Reflecting higher cap rates and office rents in earnings estimates/TPs; six rating changes (Tokyu Fudosan up to Buy)

Research evidence excerpt

Reflecting higher cap rates and office rents in earnings estimates/TPs; six rating changes (Tokyu Fudosan up to Buy)

Equity Research

22 July 2026 | 5:28PM JST

JAPAN REAL ESTATE

Reflecting higher cap rates and office rents in earnings estimates/TPs;

six rating changes (Tokyu Fudosan up to Buy)

Sachiko Okada

+81(3)4587-9937 |

sachiko.okada@gs.com

Goldman Sachs Japan Co., Ltd.

Sayako Tominaga

+81(3)4587-9804 |

sayako.tominaga@gs.com

Office sector firmer than initial 2026 market assumptions, built-for-sale housing

market showing signs of peaking out on higher interest rates

Half a year into 2026, the growth rate for office asking rents has exceeded the

market environment assumptions in our 2026 outlook report, while the 10-year JGB

yield has risen more than expected due to factors including the situation in the

Middle East. While we have yet to see any changes in real estate transaction cap

rates, if interest rates were to continue to rise, this could lead to higher transaction

cap rates going forward.

Against this backdrop, we make a number of rating changes within our Japan real

estate and J-REIT sector coverage.

Rating actions: one stock to Buy, two to Sell, three to Neutral

Real estate:

n Upgrade Tokyu Fudosan HD to Buy, from Neutral (upside to new target price of

¥1,550: +19% including dividend): Following the recent share price correction,

the discount to FY3/26 after-tax NAV (¥1,752) based on the market value of

investment/other properties stands at -23%, below the long-term average

discount rate since April 1, 2009 (-22%), suggesting that the current shares are at

an undervalued level and offer a compelling entry point for investors.

n Downgrade Sumitomo Realty & Development to Sell, from Neutral (downside