Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Nippon Building Says Prime Office Prices Rising in Tokyo

Don't Miss Out —
Follow us on:
Nippon Building Fund Says Prime Office Prices Rising in Tokyo
Mount Fuji, Japan's highest peak, emerges through buildings in the Shinjuku district at dusk, in Tokyo. Office rents in the central wards rose in the three years to 2008, before the global financial crisis, as increasing demand pushed vacancies to around 4 percent in 2005, leading landlords to raise rents. Photographer: Tomohiro Ohsumi/Bloomberg

April 25 (Bloomberg) -- Nippon Building Fund Inc., Japan’s biggest real estate investment trust, said property prices for prime office buildings have started to rise, signaling a turnaround in a two-decade decline.

Demand to buy office buildings outpaced supply and has pushed prices higher, said Kenichi Tanaka, president and chief executive officer of Tokyo-based Nippon Building Fund Management Ltd., which manages the REIT. The REIT has acquired 156.8 billion yen ($1.6 billion) of office buildings so far this year, more than three times it had planned, he said.

“Even though the market hasn’t reached a point where you can call it is overheated, it has become tight,” Tanaka said in an interview yesterday. “We think it would be difficult to make a similar amount of acquisitions in the second half.”

Real estate broker Jones Lang LaSalle Inc. and Barclays Plc are forecasting rental for prime office space in the capital to climb this year and next. The office vacancy rate, a measurement of unoccupied office space, dropped to 8.6 percent in March in Tokyo after rising to a record high in June, according to Miki Shoji Co., an office brokerage company.

The capitalization rate, a measure of investment yield, for office buildings in Tokyo declined for four straight months to 5.2 percent in February from 5.5 percent in October, the highest since Real Capital Analytics Inc. started compiling the data in 2009. A drop in the cap rate, which is a property’s net income divided by the purchase price, usually signals an increase in real estate prices.

Office Rebound

Japan has been struggling with deflation that has caused companies and households to put off spending since the late 1990s, after asset prices collapsed. Prices have declined for 21 years, cutting rents for all categories of offices in the city’s five central wards by 63 percent, according to Miki Shoji.

Office rents in the central wards rose in the three years to 2008, before the global financial crisis, as increasing demand pushed vacancies to around 4 percent in 2005, leading landlords to raise rents, according to Miki Shoji.

Nippon Building Fund closed 0.2 percent higher at 1.42 million yen in Tokyo, while the 39-member Tokyo Stock Exchange REIT Index fell 0.5 percent. The REIT has risen 59 percent so far this year, compared with a 44 percent gain by the index.

To contact the reporters on this story: Kathleen Chu in Tokyo at kchu2@bloomberg.net; Katsuyo Kuwako in Tokyo at kkuwako@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.