The real estate investment trust (REIT) market is doing well. The Tokyo Stock Exchange REIT Index, which shows overall price movements in the Tokyo market on 26th, rose 0.8% from the previous day to 1,900.28, regaining 1,900 units for the first time in seven months since last December. The Bank of Japan‘s policy revisions and caution about the future of the office market have restrained higher quotations, but at present, office occupancy rates are recovering, and excessive anxiety is receding.

Mainstay offices are driving the recovery in the REIT market. Looking at the percentage change from the end of May in the REIT index by use, the office sector was up 5.1%, much higher than residential (up 0.5%) and commercial/logistics (down 2.4%). On 26th, office-focused Nippon Building Fund Inc. rose for the sixth consecutive business day, up 1.3% from the previous day, while Japan Real Estate Investment Corp. was up 2.1%.

The monthly office occupancy rate announced by Nippon Building Fund Japan was 97.5% in June, recovering from the 96% range at the end of last year. Hiroshi Torii, senior analyst at SMBC Nikko Securities, explains, “The office market has bottomed out and is beginning to improve.”

The Bank of Japan‘s receding policy revision speculation is also supporting the rally. Naoki Fujiwara, senior fund manager at Shinkin Asset Management Investment Trust, says of the REIT market, “The rise has also factored in the possibility of the elimination of short- and long-term interest rate manipulation (yield curve control, YCC), and the market has become more tolerant of a certain degree of interest rate hikes. Even if there is a sudden policy correction, it is likely to be only a temporary decline.”

The “NAV multiple,” which indicates the size of market capitalization relative to net asset value (NAV), which is calculated by valuing asset holdings at market value and subtracting liabilities, is below 1x, which is the standard for many stocks. The NAV multiple is equivalent to the PBR (price-book value ratio) of a stock. Buying based on a sense of undervaluation is also supporting the market.