Japan Investment MarketView Q1 2024

Investment volume rises 7% y-o-y with weaker foreign investment offset by growth in domestic acquisitions

• Commercial real estate investment volume for Q1 2024 grew 7% y-o-y to reach JPY 1.439 trillion. While the quarter saw a reduction in foreign investment volume, this was more than offset by an increase in domestic acquisitions. Although overseas investors generally maintained a cautious attitude, some large transactions were observed.
  
  
• Broken down by asset type, the most significant surge was seen in the logistics sector, where several major transactions pushed up investment volume by 113% y-o-y to JPY 371 billion. Office investment volume recorded a 15% y-o-y increase to JPY 742 billion, driven by a large number of J-REIT transactions, while a decline in the number of portfolio transactions in the residential sector saw investment volume for this asset class drop by 31% from the same quarter of the previous year to JPY 131 billion.
  
  
•  J-REIT investment volume (all transactions) rose by 36% y-o-y, reaching a total of JPY 502 billion, while total sales volume reached a new all-time quarterly record of JPY 356 billion. With equity financing becoming increasingly difficult, many J-REITs are reshuffling their asset portfolios, particularly in the office sector.
  
  
• When asked to divulge their views on the investment market in the latest CBRE Cap Rate Survey, risk factors mentioned by investors for all asset types were “cap rate increases due to rising interest rates” and “higher construction costs”.