Those looking for a real estate recovery in Japan face a long wait, according to Michael Linsk, managing director of PricewaterhouseCoopers LLP, Tokyo.
Land prices have continued to decline while commercial properties dropped 12.8% in value, based on 1998 benchmarks, Mr. Linsk found.
In a new report, he wrote that despite all the economic good news signaled by the actions of Japanese corporations, government officials and bureaucrats, the largest impediment to the revitalization of Japanese real estate markets is the slow pace of disposition of problem loans by the banking system.
Unemployment is expected to pick up as prices decline, he pointed out, with the bulk of layoffs likely to be enacted in March 2002 or 2003. That in turn could lead to more staff cutbacks and a reduced demand for commercial space.
Most Japanese markets already have an excess of space and a decline in demand. In addition, there is a growing trend among companies to locate away from the most expensive downtown areas.
The prospects for increases in office demand are poor. In addition in certain markets, particularly metropolitan Tokyo, a great deal of new Class A space will become available between 2001 and 2003, creating even more of a surplus.
If a general economic recovery were sparked by the growth of small companies and establishment of new business, it would spur demand for office space. But otherwise, vacancy rates will continue to rise, particularly in older buildings that don't offer modern facilities, he wrote.
