Boston, MA -- (ReleaseWire) -- 11/29/2012 -- The Japan Real Estate report examines the commercial office, retail, industrial and construction segments throughout the country in the context of reconstruction efforts post-Tohoku coming to fruition.
With a focus on the principal cities including Tokyo, Osaka and Yokohama, the report covers the rental market performance in terms of rates and yields over the past 18 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of the completion of new supply on a market which was surprisingly resilient in the wake of the earthquake and tsunami in 2011. Our most recent round of in-country interviews (conducted in July 2012) showed that rents continue to struggle with stability across all sub-sectors.
There is a further downside risk in the industrial sector, in the form of a rebound in April 2012 for global economic concerns. Manufacturing sentiment continues to decline and industrial production decline by 0.5% year-on-year (y-o-y) in June. The electronics industry in particular is seeing pressure from an increase in regional competition. The retail sub-sector, as with many in the region, has shown surprising resilience and is likely to buoy the overall market in a period of caution.
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- Mixed results from economic indicators in Q212 suggest that growth is not firmly rooted in the economy, leading us to maintain our belief that the annualised 2.8% real GDP growth in Q112 is likely to fade. The lack of widespread growth and the impending power shortage in Japan's summer months points to lacklustre performance for the rest of 2012. While we have maintained our 2012 growth forecast at 1.4%, which is far below market consensus of 2.4%, we remain wary of the increasing risks of recession as external demand continues to deteriorate.
- Residential and non-residential building activity will pick up notably in 2012 as the bulk of post- Tohoku reconstruction work is realised within the sector. We expect the sub-sector to grow by 3.4% in 2012 - following 0.9% growth in 2011 - as strong growth in project orders last year is converted into work done. However, given the factors behind this pick-up in activity, we do not see this level of growth being sustained. Indeed, from 2013 onwards we expect the sector to stagnate as chronically weak domestic demand and sluggish economic growth weigh heavily on the industry.
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