DTZ forecasts extended drop in rents due to earthquake


On March 21, major UK real estate advisor DTZ revised downwards its forecast for prime Tokyo office rents following the East Japan Great Earthquake. DTZ had forecasted prime Tokyo office rents to drop 6.5% in 2011, but revised this downward 2.6 points to fall 9.1% in 2011. DTZ further projects that rents will stabilize in 2012 and rise in 2013.
The reassessment was based on UK research institute Oxford Economics, which has a cooperative relationship with DTZ, reviewing its forecasts for Japan’s 2011 GDP growth rate following the earthquake. Previously a 1.3% rate of growth, forecasts were dropped 0.3 points to 1%.
According to surveys conducted by J-REITs and real estate broker companies after the earthquake, very few commercial real estate properties in metropolitan areas have sustained direct damage. The three mainly affected prefectures (Iwate, Miyagi and Fukushima) account for only 4% of Japan’s GDP. Meanwhile, there are fears that the indirect effects of such disruptions as damage to factories and rolling blackouts in the Tokyo metropolitan area will be widespread, burdening the recovery of corporate financial performance.  
Incidentally, DTZ had released a separate downside scenario in its 2011 Global Outlook compiled in February along with the scenario that was used as the base for the above predictions. This scenario predicts that Japan’s GDP growth rate will drop by 0.3% and Tokyo office rents would fall 10.7% in 2011. 

Tokyo Prime Office Rents, JPY/tsubo/month (Source: DTZ)

[Related site]
- Announcement from DTZ

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