Unless you're used to thinking in tsubo. :eek:

I do not mean to disparage people, but I also have a hard time seeing the market in which I work being inaccurately described here where so many people come for information on Japan. Please understand that my comments were not meant to hurt, merely clarify.

On asking prices, these are available from most developers and all agents. From the horse’s mouth so to speak. Smaller property owners are likely to be more flexible on pricing I agree. Not always but it is a good rule of thumb.

On occupancy, I am not sure what leads you to believe large firms have low occupancy. That is not so. After the Lehman Shock price plummeted and elasticity was noticed. Occupancies stayed very high as a result. Now with demand outstripping supply prices have risen.

The arrangement you described is actually quite common yes, and is used primarily by owners who for one reason or another do utilize the space they own. The developer can often lease it with the other units very effectively.

Ah, a voice of reason in the wilderness. :)

And a really good point.

The standard for old is getting older as well built properties age. Much of what came online in the past 10-15 years is really good stock. And in 10 years will be younger than a 25 year old building today.

A building 25 year old today is old but its guts can look amazing, That building you mention although a great property in many respects has 25 year old M&E, frame construction, and architectural specs. Hence the price. And about the price, an example fo the kind of steals available in Tokyo if people are willing to not live in the newest space possible.

Wow. Ad hominem much? :) All good though.

Anyone can view publicly disclosed information that is true. But a closer look at what is disclosed is appropriate I would think.

First of all these are periodic reports so nit even remotely useful for a picture of the market at any other point than the backdated snapshot time frame in the report.

Occupancy fluctuates rapidly as do prices which are quite often tied to occupancy.

Perhaps an excerpt from an article on the legal reporting in Japan for REITS will help this be more understandable..

The Securities Registration Statement and prospectus must disclose not only the investment company’s policies and standards for investment, but also (i) the name, location, usage, area, structure, description of ownership or other rights, price and investment ratio, and (where lease agreements have been executed) the total number of tenants, total amount of rent income, total leased area, total leasable area, changes in the occupancy rate for the past five years, etc., for each real property item with respect to real estate related assets; and (ii) concerning each major tenant of key real property items, the tenant’s name and business, and specific details of the lease agreements, such as annual rent, leased area, lease expiry date, manner of renewal, and amounts of key money and security deposit. Such information disclosure, however, may allow inference of rents and other basic conditions of specific leases, possibly leading to harmful commercial effects (e.g., in renegotiating individual leases).

Oh and then there is the fact that not all properties are included in REITs. What of those? Do they not comprise part of the market. Most of the market in fact? Where disclosures do not happen? That which is reported is face value not net effective values and it is most certainly not complete or in real time.

So again, I will repeat for the benefit of clarity on what I am saying:

Anyone who believes they have access to marketwide and accurate data on real achievable prices is either an agent, a developer or wrong.

Key points are “marketwide” and accurate.

So we can see not only am I not wrong, just the opposite in fact. Rather, claims to the contrary on the point of transparency of the market are what are wrong. Sorry to say. ;)

What was ad-hominem? Certainly didn't intend it and apologies if it was.:o

The data is published semi-annually and broken down by property. There are data on properties for probably in excess of 200k units so it's an extremely large and good sample.

And residential occupancy in Tokyo is extremely steady as are the rents (at least on properly managed properties).

That said, the ultra high-end of the market is very thin and entirely different.. much higher vacancy, greater variation and volatility in rents, etc.

And BTW - you're not the only one who has a professional involvement in the market.

“You” in the context. Not a big deal. Not even remotely worried about it.

The breakdown does not describe the units it does not describe and some of the major players do not include their buildings at all. So the sample is representative of some of the market for some of the information. Not real time, nit useful as realtime and nothing more than a required reporting of a part of the story. If a potential tenant wants to know what incentives are being offered for a re-contract in a specific property it is very useless info. Not something the average house hunter would be able use to their benefit as price change so quickly.

Prices are not steady for different points in the year in volatile years (of which we have had several since 2008) and will likely continue to fluctuate with the increased sales activity and Olympic construction. It may be that lower end of the price spectrum properties are more stable but that is largely due to a greater and more constant addition of supply each year as properties age and become part of that sector.

I am curious abut the descriptor “ultra high-end of the market”. Would you be able to offer some examples that meet your definition. I ask because at the part of the market at which my firm operates the vacancies are extremely low, rents are fairly stable, and demand is outrageous.

So ITB as a developer? Finance side? Legal? Based on comments it appears to be a position that analyzes the market as a primary focus.

I guess that makes sense in terms of the size of rooms. Also if you count in tens of tsubo it starts to match the size of an actual apartment?

10 tsubo ~ studio
20 tsubo ~ 1BR
30 tsubo ~ 2BR-3BR
40 tsubo ~ 3BR-4BR

MJM,

I'm pretty comfortable the data is representative at least for properties in the market up to about 400k/month. I also have a pretty good handle on the ultra-high end (>1.2/month), but I haven't really been paying attention to the market in between. I suspect you're probably most familiar with stuff in the 700k and up range in larger buildings. Anecdotally, I've heard as you said that that market got hit after the Lehman shock but is pretty healthy now. The lower end of the market is really deterministic based more on disposable income than supply and demand and really came through Lehman with hardly a blip (a bit of negotiation on deposits, key money and some free rent but that was about it). The really high end is still not in great shape and I understand a lot of condo developers are sticking to more modest sizes in new developments.

My involvement has been kind of varied....owner, tenant, lessor, developer, litigant, etc. (Not much on the analysis side. ;) )

BTW - Any predictions on rents during the Olympics?

Ah now I see the reference point gap. We do not have units for less than 400K, but pretty much start there for the most part and 1.2 is mid range. I would likely define ultra-high end as 3+. That is referring to numbers tough. Referring to quality, all of our stuff is at the far (good) end of the spectrum.

I have been intrigued by the value seekers in that low end if the market. People that were paying 400K along the Bay suddenly saw themselves being able to pay 400-500K in the center and moved in droves. It is as though the traditional asset acquisition trend is all over. The percentage of expat to local reversed itself overnight almost. A good thing too as it is sustainable.

It is this demographic change which causes unit sizes to change in large part. A local family may be very happy on 140sqm and does not need 250. Many expats could not fathom living in less than 200+ but enough can that it behoove us to have a large number of “go either way” sizes.

The market for us though is and has been pretty phenomenal. Our competitors I think are hit harder as there are finite potential tenants and in order to grab a bigger slice of the pie, the soft side of the equation rather than the hard becomes paramount.

In the run up to the Olympics I think the general attractiveness of Tokyo will be the biggest factor in driving rents up slightly but more like this will impact purchase prices.

After the Olympics we see a glut of space and the prices will drop accordingly.

I pretty much agree. Although I don't think there is much of a rental market for apartment/condos at 3+ and what there is sits on the market for a very long time. Also totally agree about soft product and am actually surprised that there is not more innovation at the lower end of the market in terms of improving soft product. Also to be honest, I'm a bit surprised that rents at the lower end (which I think represents about 95% of the market) have not started to move up. Yields have come down quite a lot, occupancy in through the roof, and landlords have had to take the hit on the consumption tax increase.

I'm really curious though if you see many units actually rent over 20k/tsubo. I'm sure there are a few rubes (renters and buyers) who always fall for the sales pitch on the latest brand new tower residence, but I can't imagine there are that many or that the rents are sustainable for any length of time.

Re Olympics, I was more thinking about rents for high end properties while the Olympics are actually taking place.

Yes, I do. The vast majority of the units I see rented are at 20+. A large chunk of those at 30+. This is the price that certain areas and facilities command. Great hardware and unrivaled software have led to this. In this level of rent in buildings 25 years old and newer I see demographics that are local and interestingly, quite young. The sustainability has been going on for a long time. High 90’s on occupancy percentage as well. I would characterize the people living in these units as perhaps more educated about property in an earthquake etc. and their choices stem form concerns that have been carefully weighed. It is a very educated market here and it is in speaking with peers back home that I realize how truly so that is.

For the Olympics period itself I cannot see the better residences being let for short periods at all. To do a fixed term lease of 3 weeks or so is a nightmare as a full shinsa cannot happen then, most potential occupiers will be non-Japanese and deposits will be frowned upon. I exp0ect the biggest positive will be increased awareness of Tokyo.

Yeah....but nothing built in the last 25 years is going to sustain anything other than very, very minor damage even in the biggest quake.

Also, I'm really curious how much of a market there is for units substantially above 20k. I'm sure you know more about this market than me, but it seems very thin. Maybe Hirakawa, Roppongi Hills, and Hiroo 9-20, but as far as I can tell after the initial opening, listings sit for quite a while and IME you can generally negotiate a pretty generous free rent period. Be curious to hear your further thoughts.

Every other Olympics in a big city have seen one month rentals at very high prices (e.g. 10x normal rates) for high end houses/condos. No way are there enough presidential suites in Tokyo hotels to go around.

Not trying to let the conversation slide backward away from the positive spin it has taken, but this statement is entirely untrue I am afraid. The range of construction quality, although all meeting standards imposed in the mid 80's are no where near enough for large quakes. BCP is the buzzword (buzzphrase?) these days and with the exception of one building that had elevators running within 2 hours of 3/11 most of the better buildings saw the elevators shut through the weekend and many through Monday or Tuesday. The sway at Ebisu Garden Place was 1.5 meters at the top and stairway ceilings collapsed blocking escape routes. Firms in that building saw ceilings in offices come down crushing delicate machinery. ToCho had significant damage as well. It is a building built with a rigid frame rather than a frame to absorb energy. I would agree and go so far as to say any building built in the last 25 year is earthquake survivable sure, but not so far as to say many buildings could continue to function for work. Electricity and power generation alone are a huge issue and only one building in Tokyo was able to have zero risk of brownouts. All others were at risk and this is a huge aspect of BCP.

I cannot speak to all developers but I know for fact the market for 20K+ for a good portion of the stock out there. And thin is the opposite of how I would describe it. Roppongi to Toranomon over to Nagatacho down to Akasaka and over to Roppongi again. A very healthy market indeed.

Hiroo and similar slightly removed residential areas are likely most impacted by the post Lehman shock issues still. The areas seeing best growth are those catering to the sustainable sector, the local population. And there are a lot of locals whop seek the properties at that end of the market.

Free rent. For the portion of the stock with which I am familiar, I have seen some campaign activity of up to a month. Nothing more has ever been required.

On Olympic rentals, the structure of the contract here will make it hard to short term rentals. Anything less than a month is illegal unless registered as a hotel and single month rentals entail too much cost at the back end for the landlord unless the premium is just insane. The opportunity costs are pretty high and may be a barrier. But like you I am very keen to see how that pans out.

It sounds like a coffee and a walkthrough some units to which I have access may be an interesting weekend day one day this Fall.

Pardon my ignorance, but what does BCP stand for?

Business Continuity Planning

More about getting back to work or continuing to work than merely ensuring you survive.