Japan Investment MarketView Q1 2023

May 8, 2023

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Q1 investment tops JPY 1 trillion for first time since 2020, driven by office investment

  • Commercial real estate investment in Japan surged by 102% y-o-y to reach JPY 1.27 trillion in Q1 2023*1. Domestic investors accounted for over JPY 500 billion of the quarterly total, the first time they have done so in nine years.
  • Office remained the most popular asset class, attracting JPY 605 billion worth of transactions this quarter, up 135% y-o-y, and the number of large transactions in excess of JPY 10 billion doubling from Q1 2022. Investors’ most commonly given reasons*2 for investment in the office sector were “cashflow stability” and “high liquidity”.
  • Expected yields for the major asset types*3 in Tokyo remained unchanged for all sectors other than hotels (management contract), which recorded a 5 bps q-o-q decline, bringing the figure in line with its Q1 2020 level.
  • While properties put on sale have increased during the quarter, differences in investor interest began to emerge between individual properties. Many investors are now reconsidering their investment targets, with the stable cashflow offered by residential properties and recovery in revenue expected for hotels making these asset classes increasingly popular.