REIT index for offices in Japan drops to 17-month low
Overheating concerns lead investors to shift money elsewhere
TOKYO -- Real estate investment trusts that own office buildings in Japan are sliding noticeably as investors move money elsewhere out of concern that the market may be overheating.
The Tokyo Stock Exchange REIT Office Index dipped 0.33% Monday, ending at its intraday low of 1,651.50. Nippon Building Fund -- with the largest market capitalization among all components --- declined two sessions in a row. Ichigo Office REIT Investment, which targets midsize office buildings, fell 1.3%, and Kenedix Office Investment slipped 1%.
The broad decline of many issues is notable. Among the TSE's REIT indexes, the one for the office sector has lost 11% since the end of last year, compared with an 8% drop for the residential sector and a 7% slide for the retail and logistics sector.
Concern that the market is losing steam appears to be widespread. As of Jan. 1, the roadside land value in part of Tokyo's Ginza shopping area had surpassed the record reached in 1992, according to the National Tax Agency. Such changes may affect the prices that REITs pay to acquire properties going forward.
"The rise in land value is not accompanied by economic growth, so the situation looks like a bubbly market," warns Hiroto Iwasa, chief researcher at the NLI Research Institute. The average listing prices of office buildings in the five central Tokyo wards of Chiyoda, Chuo, Minato, Shinjuku and Shibuya look to be hitting a ceiling. Many investors are locking in profits now on expectations that the overall real estate market may peak out because many large office buildings are set to open in 2018 and beyond.
"Foreign investors are shifting money to countries where the real estate market is seen expanding in the future, like Singapore," said Norihiko Sawano, an analyst at Mitsubishi UFJ Morgan Stanley Securities.