CBRE releases results of 2020 Japan Investor Intentions Survey

Japanese investors display strong appetite; "Prime or Core" remains preferred strategy but riskier "Value-Add" strategies gain popularity

CBRE today released the results of the "Japan Investor Intentions Survey," a survey conducted between December, 2019 and February, 2020 with Japanese investors on their real estate investment strategies. (An overview of the survey is provided at the end of this release.)

Japanese investors had planned to purchase more this year
The three major threats to real estate investment this year were identified as "global economic outlook," "overpriced property price," and "local economic outlook." However, Japanese investors display strong appetite. The number of Japanese investors who stated that the amount of acquisition will increase was up 44% (+13 points) from 2019's survey and the percentage of investors who answered that the amount of sale will increase from the previous year was 28%, just 2 points higher than the previous time. (Figure1)

Figure 1: Expected investment activity in 2020

Focus remains on stable income streams; risk tolerance rises as investors seek higher returns
Most investors cited "stability of income stream" as their main reason to invest in real estate – a similar finding to last year's survey. However, 16% of investors stated that their risk appetite would be "much higher" or "higher" compared to the previous year, a 7-point increase from last year's survey.

Increase in high risk/high return strategies
Respondents selected "Prime or Core" (29%) and "Core-plus / Good Secondary" (26%) as their preferred investment strategies. Approaches remained varied, with "Prime or Core" and "Core-plus / Good Secondary" chosen by a lower proportion of respondents this year, but high risk-high return strategies such as "Value-Add" increasing in popularity.

Rising interest in assets offering stable income and relatively high yields
Offices were selected as the most attractive sector, attracting 38% of responses, but this was 12 points lower than last year's survey. Logistics saw the biggest increase in responses, rising 20 points y-o-y to 34%.

More investors focusing on environment and technology for value enhancement
When asked to identify the main occupier trends that will most likely affect property value in 2020, investors selected "sustainability," "smart buildings," and "automation in logistics facilities." The growing corporate focus on environmental issues and employee wellness appears to be shaping real estate investment decisions, with LEED or WELL-certified buildings increasingly sought after. Investors are also looking to utilize the latest technologies to maintain and enhance real estate value while mitigating challenges such as the labor shortage. Other key survey findings include the growing adoption of Environmental, Social & Governance (ESG) criteria in investment decisions. 71% of respondents stated they had "already" adopted ESG criteria or were "currently considering adopting it."

Survey Overview
CBRE Investor Intentions Survey focuses on the forward-looking views of real estate investors. This report summarizes the responses CBRE received from Japanese investors.

Implementation period: December 16th, 2019 to February 16th, 2020
No. of respondents: 249 (investors who invest in Japan)

Separate survey on the impact of COVID-19 on investment
In order to identify the impact of COVID-19 on investment, CBRE conducted a separate survey to Japanese investors at the end of March 2020 (number of responses: 95).

Highlights:
41% of investors stated that COVID-19 had affected their real estate transactions. Transactions are being postponed or canceled as overseas investors cannot conduct site surveys, or as more domestic investors are taking a watch-and-wait stance. Investors also look to be increasingly cautious toward asset types affected by travel restrictions and self-isolation measures such as retail and hotels.

The momentum in trading seen last year slowed in Q2 due to COVID-19, and transaction volume will likely contract in 2020. That said, funds for investment in real estate remain ample. The Bank of Japan's March Tankan survey showed no significant change in financial institutions' lending attitude. As such, there is unlikely to be any substantial change in the appetite for medium-to long-term investment. However, investors are likely to become increasingly selective and focus even more on income stability. In particular, appetite for logistics facilities, residential, and data centers could increase further due to the relatively smaller negative impact of COVID-19 on these asset types.

For further details, refer to "Japan Investor Intentions Survey 2020" released today.
https://www.cbre.co.jp/en/research-reports/investment-reports

Download this news release in PDF format