Japan Property Market Booming

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Commercial property sales in Japan are soaring, as investors look to take advantage of low prices and a declining yen.

Sales of offices, logistics and retail space were up 70 percent to 1.48 trillion yen ($15 billion) in the first five months of 2013 from a year earlier, according to Jones Lang LaSalle. Deals will rise to as much as 3.5 trillion yen this year, the most since 2008, Takeshi Akagi, local director of JLL told Bloomberg.

Prime Minister Shinzo Abe has been trying to spark the economy with policies that have been dubbed "Abenomics," including measures to increase inflation.

"I don't think anyone would argue that there hasn't been a favorable sentiment shift since Abe came to power," Christian Mancini, chief executive officer of North East Asia at Savills Asia Pacific Ltd., told Bloomberg. "Inflation translates into balance-sheet recovery and has a knock-on effect on the real estate market."

This week Moody's Japan K.K. revised the outlook on Japan's real estate industry to stable from negative.

"The change in the sector outlook reflects the appreciation in the values of commercial properties, as well as the increasing rents for new office buildings and the stable rents for properties such as logistics, retail and residences," Moody's wrote.

There are several other positive signs for the market. Office vacancy rates are falling, while rents are starting to move up. Land prices are also rising, Bloomberg notes.

Last month Akira Mori, head of the Mori Trust, which manages 89 buildings in Japan, said his company is contemplating buying more property, as the market improves.

Some analysts are skeptical the new policies will have a long term impact. But they have definitely sparked interest in the property sector.

"Some of the J-REITs and some of the property companies are willing to purchase very aggressively right now to lock into what they believe would be an improvement in the market," Mr. Mancini told the wire service. "You can expect prices going forward will continue to improve."

Retail may be one of the main beneficiaries as consumer confidence picks up, JLL predicts.

"Tokyo stands out as a bright spot on a global stage when investors consider where to put their money," Mr. Akagi of JLL told Bloomberg. "It's no doubt Abenomics is immensely positive for the real estate market and has a huge impact and property prices."