REAL ESTATE INDUSTRY PROSPECTS IMPROVE FOR TOKYO; CITY’S REBOUND IS MARKED BY INCREASED FOREIGN INVESTMENT,
ACCORDING TO EMERGING TRENDS IN REAL ESTATE® ASIA PACIFIC 2013
TOKYO (December 12, 2012) – The outlook for Tokyo’s real estate industry over the next 12 months is improving, with the recovery marked by the return of foreign investors to the city, according to Emerging Trends in Real Estate® Asia Pacific 2013, published by the Urban Land Institute (ULI) and PwC.
The widely anticipated forecast provides an overview of Asia Pacific real estate investment and development trends, real estate finance and capital markets, and trends by property sector and metropolitan area. It is being released today at a program hosted by ULI Japan and PwC.
Of the 22 markets included in the report, Tokyo is ranked 13th for investment prospects and 18th for development prospects, with many investors growing increasingly confident about the city’s rebound. Emerging Trends characterizes Tokyo as a magnet for foreign investment, with several funds opening offices and relocating staff to the city. Typically, core funds are focusing on the office sector.
In addition, there has also been a move into more niche sectors, with a number of investors seeing potential in logistics, as the country rebuilds its distribution infrastructure after the tsunami of March 2011. Outside of Tokyo, the prospects for cities are less promising, with Osaka ranked at the bottom for both investment and development prospects, largely due to an oversupply of Class A office space.
For Asia Pacific as a whole, steady economic growth, rising incomes, and stable or increasing property values are all contributing to an overall sense of optimism. However, the outlook is tempered by growing concerns among investors that prime assets in key real estate markets are becoming overpriced. For instance, capitalization rates across Asia remain more compressed than in many western markets, and yields for core office stock in cities such as Beijing, Hong Kong and Singapore are returning as little as two percent.
“With high rents, high capital values, low yields, and an abundance of local capital, many international investors are struggling to see attractive investment opportunities in Asia Pacific’s prime real estate markets,” commented ULI Trustee and ULI North Asia Vice Chairman Richard Price, Chief Executive, Asia Pacific for CBRE Global Investors. “As a result, investors are expanding their horizons as they seek compelling investment opportunities. Some are looking at frontier markets such as Indonesia, while others are revisiting often overlooked capitals such as Kuala Lumpur and Bangkok, which explains the strong showing for these locations in this year’s report. Secondary markets such as Kowloon in Hong Kong and second-tier Chinese cities are also experiencing increased interest from international buyers. At the same time, core investment markets in many mature, western markets are seeing a surge in demand from newly formed Asian Institutional Investors seeking to capitalize on the post-global financial crisis corrections there.”
Hiroshi Takagi, PwC Japan’s real estate leader, adds that the consensus among investors is that Tokyo real estate hit bottom in 2011. He said that he is now seeing increased interest from both Japanese and overseas investors, especially for logistics and Grade A offices. The strength of Japanese banks, the increased investment in real estate by domestic and foreign institutional investors and the return of Japanese REITs to the market makes the outlook for Tokyo next year a positive one.
Overall, respondents were more bullish on the prospects for individual cities, awarding higher scores than in the previous two years. The top five investment markets for 2013 are predicted to be:
In addition to Shanghai, other cities in China – including several second-tier cities as well as Beijing -- were placed in the top ten listing for both investment and development prospects. Despite concerns related to rapid growth and surging prices, the report points out that it is not unusual for emerging markets to witness unexpected price movements, and that such shifts must be viewed within the context of local market conditions.
Emerging Trends is based on the opinions of more than 400 internationally renowned real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants. It is being released at a series of events throughout Asia that are being hosted in November and December by PwC and ULI Asia Pacific, which serves ULI’s nearly 1,000 members in the Asia Pacific region.
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The Urban Land Institute (www.uli.org) is a global nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has nearly 30,000 members representing all aspects of land use and development disciplines.
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PwC Japan (PricewaterhouseCoopers Japan) represents PricewaterhouseCoopers Aarata, PricewaterhouseCoopers Co., Ltd., Zeirishi-Hojin PricewaterhouseCoopers and their subsidiaries. Each entity is a member firm of the PricewaterhouseCoopers global network in Japan, or their designated subsidiary, operating as a separate legal entity.