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CB Richard Ellis Group, Inc. Releases ViewPoint on Real Estate Impacts of Great East Japan Earthquake


  • Tokyo office rents may soften amidst uncertain economic environment

  • Tokyo prime retail rents expected to remain flat

  • Industrial sees short-term demand pickup but longer-term benefit to rents uncertain

Tokyo – May 31, 2011 – Office and luxury retail rents in Tokyo could come under pressure in the aftermath of the Great East Japan Earthquake and the uncertain economic environment, while the industrial market could see a temporary uplift in demand with uncertain long-term effects on industrial rents, according to CB Richard Ellis’ (CBRE) preliminary assessment of the earthquake’s impact on the Japan real estate markets. The report also finds that Japanese investors and funds are likely to lead the recovery in transaction volumes, supported by domestic banks that remain willing to finance prime real estate acquisitions. These findings are included in a special Asia Pacific Viewpoint on Japan prepared by CBRE’s Asia Pacific and Japan Research teams and released today.

“While it is still too early to assess the full impact of the earthquake on the Japan real estate market, some short-term implications, among them economic disruption, are inevitable,” said Nick Axford, Head of Research, Asia Pacific. “The uncertain economic environment could put some pressure on office and luxury retail rents in Tokyo, but it remains to be seen how the March events will affect industrial fundamentals. On the investment side, we anticipate that Japanese investors and funds will lead the recovery in transaction volume, and though some overseas investors have adopted a ‘wait-and-see’ attitude, others are viewing this is as a possible purchasing opportunity.” 

The following trends are detailed in the report:  

Economic Outlook

  • Loss of infrastructure was among the largest impacts; the Japanese government estimates losses totaling JPY16 to 25 trillion.

  • Economic growth will be a ‘tug-of-war’ between rebuilding efforts and stagnant activity in Tohoku, decreased production in other regions caused by production halts in Tohoku and weakened consumer confidence, among other factors.

  • The current state of public finances is a cause for concern, with Japan’s net public debt at 120% of GDP and a national budget deficit of 10%.

  • Japan’s strong sense of civil service, underscored by hardworking patient people with strong will to rebuild, will fuel restoration efforts.

 Impact on Japan Real Estate Market


  • Buildings in nearby major cities suffered relatively minor damage, while some bayside locations in Tokyo and Chiba faced liquefaction, shifting ground levels and infrastructure damage.

  • Given the uncertainty at the Fukushima Nuclear Power Plants and blackouts, some companies temporarily relocated head offices to Osaka, Kobe and Fukuoka. In Osaka, this resulted in an increase in short-term lease contracts and full hotel occupancy.

  • Demand for prime office space is expected to weaken while companies assess the economic outlook and potential impact on business performance; CBRE’s present view is that prime office rents could dip by as much as 5% while the lull in occupier activity persists.

  • Longer term, prime office buildings are likely to benefit from occupiers placing greater emphasis on a building’s earthquake resistance capabilities



  • In Greater Tokyo, two trends emerged: disaster-affected companies are leasing short-term warehouse space, filling long-time vacancies, and there has been increased demand for large-scale logistics facilities, which could result in a development upswing.

  • Looking ahead, if repairs to damaged manufacturing bases in Northern Japan are delayed, tenants may consolidate existing facilities in Greater Tokyo. However, if short-term demand fails to translate to longer term requirements, there is unlikely to be any significant benefit to rents.

  • Some industrial tenants are reviewing their national occupational strategies and looking at Kansai as an option for longer term requirements as they implement dispersal strategies.



  • High street retailers in Tokyo’s metropolitan area suffered minimal physical damage, but were affected by consumers self-imposed restraint on spending and limited operating hours due to potential power cuts.

  • Some retaiers—especially foreign apparel firms and luxury brands—temporarily moved their headquarters to Osaka or shut down completely. Japanese retailers, on the other hand, tended to stay put. By late April, all but a few retailers reopened for business.

  • CBRE’s  expectation is that rents will remain flat or soften slightly in the coming six months, but begin to recover as the nuclear situation is brought under control and tourism begins to recover.


Investment Market

  • Most transactions scheduled to close in March and April were unaffected, but some deals were postponed or cancelled—primarily due to lenders taking a more cautious stance following the earthquake.

  • Overseas funds are adopting a ‘wait-and-see’ attitude as they reevaluate the outlook for the real estate sector. Once the current situation is resolved, they will likely return to positions seen before the earthquake.

  • A stronger flow of opportunistic deals may result from Japan’s public sector coming under pressure to dispose of assets to help pay for the costs of reconstruction, and some private companies severly impacted by the earthquake being compelled to liquidate assets to finance reconstruction of their business. Distressed sales will likely be scarce.


Regional and International Impacts

  • Manufacturing Supply Chain: Supply chain problems from power shortages will dampen industrial ouput in Asia at least until 2H 2011, with the electronics and automotive sectors most severly effected.

  • Trade: The impact of a decline in Japanese trade on Asia markets will not likely be overwhelming.

  • Investment Flows: While it is still too early to precisely gauge the disaster’s impact on Japan Foreign Direct Investment (FDI), it is possible that Japanese companies may redirect some funds originally earmarked for overseas invesment for domestic use.

  • Tourism Industry: It is anticipated that there will be significant reduction in outbound tourism from Japan to other Asian countries, possibly as much as 36%—the drop seen following the Kobe earthquake in 1995.

About CB Richard Ellis
CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2010 revenue). The Company has approximately 31,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at

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