CBRE Publishes 2018 Japan Real Estate Market Outlook

Solid occupier demand expected for offices and logistics, but regional discrepancy likely to widen

Tokyo Grade A Office - Large-scale of new supply poses rental correction

Tokyo, January 11, 2018 - CBRE today released the 2018 Japan Real Estate Market Outlook which reviews the office, logistics, retail, and investment market over the past year and discusses the expected trends for 2018-2019.


  • Office: In 2018, vacancy rates are likely to start rising in Tokyo but are expected to continue tightening in regional cities. As such, Tokyo rents are forecast to see a downward correction, whereas regional rents have further upside.

  • Logistics: Greater Tokyo will see a 40% increase in its stock of large-scale multi-tenant logistics facilities. While demand is solid mainly driven by e-commerce, the difference in the supply-demand balance by area will become further pronounced.

  • Retail: Ginza high street* rents are expected to continue trending down in 2018. However, with an expected recovery in demand from luxury retailers and an expansion of show-room strategies, rents may start to rise at the start of 2019.

  • Investment: While investor sentiment remains high, we look for a y-o-y drop in volume by about 6% to JPY3.7 trillion in 2018. Upside in rents is becoming limited for some assets and/or areas, making investors more cautious on pricing.

*Ginza high street: CBRE has designated this area (street) within Ginza as a particularly high-end, commercial zone and as the primary sector of the retail market.


Macro outlook for 2018 and beyond

CBRE Global Research expects Japan to record real GDP growth of 1.7% in 2017 and a similar level in 2018. However, given that inflation remains low, the current loose monetary policy is likely to be maintained, and interest rates look set to stay at their current ultra-low level for some time. Meanwhile, the U.S. may see slow-down in growth from 2019, on the back of “normalization” of monetary policy by the FRB. This is likely to impact Japan, and coupled with the planned consumption tax hike in 2019, its economic growth could turn negative in 2020.


Expected outlook for each sector:

  • Office: Rents set to fall for Tokyo Grade A buildings but will continue to rise in regional cities
    New supply in Tokyo will average 233,000 tsubo in 2018 and 2019, an increase of almost 30% on the 10-year annual average. The vacancy rate is thus expected to rise to 4.8% at the end of 2019, 2.7 points higher than at the end of 2017. As a result, rents are likely to decline over the course of 2018, and are forecast to fall by around 8% by the end of 2019. Meanwhile, future supply will remain limited in regional cities, where supply-demand conditions are already tight. With strong occupier demand also expected to continue, rise in rents is expected to continue in these regional cities.

  • Logistics: Demand driven by expanding e-commerce market and automation needs
    All three urban areas – Greater Tokyo, Greater Osaka, and Greater Nagoya - expect to see a large volume of new supply enter the market. In particular, the Greater Tokyo area expects 470,000 tsubo in 2018 and 550,000 tsubo in 2019 - two consecutive years of historical highs since CBRE's surveys began in 2004. Although overall demand remains solid (driven by expanding e-commerce and automation needs), the difference in the supply-demand balance between the areas is likely to widen.

  • Retail (Ginza high street): Expected growth in demand from luxury brands and showroom-type stores may lead to a recovery in rents from 2019
    Ginza high street rents are forecast to continue a downward trend. That said, demand for new openings by luxury retailers is expected to recover which will then most likely lead to an increase in rents from 2019. More retailers pioneering show-room strategies for new store openings also suggest an upside in rents, particularly for prime locations.

  • Investment: Investor appetite to remain strong, but transaction volume in 2018 forecast to fall
    Investor appetite is expected to remain strong, particularly from institutional investors. Nevertheless, limited upside in rents for some assets and/or regions will cause some investors to become more cautious on pricing. Meanwhile, demand for regional assets is rising on the prospect of further rent growth in many of the cities. As such, the market will start to see further regional diversification, although this may not necessarily contribute to overall transaction volume.

For further details, please refer to the 2018 Japan Real Estate Market Outlook published by CBRE.


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News Release

Japan Market Outlook 2018

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CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.  Please visit our website at

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