Japan Investment MarketView Q3 2024

Investment volume grows 24% y-o-y
amid stronger appetite for office properties

• Japan commercial real estate transaction volume grew by 24% y-o-y to JPY 1.207 trillion in Q3 2024, with the number of large transactions in excess of JPY 10 billion doubling from the same period of the previous year. The hotel sector registered the largest transaction volume, up 72% y-o-y to JPY 335.0 billion, crossing the JPY 300 billion threshold for the first time since Q1 2008. Office investment volume was also up 78% over the same period, growing to JPY 304.0 billion. This brought cumulative office investment volume for the first three quarters of the year to roughly JPY 1.2 trillion, outstripping the figure for full-year 2023. With office rents on the rise nationwide, investors’ desire to make acquisitions in this sector appear to be improving.

• J-REIT investment volume for Q3 2024 (all transactions, including those below JPY 1 billion) rose by 24% y-o-y to reach JPY 394.6 billion, with acquisitions in the hotel sector continuing to drive the market. Total J-REIT sales volume for the quarter was JPY 136.2 billion, some 2.2x that of the same quarter of the previous year. In the office sector, the period saw transactions involving several properties whose owners were concerned about their future competitiveness and profitability due to their age and the cost of required upgrades.

• Expected NOI yields for Tokyo prime assets remained unchanged from the previous quarter for offices and hotels, but fell again to set new record lows in the residential and retail sectors. In contrast, expected NOI yields for the logistics sector rose by 6 bps, returning to the levels of a year ago.