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Saturday, October 9, 2010

Transactions of office buildings in the Greater Tokyo area Cap rates.

I have attached a chart of recent Tokyo greater area office cap rates which also includes Total price of building and price per m2. The top field in the attached chart includes a new 11 story office building in central Ginza district total lease-able space is 6093 m2 based on 100% tenanted - JPY 98,400,000. @ 3.7% cap rate.


The net operating income used for calculating the cap rates is based on an estimation and reflects the standard closing rent and vacancy rate for each area at the time of the transaction.

The cap rates assume that all floors are office floors and that new tenants were contracted for empty buildings. The prices of the properties and transaction prices per m2 of rent-able floor space are also provided in the attachment Jpeg.

Cap rate estimated using the following formula considering net income (NOI) under the assumption that vacant buildings are occupied with new tenants. Cap rate (%) = estimated rent based on closed contracts in the neighborhood × rentable floor space × average office building occupancy rate in the area × 12 months × (100% - expense rate) ÷ selling price × 100. When the rent-able floor space is unknown, the total floor space is multiplied by a coefficient assigned for each level of total floor space. The coefficient is set as follows: 30,000 m2 or more = 57%, 20,000 m2 or more and less than 30,000 m2 = 64%, 10,000 m2 or more and less than 20,000 m2 = 65%, 7,000 m2 or more and less than 10,000 m2 = 69%, 3,000 m2 or more and less than 7,000 m2 = 72%, 2,000 m2 or more and less than 3,000 m2 = 78%, and less than 2,000 m2 = 84%. The expense rate is set as follows: five central Tokyo wards = 27%, other greater Tokyo areas = 33%, regional districts = 37%, and buildings completed within the past five years = -7%. “Own use” in the Purpose column refers to buildings that are entirely or partially used by the buyer. The Floor Space column basically refers to the total floor space, except for “(CO)” which refers to the floor space for the compartmentalized ownership of the transaction and “(CS)” which refers to the floor space for the co-ownership share. The Number of Floors column refers to stories “above ground / underground.” The Price per m2 column refers to the selling price per m2 of rent-able floor space.

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