According to the Ministry of Land, Infrastructure and Transport (MLIT), land values are in a rising trend throughout Japan. As funds and J-REITS have grown, land values in the Tokyo area have risen notably faster than in the rest of the country, resulting in large increases. The Japanese economy, however, has been impacted by the subprime load crisis, which is likely to affect land prices as well.

Rent prices in five central wards of Tokyo are rising as the vacancy rate drops. Although the population in Japan overall is in a declining trend, the population influx to Tokyo continues, creating a continued demand for space. The lease market in central Tokyo should therefore continue to be a lessor’s market.

J-REITs (real estate investment trusts) dropped in value as European and US institutional investors sold higher-priced J-REITs to cover the fallout in the subprime loan crisis.

Institutional investors affected by the subprime loan crisis have since refrained from purchasing securitized products, and with financial institutions no longer backing securitized products, either, the volume of nonrecourse loans* has dropped.

*A nonrecourse loan is a loan secured by collateral, where the borrower is not responsible beyond the collateral in the case of default. This type of loan is often used in investment real estate transactions.

Considering the future potential of the lease market, the Japanese real estate market is an attractive choice, particularly for investors with their own capital.