Signs Of Recovery In Japan’s Hotel Sector; Office Sees Continued Strength
The hotel sector, which has been slow to pick up amid the pandemic’s uncertainty, has seen more deals in recent months
January 20, 2022 – Hotel transactions have started to pick up pace in Tokyo, after being severely affected by travel and movement restrictions to curb the spread of Covid-19.
In its latest real estate market report, Nikkei confirmed ten notable hotel transactions.
Takeshi Yamaguchi, a research director at Jones Lang LaSalle’s Kansai office, told Nikkei in the report that investors’ interest started to “increase from around spring 2021.”
“The expected cap rates for high-grade hotels and limited-service hotels in prime locations will be at a level of around 5% after value enhancement,” Yamaguchi added.
Some on-going hotel transactions in the area include the Miyako Hotel Hakata – a property with 208 guestrooms on a 21, 212 square metre area. The hotel was acquired by Blackstone Group.
Hotel JAL City Fukuoka Tenjin’s transaction was also one of the biggest last year, when it was acquired by an SPC invested in by Mitsubishi HC Capital Realty. Hotel JAL has an area of 10,230 square metres and 280 guest rooms in total.
Some property firms have also been trying to take advantage of the favourable market price during the pandemic. For example, a subsidiary of Polaris Holdings, which acquired Best Western Plus Fukuoka Tenjin-Minami, said that with low liquidity due to the small number of buyers, they were able to acquire the property at a price that is more advantageous than the market price before Covid-19.
“A large amount of gain on sale can be expected if liquidity increases in the future,” said the company.
Office Market Conditions Remain Strong
The report also noted that office market conditions have not yet shown any signs of significantly deteriorating despite the rising appetite for remote working set-ups.
“There are still many cases in which companies with excellent business performance, such as IT companies, are expanding their offices,” said Tokuo Yamane, Executive Director of CBRE’s Fukuoka branch office.
Nikkei also observed activities to secure land and develop office buildings.
Among these transactions were those by Sankei Building Group, which plans to acquire land and develop offices in Watanabe-dori 5-chome and Tenyamachi following the Tenjin- Kita office development project in Nagahama 1-chome completed in November 2021.
General contractor Kajima will also develop an office building that will have 14 floors above ground with a gross floor area of 16,130 m2 in Nakasu-Nakashimamachi.