CB Richard Ellis announced the results of its quarterly survey targeting real estate investors. According to this latest survey for the quarter ended April 2011, in major areas of Tokyo the expected cap rates for all sectors (office, rental apartment, retail, hotel and warehouse) was nearly the same as the last quarterly survey in January. The same was true for office buildings in Osaka and Nagoya, where the impact of the Great East Japan Earthquake can scarcely be seen.

The survey targeted arrangers, lenders, developers, asset managers, equity investors, etc. and received 142 responses. CBRE asked for the upper and lower limits of expected cap rates for real estate properties in each sector.

Respondents were also asked about the added spread on expected cap rates due to the earthquake. Looking at the median of the responses, the added spread for all regions other than Sendai was zero points, revealing that many investors believe there is no added risk. However, both the upper and lower limits of the expected cap rate in Sendai have risen 0.50 points. Such indicators illustrate the weakened investor appetite for Sendai as a region devastated by the earthquake.

The expected cap rate of office buildings in the Tokyo Station and Otemachi area was 4.30% (lower limit) - 4.70% (upper limit). The lower limit fell 0.10 points and the upper limit remained the same in comparison to the preceding quarter. Looking at the long term, the figures have generally remained flat for four quarters since the survey in July 2010.

In major areas of Tokyo, as the expected cap rates in rental apartments, retail and hotels remained flat or declined slightly, warehouses alone recorded a rise of 0.05 points in the lower limit compared to the preceding quarter. Its upper limit remained flat. In addition, expected cap rates for office buildings in Osaka were 6.50% - 6.90% and in Nagoya 6.70% - 7.10%. In Osaka the lower limit remained flat and the upper limit fell 0.10 points, while in Nagoya both the lower and upper limits remained flat.

In the section asking for the outlook on the Tokyo office building market, the view that conditions will improve a year from now was dominant for all areas (trading volume, selling prices, expected cap rates, lending attitude of financial institutions). However, the rate of investors that answered so was lower compared to the previous survey, and the report analyzes that investor sentiment is somewhat deteriorating due to such factors as the current economic uncertainty.


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