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Property Sales Transactions In Japan Rose To Pre-Pandemic Levels In Q3

Overall investor appetite for real estate has been recovering but some sectors are still lagging

November 25, 2021 – Sales transaction volume in Japan’s real estate sector returned to pre-pandemic levels in the third quarter of the year on the back of strong investor appetite. Recovery, however, has been divergent as some sectors recovered faster than others during the period. 

In its latest issue, Nikkei Real Estate Market Report said the number of sales transactions in July to September hit 913.9 billion yen or US$7.8 billion, rising by 27% in the third quarter of 2020. The number of transactions, meanwhile, was 389, up 14% from the same period last year. 

The strong third-quarter performance brought the total sales between January and September 2021 to 2.67 trillion yen or US$23 billion. This is 1% higher than the same nine-month period in 2019.

“Although it is necessary to keep an eye on the trend through the end of the year when the transaction amount normally increases; looking at the last three quarters, it appears that liquidity in the real estate market has almost returned to the level before the coronavirus (Covid-19) pandemic,” the report said. 

REITs led the transaction count in the third quarter of 2021. During the period, 11 REITs conducted public offerings and raised 161.4 billion yen (US$1.4 billion). 

Worst could be over for the office sector

According to the report, signs of recovery in the office leasing market have started to emerge. Data from Sanko Estate and Commercial Property Research Institute showed that the potential office vacancy rate in the five central wards of Tokyo decreased by 0.06 percentage point in August.

Nikkei said while it rose slightly in September, the rate of increase is slowing down. By area, vacancy rates decreased from the previous month in Chuo, Minato and Shinjuku wards. It increased slightly in Shibuya Ward, but remained below June’s level.

Some retail spaces are still empty

According to Masuda Real Estate Institute, the number of vacant street-facing first-floor store spaces between Chuo-dori Street and Showa-dori Street reached 104 as of May 2021, compared to the previous year’s 24.

“As far as I know, this is the first time there have been more than 100 vacant first-floor store spaces. It’s as bad as it’s ever been,” said director Tomio Masuda at Masuda Real Estate Institute.