Market Outlook

Storm Clouds Gather

Asia Pacific property markets face a number of battle fronts in 2023. The first is external to the region as the war in Ukraine combined with post-COVID supply chain disruption has fueled inflation causing central banks to raise rates and in doing so cool growth. This is nowhere more apparent than in the US and Europe, the final demand markets for Asia’s exports. The second is within the region itself and concerns its largest economy, China, which accounts for 53% of the region’s GDP and almost a third of all manufactured products. A low growth and, thanks to zero-COVID policies and a more assertive political direction, more isolated China, is depriving real estate capital of a universe of investment opportunities while funds flowing out of the Mainland have slowed to a trickle. The final battle front is longer term and structural and concerns how people work and shop and how new technologies are tearing down the old boundaries between asset classes while creating new ones in an orgy of creative destruction. Something familiar to markets globally.

Read More

Economy

The moderate recovery of the Japanese economy is expected to continue in 2023, driven by consumer spending and corporate capital investment. However, with the output gap still negative, the Bank of Japan (BoJ) has made it clear that it will retain its loose monetary policy for the time being. If the economic recovery were to lead to a rise in corporate earnings as well as real wages, thereby maintaining moderate inflation, the likelihood of a shift to a tighter monetary policy would increase. However, the consensus is that such a move, were it to eventuate, would not occur until H2 2023 at the earliest.

Office

While relocations to higher grade office buildings were on the rise in 2022, downsizings and consolidations were still widely observed, leading to a general upward trend in vacancy rates. As an increasing number of companies favor the implementation of hybrid working schemes, tenants are likely to become more selective than before with respect to office specifications. With increases in supply forecast for most cities, market rents are likely to continue to fall.

Retail

The Ginza highstreet market will continue to be driven primarily by demand from luxury goods brands in 2023. While high street rents appear to have bottomed and maintaining the low levels, they should begin to rise once again in Q4 2022 and continue to slowly increase thereafter.

Logistics​

Unprecedented volumes of new supply is expected across Japan in 2023, due to the greater focus placed on logistics properties by developers. As a result, vacancy rates are expected to rise in all four metropolitan areas, despite continued robust tenant demand for logistics space.

Investment

Commercial real estate transaction volume in Japan for 2022 is expected to be slightly lower than the previous year’s level.  Nevertheless, expected yields have continued to decline, indicating that investor appetite remains stable. Some investors have become more selective amid overseas interest rate hikes and concerns over a possible recession in US and Europe.  However, the BoJ appears unlikely to tighten its monetary policy in the short term, and appetite for Japan real estate looks set to remain robust in 2023.

This report was originally published in https://www.cbre.com/insights/reports/japan-major-report-japan-market-outlook-2023

Download the Report Read More

Although the pandemic has faded into the background, 2022 was still a tumultuous year highlighted by events such as the war in Ukraine, the subsequent energy crisis, and persistent inflation leading to interest rate hikes. A global recession is likely, but the Japanese economy looks to fare better due to its belated reopening. The majority of investors in Japan are still pursuing new investment opportunities, and 2023 will see more participants. The matured Japan market will welcome a more diversified pool of investors, which will give the market more liquidity and greater potential for growth.

This report was originally published in https://www.savills.co.jp/research_articles/167577/209392-0

Download the Report Read More

Asia Pacific’s key office markets tell a story of resilience overall, with steady demand in some markets, surging supply in others – and some cities in India experiencing both surging demand and supply.

As has been the case since the start of the COVID-19 pandemic, the Asia Pacific office market continues to demonstrate its resilience. Fully 153 million square feet (msf) of office space has been absorbed across the region’s top 25 markets since the end of 2019, with 47msf of that occurring in the first nine months of 2022. Indeed, Asia Pacific continues to be the only region to record consecutive quarters of positive net absorption throughout the pandemic.

The broad outlook is for this to continue, though inevitably with nuance at the local level. Full-year office demand in 2022 is expected to reach 65msf, on par with the 63msf absorbed in 2021 and well above the pandemic lows of 2020. A modest improvement is forecast in 2023, with net absorption projected to reach 71msf (+9% y-o-y), before growth stabilises at around 5% per annum through to 2026. While this represents robust demand, it comes at a time of heightened supply as projects that were delayed in the early period of the pandemic regain momentum. Following the 112msf of new supply in 2022, a further 130msf is expected to be delivered in 2023 before slowing to less than 100msf from 2024 onwards. Inevitably, with supply outstripping demand in the near-term, regional vacancy is forecast to soften further, rising from 12.5% pre-pandemic to reach a little over 18% in 2023, after which it is expected to hold steady.

Read More