing demand, has shown a downward trend with the 40-49 age group.
Housing ownership rate in Japan by age group
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1998 2003 2008 2013
70+
60-69
50-59
40-49
30-39
-29
Source: MIC “Housing and Land Survey”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 54
Retail property market
The number of locations for large stores has been on a downtrend in recent years.
New retail space supply vs. number of development projects
Note: The reported numbers for the fiscal years 2002 and 2008 include stores without floor space indication.Source: METI “Large-scale Retail Chain Site Expansion Report”
2,455
3,335 3,729
4,178 4,545
3,983 4,369
1,919 2,081 2,351 2,193 2,860 2,824 2,607
2,098 1,833 1,833
450
638
786 738 731 730 750
654
500
584 620
738 705
669
569 548 560
0
100
200
300
400
500
600
700
800
900
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Num
ber of projects(cases)Fl
oor A
rea(
1000
m2)
(year)
Floor Area Number of projects
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 55
30.6 30.4 31.5 33.1 34.6 36.5 38.0 42.1 42.7 44.2 45.7 46.4 47.9 49.8 50.8 51.7 52.5
11.8 11.6 12.1 12.4 12.8 13.2 13.6 14.1 14.2 14.5 14.8 15.0 15.3 15.7 15.9 16.1 16.3
0
2
4
6
8
10
12
14
16
18
0
10
20
30
40
50
60
70
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Floor area per shopping centerO
vera
ll flo
or a
rea
(year)
Overall floor area Floor area per SC(in 1 million m2) (in 1000m2/store)
Retail property market
For shopping centers, the total floor area for all stores and the floor area per store are both on the rise.
Overall floor area and per-store floor area for shopping centers
Note: In the old SC standard, only shopping malls with more than 10 retail tenants were considered.In the new SC standard, the shopping center must have more than 10 tenants including food stalls, service centers and retail outlets.On the same note, the shopping center must have more than 1,500 m2 retail space.
Source: Council of Shopping Centers “SC White Book”
Old SC Standard New SC Standard
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 56
Retail property market
In 2017, the annual sales of existing shopping centers increased by 0.6% compared to the previous year.
YoY comparison of existing shopping centers’ annual sales
Source: Council of Shopping Centers “Overall Sales Statistics Report”
-3.4
-2.2-2.1
-1.6 -1.7
0.3 0.30.0
-1.5
-6.8
-2.0
-1.3
0.5
-0.50.1 0
-1.1
0.6
-8
-7
-6
-5
-4
-3
-2
-1
0
1
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
(%)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 57
0
10
20
30
40
50
60
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Retail property market
Abenomics has not changed consumer outlook dramatically.
Consumer outlook index chart
Source: Cabinet Office “Consumer Trends Survey”
Note: Consumer outlook index calculation methodology:
Consumers are asked to rate their outlook for the next 6 months for the following 4 categories: “Lifestyle”, “Income”, “Job environment” and “Determining when to purchase consumer durables” using a 5-scale index.
Each of the 5 scales is assigned a value: +1 for “Will get better,” +0.75 for “Will get somewhat better,” +0.5 for “Won’t change,” +0.25 for “Will get somewhat worse,” and +0 for “Will get worse”. This numerical index is used to provide a component ratio for each of the answers, from which the results are calculated.
To illustrate, a value of 50 will be produced if all participants answer “Won’t change” for all available items.
▼ Dec. 2012Liberal Democratic Party
becomes the ruling party again
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 58
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Late2011
Early2012
Late2012
Early2013
Late2013
Early2014
Late2014
Early2015
Late2015
Early2016
Late2016
Early2017
Late2017
Ginza
Omotesando
Ikebukuro
Shinjuku
Shibuya
Yokohama
Shinsaibashi
Oodori (Sapporo)
Sannomiya (Kobe)
Sendai
Tenjin (Fukuoka)
Shijokawaramachi (Kyoto)
Sakae (Nagoya)
(yen / month / tsubo)
Ginza
Omotesando
Shinjuku
Retail property market
Compared to other areas, rent levels in Ginza and Omotesando are still high.
1st floor rent ranking in 13 principal business areas (yen/month/tsubo)
Source: Japan Real Estate Institute, BAC Urban Projects, and Attractors Lab “Retail Chain Rental Trends”Note1: Rent in Yokohama is shown to have spiked in the early half of 2012, but this can be attributed to the extremely small sample sizeNote 2: Rent in Shinjuku is shown to have spiked in the late half of 2012, but this can be attributed to a sample bias toward small, high-rent propertiesNote 3: Rent in Ikebukuro is shown to have dived in the early half of 2013, but this can be attributed to a sample bias toward low-rent properties in unfavorable locations
Tokyo Metropolitan
Area
Provincial Areas
*2
*1 *3
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 59
Retail property market
Cap rates have been falling from around 2011, and hit a record low in all regions.
Commercial establishment cap rates (expected yield)
Source: Japan Real Estate Institute “Real Estate Investor’s Survey”
Definition:Metropolitan high-class specialty stores:
Length of time after construction -or- large-scale repair/improvement: less than 5 yearsTenants: Mainly retailers of high-class brands.Rent system: Mainly fixed-term, variable rental schemes based on the revenue.Areas: Along Chuodoori in Ginza’s Chuo district.
Along Omotesando in Shibuya’s Omotesando district.
Suburban shopping centers:Sales floor area: around 20,000m2
Key tenants: Prominent general merchandise stores (GMS)Rent system: Mainly fixed-term, fixed-charge rental schemesAreas: Along main thoroughfares within about an hour from metropolitan Tokyo.
Stores for areas outside Tokyo follow similar locational conditions as above.
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Apr-
05O
ct-0
5Ap
r-06
Oct
-06
Apr-
07O
ct-0
7Ap
r-08
Oct
-08
Apr-
09O
ct-0
9Ap
r-10
Oct
-10
Apr-
11O
ct-1
1Ap
r-12
Oct
-12
Apr-
13O
ct-1
3Ap
r-14
Oct
-14
Apr-
15O
ct-1
5Ap
r-16
Oct
-16
Apr-
17O
ct-1
7Ap
r-18
Metropolitan , GinzaMetropolitan , Omotesando
Suburban, Nagoya
Metropolitan , NagoyaMetropolitan, Osaka
Suburnban, TokyoSuburban, Osaka
Copyright(C) Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 61
Logistics property market
The truck-based transport volume (in tons), which forms the bedrock of Japan’s cargo industry, has continued to decline in recent years.
Truck-based (automobile) transport is the primary transport method that constitutes a large share of Japan’s freight traffic. In recent years, the volume of cargo transported via automobile has declined due to the downturn in the quantity of trucks sold for private use.
Cargo quantity by transport method (FY2015) Automobile cargo quantity movement
Note: The chronological continuity of data from prior to 2009 could not be guaranteed due to the changes made to the tallying methodology in the middle of 2010.Source: MIC “Transport quantity by transport method” and MLIT “Automobile Transport Statistics Survey”
(Unit: 1 million tons)
Motor vehicles 4,289
Coastwise vessels 365
Domestic aviation 1
Railways43
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
'60 '65 '70 '75 '80 '85 '90 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15
Business Personal(1 million tons)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 62
The movement to smaller logistics lots progresses across the whole industry. The number of home delivery service handled has increased by an average of approximately 3% per year, and reaching 4.2 billion in FY2017.
Logistics property market
As the movement to smaller logistics lots progresses, the quantity distributed in such lots appears to be in upward trend based on the number of instances.
Industry-wide distribution quantity by lot size Number of home deliveries (million)
Source: MLIT “Logistics Census”
46.4%
59.2%
72.4%
79.2%
0% 50% 100%
2000
2005
2010
2015
Below 0.1t 0.1~0.5t 0.5~1t 1~5t Above 5t
2,751
3,2323,526
4,251
2007(FY)
2002 2012 2017
+2.9%
Source: MLIT “Release of Reports on the Number of home deliveries”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 63
Logistics property market
Small-lot consignments increase, due partly to the expansion of e-commerce, which is expected to continue growing hereafter.
Market size of Business-to-Consumer e-Commerce is expected to surpass 20 trillion yen in 2019.
Market size of B-to-C e-Commerce
Note: Business -to-consumer e-commerce: sale of products and services to consumers in general via the InternetSource: NRI
(trillion JPY)
15.416.6
18.019.3
20.621.8
23.124.5
25.9
20222016 20232015 20182017 2019 2020 2021
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 64
The number of supplied warehouse buildings fell to roughly 23% of the peak level in 1991 (12,000 buildings/year) which has stabilized in recent years. The number of supplied warehouse buildings for the transport industry is dwindling at a more relaxed pace compared to the rest of the industry (see figure below left),
but the floor space per building is on an upward trend (below right). This explains the increased need for SCM support for generic enterprises and new/large-scale logistics facilities for logistics consolidation.
Logistics property market
While new supply has stopped dwindling, facilities are growing larger due to businesses consolidating their logistics capabilities.
Nationwide number of supplied warehouses including warehouses for transport and transport industry share
Floor space per warehouse building
Source: MLIT “Construction Statistics”
0%
5%
10%
15%
20%
25%
0
10,000
20,000
30,000
40,000
50,000
60,000
'88
'89
'90
'91
'92
'93
'94
'95
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
(Buildings)Transport industry Other than transport Transport industry share
0
500
1,000
1,500
2,000
2,500
'88
'89
'90
'91
'92
'93
'94
'95
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
(㎡)Entire industry Other than transport Transport industry
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 65
0
100
200
300
400
500
600
700
800
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
(1 billion yen) Real estate industry Transport industry Others
Logistics property market
In response to the growing demand of logistics used by e-commerce, the volume of order to build warehouses/logistics facilities has been increasing.
Order volume for construction of warehouses/logistics facilities by ordering industry
Note: Only contracts worth 500 million yen and above are includedSource: MLIT “Construction Order Trends, Statistics and Survey”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 66
Logistics property marketMajor foreign-based logistics property players and Japanese real estate developers are gearing up for roadside development ahead of new expressway construction.
Narita Airport
HanedaAirport
Ken-OEXPWY
Gaikan EXPWY
Joban EXPWY
ChuoEXPWY
Tomei EXPWY
Kan-etsuEXPWY
Tohoku EXPWY
13
01
0241
23
03
31
07
2904
0622
36
37
21 0912
15
16
1730
35
05 10
1425
24
26
2728 32
3334
3839
40
0811
18
19 20
PROLOGIS Park hurukawa3
PROLOGIS Park Tsukuba1
ESR KUKI Distribution Center
No. Project
MFLP Prologis Park Kawakoshi
MFLP Haneda
MFLP KawasakiⅠ
MFLP HunabashiⅡ
Tokyo Rail Gate EAST
GLP Sagamihara Project
DPL Satte
Chibashi Wakamatutyou Logistics Center
Logicross Yokohama Kouhoku
Logiport Kawasaki Bay
Logicross AtsugiⅡ
Landport Shinonome
Landport OumeⅠ
Landport OumeⅡ・Ⅲ
Landport Atsugiaikawamachi
Landport Kawaguchi
Landport Koshigaya
Landport Higashinarashino
ESR ICHIKAWA Distribution Center
MFLP KawaguchiⅠ
GLP Niiza
0101
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
02
22
23
24
Landport NarashinoDPL ShinnarashinoMCUD IchikawaⅠMCUD IchikawaⅡSOSiLA Kawakoshi
I Missions Park Ichikawashiohama
SOSiLA EbinaSOSiLA Kasukabe
25
26
27
28
29
30
31
32
ExpresswayExpressway (planned)New devts
Source: Compiled by NRI from companies’ respective websites
I Missions Park Inzai2
I Missions Park haku2
Atsugi ⅡLogistics Center
Hasuda Ⅱ Logistics Center
Matsubushi Logistics Center
PROLOGIS Park Chiba1
PROLOGIS Park Chiba2
GLP NagareyamaⅢ
GLP KenouGoka
33
34
35
36
37
38
39
40
41
GLP YachiyoⅡ
GLP Twin City PRJ(AtsugiⅢ)
42
43
43
42
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 67Source: Compiled by NRI from companies’ respective websites Note) * Total leasable area, ** Site area
# Name of Project Name of Developer Map No. Completion Scale (Total floor area)1 PROLOGIS Park Hurukawa3 PROLOGIS 1 2018.8 31,256㎡2 PROLOGIS Park Tsukuba1 PROLOGIS 2 2018.8 About 70,000㎡3 I Missions Park Haku2 ITOCHU Corporation 34 2018.8 Unknown4 Atsugi ⅡLogistics Center ORIX 35 2018.8 32,909㎡5 ESR KUKI Distribution Center ESR 3 2018.9 155,853㎡6 MFLP Prologis Park Kawakoshi Mitsui Fudosan/PROLOGIS 4 2018.10 About 130,800㎡7 GLP KenouGoka GLP 41 2018.10 140,031㎡8 Landport OumeⅠ NOMURA REAL ESTATE DEVELOPMENT 19 2018.11 61,121㎡9 DPL Shinnarashino Daiwa House Industry 26 2018.11 14,084㎡10 ESR ICHIKAWA Distribution Center ESR 5 2019.1 229,715㎡11 Hasuda Ⅱ Logistics Center ORIX 36 2019.1 26,073㎡12 SOSiLA Kawakoshi SUMITOMO CORPORATION 29 2019.1 21,823㎡13 GLP YachiyoⅡ GLP 42 2019.1 About 54,000㎡14 GLP NagareyamaⅢ GLP 40 2019.2 91,440㎡15 I Missions Park Inzai2 ITOCHU Corporation 33 2019.3 Unknown16 SOSiLA Kasukabe SUMITOMO CORPORATION 31 2019.3 52,900㎡17 Matsubushi Logistics Center ORIX 37 2019.3 77,326㎡18 GLP Niiza GLP 7 2019 Spring About 31,000㎡19 MFLP KawaguchiⅠ Mitsui Fudosan 6 2019.4 About 54,100㎡20 Logiport Kawasaki Bay MITSUBISHI ESTATE 16 2019.5 296,799㎡21 MFLP Haneda Mitsui Fudosan 8 2019.6 About 84,400㎡22 Logicross Yokohama Kouhoku MITSUBISHI ESTATE 15 2019.6 About 16,400㎡23 Landport Kawaguchi NOMURA REAL ESTATE DEVELOPMENT 22 2019.6 19,742㎡24 Landport Higashinarashino NOMURA REAL ESTATE DEVELOPMENT 24 2019.7 74,725㎡25 I Missions Park Ichikawashiohama ITOCHU Corporation 32 2019.8 Unknown26 Logicross AtsugiⅡ MITSUBISHI ESTATE 17 2019 Summer About 34,700㎡27 MFLP KawasakiⅠ Mitsui Fudosan 9 2019.9 About 41,500㎡28 PROLOGIS Park Chiba1 PROLOGIS 38 2019.9 146,805㎡29 MFLP HunabashiⅡ Mitsui Fudosan 10 2019.10 About 225,000㎡30 GLP Twin City PRJ (AtsugiⅢ) GLP 43 2019.10 About 42,000㎡31 Landport Shinonome NOMURA REAL ESTATE DEVELOPMENT 18 2019.12 Unknown32 PROLOGIS Park Chiba2 PROLOGIS 39 2019 About 66,000㎡33 Landport Narashino NOMURA REAL ESTATE DEVELOPMENT 25 2020.1 142,742㎡34 SOSiLA Ebina SUMITOMO CORPORATION 30 2020.2 76,568㎡35 Landport Atsugiaikawamachi NOMURA REAL ESTATE DEVELOPMENT 21 2020.3 93,428㎡36 Landport OumeⅡ・Ⅲ NOMURA REAL ESTATE DEVELOPMENT 20 2020.6 Unknown37 Landport Koshigaya NOMURA REAL ESTATE DEVELOPMENT 23 2020.6 31,981㎡38 Tokyo Rail Gate EAST Mitsui Fudosan 11 2021.10 About 161,000㎡39 GLP Sagamihara Project GLP 12 From 2022 655000㎡40 DPL Satte Daiwa House Industry 13 Unknown 115,600㎡**41 Chibashi Wakamatutyou Logistics Center ITOCHU Corporation 14 Unknown About 10,478㎡42 MCUD IchikawaⅠ Mitsubishi Corporation Urban Development, Inc. 27 Unknown About 17,300㎡**43 MCUD IchikawaⅡ Mitsubishi Corporation Urban Development, Inc. 28 Unknown About 3,300㎡**
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 68
Logistics property market
While the supply of logistics properties is increasing, vacancy rates are rising since 2016.On the other hand monthly rent offers are also rising in Greater Tokyo.
Monthly rent offers and vacancy rates of logistics properties
Note: Logistics facilities which have a total lot area or total floor area of 10,000m2Source: Ichigo Real Estate Information Service “Survey on the Logistics Facilities Rental Market”
Rent offer
Vacancy rates
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15 Apr-16
Apr-17
Apr-18
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16 Apr-17
Apr-18
3,000
3,500
4,000
4,500
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%
(yen / month / tsubo) Tokyo area Osaka area
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 69
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
Oct
-05
Apr-
06O
ct-0
6Ap
r-07
Oct
-07
Apr-
08O
ct-0
8Ap
r-09
Oct
-09
Apr-
10O
ct-1
0Ap
r-11
Oct
-11
Apr-
12O
ct-1
2Ap
r-13
Oct
-13
Apr-
14O
ct-1
4Ap
r-15
Oct
-15
Apr-
16O
ct-1
6Ap
r-17
Oct
-17
Apr-
18
Chiba(inland)Tokyo(inland)Tokyo(bay)
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
Oct
-05
Apr-
06O
ct-0
6Ap
r-07
Oct
-07
Apr-
08O
ct-0
8Ap
r-09
Oct
-09
Apr-
10O
ct-1
0Ap
r-11
Oct
-11
Apr-
12O
ct-1
2Ap
r-13
Oct
-13
Apr-
14O
ct-1
4Ap
r-15
Oct
-15
Apr-
16O
ct-1
6Ap
r-17
Oct
-17
Apr-
18
Chiba(inland)Tokyo(inland)Tokyo(bay)
Logistics property market
Cap rates have been falling since 2012, with Tokyo hitting all-time low.
Single tenant Multi-tenant
Note: Single tenant: 2-3 floors; total floor area of around 10,000m2
Multi-tenant: 3-4 floors; total floor area of around 50,000m2
Source: Japan Real Estate Institute “Real Estate Investor’s Survey”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 71
15.4 14.8 15.0 15.4 13.9 15.8 16.0 16.1
5.1 5.0 4.4 4.84.5
4.6 4.9 5.01.1 0.8 1.1 1.4
2.03.5 3.7 4.421.6 20.6 20.5 21.6 20.4
23.9 24.7 25.5
0.0
5.0
10.0
15.0
20.0
25.0
30.0
'10 '11 '12 '13 '14 '15 '16 '17
Japanese Stay Travel Japanese Day Trip Foreigners Travel
Hotel market
Foreign travelers in 2017 accounted for 17% of total domestic travel expenditure
Domestic travel expenditure in 2017 was the largest in the last 7 years, driven by an increased number of foreigner travelers to Japan.
Trends in domestic travel expenditure
(trillion yen)
Sources: Compiled by NRI from Japan Tourism Agency “Ryokou・Kankou Sho-hi Doukou Chosa” and “Consumption Trend Survey for Foreigners Visiting Japan” data
-Consumption tax increase
-:Great East Japan earthquake
+:depreciation of yen progress
+:”Silver Week”Start
+:the number of national holidays
is the most
+:foreign travelersIncrease
significantly
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 72
372 360 368 383 349 365 385 386
143 145 138 141134 130 144 143
117 108 107 107112 109
111 118
632 613 613 631595 605
641 648
0
100
200
300
400
500
600
700
'10 '11 '12 '13 '14 '15 '16 '17Sightseeing/Recreations Homecoming/Friend VisitBusiness Trip
318 314 316 320 297 313 326 323
314 299 297 311298 292 315 324
632 613 613 631595 605
641 648
0
100
200
300
400
500
600
700
'10 '11 '12 '13 '14 '15 '16 '17
Stay Travel Day Trip
Hotel market
The number of travelers among Japanese residents has edged sideways.
Cumulative domestic traveler numbers (Overnight Travel/Day Trip)
(Million)
Source: Compiled by NRI from Japan Tourism Agency “Ryokou ・Kankou Sho-hi Doukou Chosa” dataNote: Cumulative domestic traveler numbers do not include foreign travelers to Japan.
Cumulative domestic traveler numbers(by trip objective)
(Million)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 73
China, 736, 26%
Korea, 714, 25%Taiwan,
456, 16%
Hong Kong, 223,
8%
Thailand, 99, 3%
U.S., 137, 5% Others,
504, 17%
6.7 7.3 8.3 8.46.8
8.66.2
8.410.4
13.4
19.7
24.0
28.7
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
Hotel market
Measured by departure country, Chinese visitors will account for about 53% of the total in 2030.
Conversely, the number of travelers to Japan increased rapidly and reached about 28.7 million, thanks to the weak yen and relaxed visa criteria. It accounts for approximately 75% of the four neighbouring Asian countries/regions.
No. of foreigner travelers to Japan
Sources: Compiled by NRI from (Actual numbers) JNTO
No. of foreigner travelers to Japan by departure country (2016)
Source: Compiled by NRI from JNTO data
(Million)
←Actual Forecast→
* Assumes the base scenario below
2,870 Ten thousand
(Ten thousand visitors)
Four neighboring countries in Asia account for about 75%.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 74
106 106 106 103 106 103 98
61 65 69 68 72 74 72
160 170 184 194 211 207 212
62 67 73 75 80 78 808 9 10 9
26 24 28417 439 466 474504 494 498
0
100
200
300
400
500
600
'11 '12 '13 '14 '15 '16 '17
Japanese-Style Hotel Resort HotelBusiness Hotel City HotelLodging House Company/Group Loidging
417 413 432 429 438 423 420
18 26 33 45 66 71 78417 439466 474
504 494 498
0
100
200
300
400
500
600
'11 '12 '13 '14 '15 '16 '17
Domestic Customer Foreign Customer
Hotel market
Viewed by facility type, the rise in foreign travelers is impacting growth in business hotels.
The ratio of foreign nationals to the number of accommodation is rising and was 15.7% in 2017.
Domestic accommodation(Domestic/Foreign)
(Million)
Source: Compiled by NRI from Japan Tourism Agency “Syukuhaku Ryokou Toukei” data
Domestic stays (by accommodation type)
(Million)
*Business Hotel:Budget Hotel
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 75
756 781 798 803 814 815 827 835 846 870
823 808 792 764 761 741 735 710 702 692
1,579 1,588 1,590 1,568 1,576 1,556 1,562 1,545 1,548 1,562
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Japanese-style Hotel Hotel
Hotel market
The total number of the accommodation facilities remains stable.By type, however, the proportion of hotels continues to rise
Trend in number of guest rooms
Source: Compiled by NRI from MHLW “Report of Health Administration and Services” data
(Thousand rooms)
(Fiscal year)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 76
327 345419 412
547
819
1,205
393 448615 675
848
1,822
2,678
0
500
1,000
1,500
2,000
2,500
3,000
3,500
0
200
400
600
800
1,000
1,200
1,400
'11 '12 '13 '14 '15 '16 '17Number of Ridge(Left Axis)Floor Space(Right Axis)
1,2021,298
1,4671,639
1,550
2,224 2,222
0
300
600
900
1,200
1,500
1,800
2,100
2,400
'11 '12 '13 '14 '15 '16 '17
Hotel market
Floor space per building is 1.25 times higher than 2011, as large buildings are being built
The number of accommodation facilities and area of floor space continues to expand owing to a stable economic environment and growing demand for accommodations.
Accommodation facilities* No of buildings and floor space
Source: Compiled by NRI from MLIT “Statistics on Construction Undertaken” data
Accommodation facilities * Floor space per building
*Accommodations assume a hotel.Surveyed buildings are those built with steel framed reinforced concrete, ferroconcrete and steel frame
(Buildings) (thousand ㎡)(㎡)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 77
Hotel market
c13,000 rooms are expected to open in Tokyo over the next 3 years
Main new hotel development projects in Tokyo* 1/2
Source: Compiled by NRI from Ohta Publications Co., Ltd. ”Weekly HOTERES” dataNote: A hotel development project is chosen as the area where weekly HOTERES investigated.
Operator Area Opening year
Number of rooms
APA Group Shintomicho 2018 141Shinjuku 2018 176Akasaka 2018 306Nihonbashi-Bakurocho 2018 193Ayase 2019 170Ueno 2019 129Otuska 2019 613Komagome 2019 184Shinjuku 2019 166Shinjuku 2019 217Nagatacho 2019 500Nihonbashi-Bakurocho 2019 281Roppongi 2019 875Higashi-Shinjuku 2020 565Nihonbashi-Bakurocho 2020 281Ryogoku 2020 1111Roppongi undecided 670
Kyoritsu Maintenance Ginza 2019 undecidedKeikyu EX Inn Hamamatsucho 2019 111
Nihonbashi-Kayabacho 2020 142JR Kyushu Railway Company
Shinbashi 2019 267
Operator Area Opening year
Number of rooms
JR East Japan RailwayCompany
Shinkiba 189Akihabara 2019 196Gotanda 2020 166Takeshiba 2020 200-300
JR West Japan RailwayCompany
Iidabashi 2018 295Nihonbashi 2019 240
Daiwa Royal Shinbashi 2018 undecidedAriake 2018 undecidedKyobashi 2019 about 200
Daiwa House Industry Toyosu 2019 330Tokyu Hotels Shibuya 2018 180Toyoko Inn Shinjuku-Gyoen 2018 undecided
Inagi 2018 263Akabane 2019 220
Hankyu Hanshin Hotels Kyobashi 2019 270Ginza 2019 238
Four Seasons Hotels and Resorts
Otemachi 2020 190
Fujita Kanko Asakusa 2018 125Hamamatsucho 2019 190Asakusa 2020 undecided
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 78
Hotel market
c13,000 rooms are expected to open in Tokyo over the next 3 years
Main new hotel development projects in Tokyo* 2/2
Source: Compiled by NRI from Ohta Publications Co., Ltd. ”Weekly HOTERES” dataNote: A hotel development project is chosen as the area where weekly HOTERES investigated.
Operator Area Opening year
Number of rooms
Prince Hotels Ebisu 2020 82Shiomi 2020 605
Hotel Keihan Tsukiji 2018 300Ginza 2019 undecided
Hotel Livemax Ueno 2018 -Takadanobaba 2018 -Asakusabashi 2018 -Okachimachi 2018 -Akabane 2018 -Shintomicho 2018 -Ayase 2019 -
Marriott International Yaesu 2022 98Mitsui Fudosan HotelManagement
Kanda 2018 191Gotanda 2018 370Nihonbashi-muromachi 2018 260Ginza 2019 338
Mitsui Fudosan Kasumigaokamachi 2019 undecidedRoppongi 2019 260Toyosu 2020 200Otemachi 2020 190Yaesu 2022 98
Resorttrust Nihonbashi-hamacho 2019 223
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 79
Hotel market
Over 6,000 rooms are expected to open in Osaka as well over the next 3 years
Main new hotel development projects planned in Osaka prefecture*
Note: A hotel development project is chosen as the area where weekly HOTERES investigated. Source: Compiled by NRI from Ohta Publications Co., Ltd. ”Weekly HOTERES” data
Operator Area Opening year
Number of rooms
APA Group Osaka 2018 193Osaka 2019 917Osaka 2019 161Suita 2019 119
AB Hotel Osaka 2019 168Sakai 2019 125
Candeo Hospitality Management Global Headquarter
Suita 2018 111
Kuretakeso Osaka 2018 141Sakai 2018 122
JR West Japan Railway Company
Osaka 2018 400Osaka 2018 88Osaka 2019 220
Sotetsu Inn Osaka 2018 176Osaka 2018 276
Daiwa Royal Hotel City Osaka 2019 undecidedDaiwa House Industry Osaka 2019 undecidedTokyu Hotels Osaka 2019 360
Operator Area Opening year
Number of rooms
Toyoko Inn Osaka 2018 undecidedOsaka 2018 542
Hankyu Hanshin Hotels Osaka 2019 250Hotel Keihan Osaka undecided undecidedHotel Monterey Group Osaka 2018 345Unizo Holdings Osaka 2019 291
Osaka 2021 487Hotel Livemax Osaka 2019 undecided
Osaka 2019 undecidedMarriott International Osaka 2020 288
Osaka 2021 337Route Inn Japan Kishiwada 2019 210
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 80
83 80 73 72 68 68 66 66 66 66 64 64 62 62 58 58 58 58 58 58 58 56 56 55 55 55 55 55 54 53 52 52 52 51 51 50 49 49 49 48 47 47 45 43 42 41 38
0102030405060708090
100
Osa
kaTo
kyo
Fuku
oka
Aich
iCh
iba
Kyot
oKa
naga
wa
Oki
naw
aHi
rosh
ima
Saita
ma
Hokk
aido
Ishi
kaw
aSa
gaKu
mam
oto
Miy
agi
Kaga
wa
Oka
yam
aHy
ogo
Shim
ane
Nag
asak
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mor
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itaYa
mag
uchi
Shig
aEh
ime
Shizu
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shim
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chig
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aki
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Akita
Koch
iFu
kush
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Wak
ayam
aN
iigat
aYa
man
ashi
Fuku
iN
agan
o
Hotel market
Occupancy rates at hotels in Osaka and Tokyo have risen to c80% are approaching full capacity.
Guest room occupancy rates vary widely by prefecture
Source: Compiled by NRI from Japan Tourism Agency “Syukuhaku Ryokou Toukei” data
Average occupancy rate by prefecture(%)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 81
58
91 85 89
57
7385 83
31
61
79 84
31
56
79 80
31
8474
80
0102030405060708090
100
Japa
nese
-Sty
le H
otel
Reso
rt H
otel
Busin
ess H
otel
City
Hot
el
Japa
nese
-Sty
le H
otel
Reso
rt H
otel
Busin
ess H
otel
City
Hot
el
Japa
nese
-Sty
le H
otel
Reso
rt H
otel
Busin
ess H
otel
City
Hot
el
Japa
nese
-Sty
le H
otel
Reso
rt H
otel
Busin
ess H
otel
City
Hot
el
Japa
nese
-Sty
le H
otel
Reso
rt H
otel
Busin
ess H
otel
City
Hot
el
Osaka Tokyo Fukuoka Aichi Chiba
Hotel market
Looking at the type of accommodation in the top 5 prefectures, the occupancy rates in hotels often exceeds 70%.On the other hand, the occupancy rates of Japanese-style inns is less than 50% excluding the Tokyo area.
Average occupancy rate in top 5 prefectures (by type of accommodation)
Source: Compiled by NRI from Japan Tourism Agency “Syukuhaku Ryokou Toukei” data
(%)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 82
Hotel market
Besides Tokyo, Osaka and Kyoto, we are capturing foreign demand in Hokkaido and Okinawa, which are tourist spots.In Oita, Gifu and Chiba, it is expected that there would be demand seeping in from large cities.
Room occupancy rate by prefectures and share of foreigners in total number of guests (2017)
出所:観光庁「宿泊旅行統計」(2017年速報値)より野村総合研究所作成
Hokkaido
AomoriIwate
Miyagi
Akita
Yamagata
Fukushima
Ibaraki
TochigiGumma
SaitamaChiba
Tokyo
Kanagawa
Niigata
Toyama
Ishikawa
Fukui
Yamanashi
Nagano
Gifu
Shizuoka
Aichi
Mie
Shiga
Kyoto
Osaka
Hyogo
Nara
Wakayama
Tottori
Shimane Okayama
Hiroshima
Yamaguchi
Tokushima
KagawaEhime
Kochi
Fukuoka
Saga
Nagasaki
Kumamoto
Oita
MiyazakiKagoshima
Okinawa
30%
40%
50%
60%
70%
80%
90%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Share of foreigners
Occupancy rate
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 83
02,0004,0006,0008,000
10,00012,00014,00016,00018,000
1月 5月 9月 1月 5月 9月 1月 5月 9月 1月 5月 9月 1月 5月 9月 1月 5月 9月 1月 5月 9月 1月 5月 9月
10年 11年 12年 13年 14年 15年 16年 17年
Month
ly r
ent
stan
dar
d
Unit: y
en/ts
ubo※
23 wards of Tokyo Nationwide
Hotel market
Hotel REIT earnings are expanding due to high occupancy rates
Rents at hotel REITs
Source: Compiled by NRI from ARES “J-REIT Property Database” data.
Note: 1tsubo=About 3.3㎡
Copyright(C) Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 85
16.5
13.4
2.6
16.7
0
4
8
12
16
20
Listed REIT Private Fund Private REIT RMBS CMBS
(¥tn)
Unlisted open-ended private REITs were offered in November 2010, and the size of the private REITs market is growing rapidly.
Real estate investment instruments
An overall perspective of the Japanese real estate market
Equity type Debt type
Listed Unlisted
Close-ended Open-ended
Residentialmortgage
Commercialmortgage
Overview of real estate investment instruments in Japan and AUM
Note: Listed REIT figure is updated as of end of Dec 2017, private fund figure is updated as on end of Dec 2017, private REIT figure is updated as of end of Mar 2018, RMBS/CMBS figure is updated as of end of Mar 2018
Sources: Compiled by NRI from Association for Real Estate Securitization, Sumitomo Mitsui Trust Research Institute Co., Ltd., and the Japan Securities Dealers Association data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 86
0
10
20
30
40
50
60
70
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2001/9 2003/1 2004/5 2005/9 2007/1 2008/5 2009/9 2011/1 2012/5 2013/9 2015/1 2016/5 2017/9
(No. of J-REITs)(¥bn)
Market Capitalization No. of J-REITs
J-REITs began trading on the stock market in September 2001 with two companies and a market capitalization of 250 billion yen. As of end of August 2018, there were 59 J-REITs traded worth approximately 12.6 trillion yen.
Real estate investment products
Launched in September 2001, J-REIT market capitalization has reached approximately 13 trillion yen.
J-REIT market cap and number of J-REITs
Source: Compiled by NRI from ARES “ARES J-REIT Databook” data.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 87
5 Central Wards of
Tokyo33.4%
23 Wards of Tokyo
16.7%
Kanto Area22.0%
Chubu Area4.6%
Kinki Area14.1%
Other Areas9.2%
Office42.8%
Residential15.3%
Retail18.4%
Hotel7.1%
Logistics14.7%
Others1.7%
Real estate investment products
c73% of real estate owned by J-REITs is in the Tokyo metropolitan area. In recent years, J-REITs have become more diversified in type of property owned, and a healthcare REIT was launched in November 2014.
c73% of J-REIT assets are located in the Tokyo metropolitan area and 43% are portfolios of office properties.
Asset mix of J-REITs by area and asset class
Greater Tokyo Area73.0%
Approx.16.2
trillion yen
Approx.16.2
trillion yen
Source: Compiled by NRI from ARES data
Note: As of the end of June 2018
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 88
0
500
1,000
1,500
2,000
2,500
3,000
2003/3 2004/6 2005/9 2006/12 2008/3 2009/6 2010/9 2011/12 2013/3 2014/6 2015/9 2016/12 2018/3
TSE REIT Index TOPIX TOPIX Real Estate Sector Index
The TSE REIT index dropped sharply from its peak in May 2007, but has recovered rapidly from late 2012.
Real estate investment products
The TSE REIT index surged in late 2012 and remain firm.
TSE REIT Index, TOPIX, and the TOPIX Real Estate Sector Index
Source: Compiled by NRI from ThomsonReuters data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 89
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
2002/1 2003/1 2004/1 2005/1 2006/1 2007/1 2008/1 2009/1 2010/1 2011/1 2012/1 2013/1 2014/1 2015/1 2016/1 2017/1 2018/1
Spread J-REITs Dividend Yield JGB 10-Year-Yield
Yield spreads are currently around 4%
Real estate investment products
J-REIT dividend yields rapidly increased to around 8%, but are currently down to around 4%.
J-REIT dividend yield and JGB 10-year yield
Sources: Compiled by NRI from Thomson Reuters and MoF data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 90
According to the index based on actual performance of core funds invested in domestic real estate, the performance of real estate investments in Japan recovered to positive territory in terms of capital return and has been firm since.
Real estate investment products
Capital return is firm.
ARES Japan Property Index (AJPI) and ARES Japan Fund Index (AJFI)
Sources: Compiled by NRI from ARES “ARES Japan Property Index” and “ARES Japan Fund Index” data.
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
2002/12 2005/8 2008/4 2010/12 2013/8 2016/4
AJPI: Total ReturnAJFI: Total Return
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
2002/12 2005/8 2008/4 2010/12 2013/8 2016/4
AJPI: Income Return
AJFI: Income Return
AJPI: Capital Return
AJFI: Capital Return
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 91
9,743
14,81516,935
32,44730,260
21,282
16,276 16,81112,217
7,93511,113
8,787 8,34111,287
15,06412,030 11,148 9,894 10,760 9,465 8,235
10,42513,562 13,614
17,83415,423 14,782 14,670
3,470
1,994
6,937
4,234 7,418
7,352
8,7559,879
1,964
1,303
980
45 138
258
563
0 1400 5
00
0
0 10
04 0 0
0
10,000
20,000
30,000
40,000
50,000
60,000
20041stHalf
20042ndHalf
20051stHalf
20052ndHalf
20061stHalf
20062ndHalf
20071stHalf
20072ndHalf
20081stHalf
20082ndHalf
20091stHalf
20092ndHalf
20101stHalf
20102ndHalf
20111stHalf
20112ndHalf
20121stHalf
20122ndHalf
20131stHalf
20132ndHalf
20141stHalf
20142ndHalf
20151stHalf
20152ndHalf
20161stHalf
20162ndHalf
20171stHalf
20172ndHalf
(¥100m)
RMBS CMBS CDO Lease Consumer Loan Shopping Credit Accounts receivable/Commercial Bills Others
Real estate investment products
Most recently, about 64% of residential mortgage-backed securities were originated by the Japan Housing Finance Agency.
CMBS issuance has decreased drastically since 2008, and at present only RMBS are issued on a ongoing basis.
Source: Compiled by NRI from Japan Securities Dealers Association data
0% 20% 40% 60% 80% 100%
2004FY 1H2004FY 2H2005FY 1H2005FY 2H2006FY 1H2006FY 2H2007FY 1H2007FY 2H2008FY 1H2008FY 2H2009FY 1H2009FY 2H2010FY 1H2010FY 2H2011FY 1H2011FY 2H2012FY 1H2012FY 2H2013FY 1H2013FY 2H2014FY 1H2014FY 2H2015FY 1H2015FY 2H2016FY 1H2016FY 2H2017FY 1H2017FY 2H
Housing Finance Agency Banks/Trust Banks Regional Banks Non-bank Others
Asset backed securities breakdown by type of backing and RMBS breakdown by originator
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 92
Authors
Contact: Nomura Research Institute, Ltd.Consulting [email protected]
溝口 卓也Takuya MIZOGUCHIConsultantSection in Charge
Hotel marketExpertise
Tourism, MICE and hotel business strategy and research. In addition, supporting area development.
大西 直彌Naoya ONISHIConsultantSection in Charge
Real estate investment productsExpertise
Real estate, energy and logistics business strategy and research.
荒木 康行Yasuyuki ARAKISenior ConsultantSection in Charge
Macro fundamentals of JapanExpertise
Real estate development, investmentand TECH/DX business strategy planning and research. In addition, international market entry support.
大道 亮Akira DAIDOConsultantSection in Charge
Overview of real estate investment market in Japan, Residential market, Logistics Property marketExpertise
Residential, real estate and energy business strategy and research.
沼田 悠佑Yusuke NUMATAConsultantSection in Charge
Population movements in JapanExpertise
Real estate and energy business strategy and research. In addition, industrial policy planning and monitoring.
亀井 敬太Keita KAMEIConsultantSection in Charge
Office market, Retail property market, Expertise
Real estate, residential loan and infrastructure business strategy and research.