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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
Unique Features: Medium-sized office buildings
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
Unique Features: Medium-sized office buildings
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
Source: Xymax Real Estate Marketing Institute
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
Unique Features: Earthquake protection
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
Unique Features: Earthquake protection
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
Unique Features: Earthquake protection
Purpose of relocation (Interviews with tenants of buildings managed by Xymax, Tokyo 23 wards)
Source: Xymax Real Estate Marketing Institute
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
Unique Features: Earthquake protection
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)
Source: Xymax Real Estate Marketing Institute
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