Different Views on The Property Market

I am now back to write my comments in this Blog after a 'short break'.

Mitsui Fudosan's residential J-REIT announced a follow-on equity offering and this is the first equity offering over the past 15 months! I heard other J-REITs were considering a similar equity financing. It looks like it has been warmly received among the community of investment community which manages J-REITs in their equity portfolios. They seem that they are looking at the capability to realize an external growth by acquiring properties.

Conversely, there are a few property managers, if any, which view the worst is over in the property market. A major driver for negative thinking lies in the continuing increase in vacancy rate and decline in rents. There is a good reason to believe so. It is partly because the demand for a space is really weak, and partly because many tenants are still asking property owners to consider a decrease in rent; otherwise, they will leave it for a cheaper place.

It is obvious that the equity market is a leading indicator and that the market is looking for something positive. However, on thing for sure is that the increased stock price will not last unless the J-REIT's NOI and divided go up.