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Over the past three years, central Tokyo office rents have
increased 60% to 70% and yields have compressed from
4% to about 3%, which suggests that property prices
have more than doubled in the same period. Going
forward, new supply of commercial office space is set
to bottom in 2008, maintaining the current ‘landlord
market’ conditions. In light of this, quality commercial
investment properties remain highly sought after by
domestic and overseas investors as spreads between
investment yield and financing costs remain attractive
relative to other markets.
Land prices in the prime retail locations of Ginza and
Omotesando have seen significant increases in part to
competition for luxury brand flagship store sites. There
have been a number of high profile transactions in the
Ginza area, the latest being Goldman Sachs’ purchase
of the Tiffany property for JPY 37 billion equating to a
land price of approximately JPY 175 million per tsubo.
Retail rents are the highest in prime areas of Ginza and
Omotesando where street level rents range between
JPY 120,000 to 250,000 per tsubo per month. Retail
rents in other prime areas tend to be more correlated to
the consumer market.
Chengdu Property Market3
Chengdu is the capital of China’s Sichuan province.
Chengdu’s economy has been growing strongly and
steadily over the past few years, with a GDP growth
rate of 15.3% in 2007. The city’s new subway system
is expected to commence operations in 2010. While
there is a strong pipeline of office and retail supply
in Chengdu over the next three years, office rents are
expected to remain steady as demand is increasing in line
with supply.
According to CBRE, quoted rents of most prime office
space have sustained increases in 4Q 07. The average
prime rent was RMB 92.2 psm per month, increasing
2.7% from the previous quarter. Grade A office space
rents shot up by 1.6% quarter-on-quarter. The vacancy
rate of prime office space in Chengdu decreased slightly
to 28.2%, of which Grade A and Grade B were 25% and
32.8% respectively.
Retail rents, on the other hand, are expected to increase
steadily, in view of increasing demand from the influx
of new retailers entering the Chengdu retail scene. The
city, boasting a population of 11.03 million, recorded
RMB 115.53 billion in total retail sales of consumer
goods in 2006. Department stores’ promotional activities
were most prominent in the fourth quarter and prime
retail rentals on the ground and first floor rose by 1.9%
and 1.3% quarter-on-quarter, respectively. Several new
department stores which were opened in the fourth
quarter were quickly filled up with tenants. The overall
vacancy rate dropped to 4.8% from 6.4% at the end of
the third quarter.
Top to bottom: Harajyuku Secondo, Tokyo;
Renhe Spring Zongbei, Chengdu
MARKET OVERVIEW
Sources:
3 Chengdu Statistics Bureau, News Release (January 2008)
CBRE, “Market View - People’s Republic of China” (4Q 2007)