Japan Investment MarketView Q1 2025

Investment volume rises by 24% y-o-y
as foreign acquisition volume doubles

• Commercial real estate investment volume increased by 24% y-o-y to JPY 1.90 trillion in Q1 2025. Transaction activity during the quarter was predominantly driven by foreign investors completing multiple large-scale acquisitions of a size greater than JPY 100 billion. Offices accounted for the largest single share of investment volume, with that for the sector surging by 58% y-o-y to reach JPY 1.117 trillion. While investment volume in the retail and hotel sectors also increased significantly, that for the residential and logistics sectors dropped from the same quarter of the previous year. Several asset sales by Japanese corporates were also observed during the quarter.
  
  
• J-REIT acquisition volume for the quarter (all transactions, including those below JPY 1 billion) fell by 16% y-o-y to JPY 425.8 billion, while J-REIT sales dropped by 6% y-o-y to JPY 333.8 billion. While J-REITs continued to overhaul their portfolios, with the office sector accounting for over 70% of all J-REIT sales during the quarter, their appetite for residential and hotel acquisitions remained strong.
  
  
• Despite long-term interest rates rising during the quarter, expected NOI yields for Tokyo prime assets remained unchanged from Q4 2024 for offices and retail, and fell to all-time lows in the logistics and hotel sectors. While projections for future interest rate hikes have faded on the back of uncertainty wrought by U.S. tariffs, investors may still adopt a more selective stance should trade policy begin to affect real estate fundamentals.