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Monday, 04 July 2011 09:08

The first 2 J-REITs (Nippon Building Fund Inc and Japan Real Estate Investment Corporation), were listed in 2001 with a Market Cap of about USD$3.2bn, which quickly increased to almost 40 J-REITs worth about USD$43bn 5 years later (34 REITs with about 1,900 properties with a Market Cap of USD$38.5bn at end-2011), during which time they provided annual dividends of about 4.5% compared to only about 1.6% from 10-year government bonds (though this has since fallen back). Although the J-REIT market has grown in size 10 fold since 2001, the current Market Cap is still a relatively tiny @0.7% of Japan's GDP, which when compared to Australia’s @11% shows the untapped potential.


Although initially dominated by office properties, J-REITs have diversified in recent years and now also comprise retail, residential, logistics, hotels, infrastructure, and senior care facilities. Competition among J-REITs has contributed to an upturn in real estate values, particularly in central Tokyo and other major cities, and this increased competition has also had a stabilizing effect on distribution yields. J-REITs generally continue to enjoy a favorable environment for raising capital due to their high yields compared with government bonds and investor confidence in the regulatory bodies and sponsors. Growth of the J-REIT market took a hit in 2007 due to stricter government regulations and Sub Prime debacle in the US which forced overseas investors to refrain from investing new capital. However, it is anticipated that there will be decent future growth, more diversification and specialization, although in the short to medium-term everything depends upon the Japanese real estate market and macro economy as well as global economic conditions.





"In November 2000, Japan was the first country in Asia to establish a REIT market. The Japanese real estate investment trusts (J-REITs) were introduced by the Act on Investment Trusts and Investment Corporations also known as the Investment Trust Law (ITL). According to the ITL, there are two different types of J-REITs; (1) investment trusts and (2) investment corporations. So far, all listed J-REITs have been established as investment corporations (CBRE 2011). In September 2001, Japan Real Estate Investment (sponsored by Mitsui Fudosan) and Nippon Building Fund (sponsored by Mitsubishi Estate) were the first two J-REITs listed on the Tokyo Stock Exchange (TSE). The Japanese REIT market capitalisation has expanded rapidly to reach US$50 billion in May 2007. During the GFC, market value fell rapidly by more than half to its trough at US$21 billion in October 2008. In the period after the GFC, the J-REIT market has recovered strongly, supported by stimulus programmes (e.g. Real Estate Market Stabilisation Fund, Asset Purchase Program) by the Japanese government and the Bank of Japan (BOJ) (ARES 2012). On March 11 2011, a magnitude 9.0 earthquake struck the east coast of Japan triggering a devastating tsunami and causing a number of subsequent nuclear accidents. In the immediate aftermath of the earthquake, fear of a nuclear crisis has shocked the Japanese share market. The Nikkei 225 share index plunged by 10.22% within a week after the earthquake. The Japanese REIT market was also affected but to a lesser extent than shares, dropping by only 4.38% for the week. This is partly because the direct impact of the crisis on J-REITs was only limited, as they had only 3% of their assets in the affected areas (JLL 2011). The estimated repair cost of damages on J-REITs’ properties totalled ¥2,980 million (US$38 million), averaging 0.11% of their total asset size (ARES 2011). By the end of April 2011, the J-REIT index has actually increased by 1.72% over the previous month. With a strong boost by the BOJ’s asset purchasing scheme, J-REITs have been actively expanding their property portfolios. Acquisitions by J-REIT jumped by 67% yoy to US$9 billion in 2011, accounting for around two-thirds of the total regional volume during the period (CBRE 2012). Despite a temporary setback from the natural disaster, the post-GFC period from October 2008 to April 2012 witnessed a remarkable recovery of the J-REIT market, as total market capitalisation almost doubled from US$21 billion to US$41 billion (Figure 0.2). With 34 listed J-REITs and a total market capitalisation of US$41 billion as of September 2011, and Japan has become one of the major global REIT markets. It is home to the fourth largest REIT market in the world after the US (#1), Australia (#2) and France (#3). In Asia, Japanese REITs have been playing a leading role, making up 41.1% of the total Asian REIT market capitalisation as at June 2012. The country has 4 REITs in the top 10 largest REITs in Asia, 9 in the top 20 and 24 in the top 50. Within a domestic context, J-REITs accounted for 32.4% of the local listed property securities market. The industry is strongly supported by the government and the private sector, in particular by professional associations such as the Association for Real Estate Securitisation (ARES). J-REITs invested across the diversified (36%), office (35%), residential (12%), retail (11%), industrial (5%) and lodging (1%) property sectors. In total, J-REITs own 1,981 properties, averaging 58 properties per J-REIT."

Source: Prof. Alex Anh Khoi Pham - University of Western Sydney: The Development of REIT Markets in Asia (1/1/2014) - Link.


The first Healthcare REITs are being put together as the proportion of Japanese older over 65+ is set to rise to 31% by 2025 from an estimated 26% in 2014, and the country will need as many as 1.8m housing units for the elderly by 2020,


Last Updated on Wednesday, 05 November 2014 05:28