Japanese commercial real estate down by 20%

Japanese commercial real estate markets has fallen by almost 20% over the two and a half years to the end of the third quarter 2010, the latest data shows.

Japan, the world’s second-largest commercial property market by value, is one of the few major real estate markets to continue to record capital depreciation, reflecting the country’s weak economic growth.

By the end of the third quarter of last year, up to which point IPD has its most current Japanese data, UK, the US and Australia had all emerged into positive capital growth. In the UK, the rebound was a significant 17.4%, while the US had risen by 5.5% over the previous six months and Australia had recovered by a modest 1.1%.

Back in Japan, the annual rate of capital depreciation was -6.3% at the end of September 2010, the shallowest rate of capital decline since December 2008 and a significant improvement on the -12.2% annual capital growth rate in September 2009.

The retail sector, driven by improved consumer confidence, has continued to buck the trend of the broader market by showing an upturn in the capital growth recovery, ending September with an annual capital return of -2.8%. This is the shallowest rate of capital depreciation since July 2008.

At the other extreme is offices, which is running at an annual capital depreciation of -8.3%, reflecting the continuing economic malaise. Between the two sectors is residential, which had an annual capital growth rate of -4.5% to end September 2010.

‘There is no immediate end in sight to the two and a half year unbroken period of capital write-downs. Each quarter brings, at best, modest improvements. The market would benefit from increased transactions, which would boost confidence and provide a deeper insight into the property fundamentals,’ said Toshiro Nishioka, managing director at IPD Japan.