Tokyo Real Estate Market Forecast

According to Jones Lang Lasalle (JLL), Tokyo was ranked No.1 in the global real estate investment amount for the period from January 2020 to September 2020 with 2 trillion yen. It is expected the Japanese real estate market will be recovered with its forecast of growth. This passage examines the office, retail stores and logistics, and the investment demand in Tokyo for forecasting.

Office

Recent years have seen flexible offices emerge as a popular solution to the demands created by the introduction of a wider range of working styles such as remote working. Many tenant surveys showed an increase in occupiers utilizing flexible offices over the past year. According to CBRE, the market scale of the Tokyo flexible office market keeps increasing by more than 20% per year under the pandemic.

With more market share of flexible offices, further diversification of office workers occurs. Since the retirement age will be raised to 70 by 2030, the working-age population in Tokyo is expected to increase by 8% in 10 years.

 

Flexible offices also drive the diversification of geographic locations. Before, employees are concentrated around the Tokyo Station, which shows an area disparity between the living area and working area. In the future, it is possible that the geographic dispersion will be narrowed after the completion of new infrastructure schemes in Greater Tokyo in 2030.

Source: CBRE Research

Retail Stores and Logistics

According to the Ecommerce Guide, the e-commerce market size in Japan is predicted to be worth $135.5billion by 2024. With the rapid growth of the e-commerce industry, it is believed that physical stores will continue to evolve to survive in the fast-paced environment. As retails sales are declining under the pandemic, there may be more mergers and alliances emerged between retailers in Tokyo. Besides, retailers are likely to restructure their stores. For example, introducing Virtual Reality (VR) and Augmented Reality (AR) to allow customers to have more entertaining shopping experiences. In the coming years, the use of Mixed Reality (MR) will reduce the need for physical stores.

Source: ecommerceguide.com/guides/ecommerce-in-japan-stats-and-trends

Besides, the e-commerce growth will drive the demand for new logistics facilities and data centres. Actually, logistics surpasses office as the most popular sector for investment according to the CBRE Research: APAC Investor Intentions Survey 2021. In 2030, it is expected that the enhanced delivery networks can make delivery become more far-reaching and faster. The use of artificial intelligence can automate deliveries, even prepare, and ship deliveries at night. It also reducing the warehouse occupying areas by allowing goods to be individually picked and developing a more specific layout compared with traditional warehouses. Since CBRE estimates ageing warehouse with 50 years will take over 30 % of total warehouses in Tokyo in 2030, redevelopment of ageing warehouse is expected to be promoted in the coming years.

Investment demand

According to CBRE Research: APAC Investor Intentions Survey 2021, Tokyo is the most preferred city for cross-border investment (Top 5: followed by Singapore, Seoul, Shanghai and HCMC). It is believed that the demand for real estate investment in Japan offers higher yields and more stable income compared with other financial products. It is likely to grow in a positive prospect in the coming years, especially in the Environmental, Social and Governance (ESG) criteria.

Financing through green bonds and loans has also become popular nowadays. By the data provided by the Climate Bond Initiative, there are a total of JPY 135.6 billion issued by 18 REITS by 2019. It is more likely for investors to consider green buildings in the future.

Source: CBRE Research