Japanese Real Estate Market Stabilizes After Earthquake
The earthquake that struck the Japan’s Tohoku region on March
11, 2011, spared Japanese real estate investment trusts, or J-REITs –- at least
in the short term, according to . Damages reported on J-REIT assets amount to 0.02
percent of the assets’ total combined value. But damage to the region's power
grid and resulting planned and unplanned blackouts are causing factories to
scale back production and stores to cut hours. The power shortages, along with
fear of radiation contamination, are slowing the country's economic recovery and
could hamper its real estate sector for the remainder of 2011.
Despite showing early signs of a recovery, capitalization rates
are expected to remain flat through year-end as a result of foreign capital staying
on the sidelines until the radiation problem is clearly resolved. However,
capital value softening will create investment opportunities, according to the
report. Japan may finance part of the recovery by selling public assets, and
some private firms also may be forced to liquidate assets.
The J-REIT index plummeted along with the Nikkei
index immediately following the earthquake, losing 15 percent of its value. But
it quickly recovered after the Bank of Japan doubled its J-REIT share purchase
package. The J-REIT index was 3 percent lower than its pre-quake level by the
end of March. By comparison, the Nikkei 225 index ended March 6.5 percent lower
than its pre-quake level. The earthquake's relatively mild impact on J-REITs is
partially due to the fact that a small portion of total J-REIT-owned buildings
were in the affected region. Of those buildings, few experienced severe damage.