Market Outlook

While real estate value is unsurprisingly concentrated in Tokyo’s central business district, namely the central five wards of Chiyoda, Chuo, Minato, Shinjuku, and Shibuya, Greater Tokyo’s comprehensive rail system grants great accessibility to outlying areas. The key advantage of Tokyo’s rail network is its density and globally-renowned punctuality. Although delays certainly occur and carriages become overcrowded during rush hour, commuters can largely count on trains arriving on time and at a high frequency. Looking at global comparisons, Tokyo is often ranked as having the most efficient and punctual railway system, especially considering its vast transport capacity.

Yokohama has come a long way since Japan opened to the world in the late 19th century. Initially a small fishing village, it came to serve as the primary port and gateway to the country, eventually becoming the centre of foreign trade. Thanks in part to its proximity to Tokyo, Yokohama prospered over the following decades. Things swiftly changed, however, as a result of the large-scale destruction and confiscation of the downtown area during and after World War II. Without the required redevelopment, many companies consequently relocated to Tokyo, taking with them the economic drive that had been prevalent in the city up until then. Indeed, by the time Japan’s post-war economic boom had arrived, Yokohama had been somewhat left on the side-lines, relegated to a residential hub for Tokyo commuters.

Although Japan has managed to contain the COVID-19 outbreak relatively well thus far, the impacts of the global pandemic will certainly put a damper on Japan’s economy and by extension the broader real estate market. As of April 2020, the IMF has forecasted that Japan’s economy will contract by 4.8% in 2020. To make matters worse, the Tokyo Olympics – which are now slated for July 2021 – could face an outright cancellation. Notwithstanding the near-term impacts of COVID-19, Tokyo will continue to see significant investment into the early 2020s and beyond. Major development projects are already underway around the C5W in areas such as Toranomon and Shibuya. Along with these developments, Shinagawa Station will undergo massive redevelopment that will prime it, as well as the Shinagawa Ward just to the south, for a boom over the course of the decade.

The COVID-19 pandemic has brought much of the world and many of the key gateway markets in Asia that we discuss in this paper, to a near standstill. It has been an almost domino effect, where the health crisis has led to an economic and financial crisis. However, out of crisis can emerge new and interesting opportunities, as can be seen in the GDP forecast for 2020 and 2021, with China and Hong Kong, in particular indicatively forecasting the widest jump of over 700 bps – a clear indication of economic growth potential and the opportunities that will come with it.