"Japan’s prospects look to remain relatively bright until 2040, regardless of some prevalent risks. Although demographic conditions are challenging, changes should be gradual and manageable, and Japan is actively exploring new avenues for innovation and growth. In particular, game-changing developments such as Integrated Resort and the Chuo Linear Shinkansen are expected to generate huge economic benefits nationwide, while multiple large-scale mixed-use commercial developments and public transport projects look to improve the urban landscape in Tokyo and beyond. As such, Japan will likely remain a popular destination for overseas capital for the coming decades, particularly given its robust and mature real estate market, and sound and stable fundamentals."

"The resilient fundamentals and growth potential of the e-commerce industry offer a long-term positive outlook for the logistics market, which has led to the large upcoming supply. However, even sound demand is struggling to keep pace with the elevated supply in the market, and the industry also faces headwinds such as labour shortages and inflation. Although fundamentals remain strong, the market is likely to undergo a phase of adjustments for the time being."

"The Tokyo office market has achieved greater stability in the post-pandemic era. Vacancy rates also appear to be approaching the tight levels observed pre-pandemic. The introduction of large office supply may threaten occupancy recovery but pre-leasing has been largely encouraging, and the mixed-use features with ESG specifications should attract tenants and ease some concerns."

"Stability has been a feature of regional office markets over the past half-year, especially given Japan’s positive post-pandemic economic performance. New supply has been fairly limited overall in 2023, creating some breathing room to absorb existing vacant space. That said, many expensive or non-ideally located properties continue to underperform, while the large new supply slated over the coming years might impact the current equilibrium."

"Average rents in the 23W have kept increasing albeit slightly. Net migration into the 23W during this peak spring moving season has seen a notable recovery, reaching 2019 levels, and with foreign nationals playing a bigger part. Multiple upcoming development projects in the C5W are likely to make it an increasingly popular area to live."

"Japan has progressed to a post-pandemic state, with domestic demand and inbound tourism making a strong comeback. While this will certainly mean improvement for the overall retail sector, there are road bumps including the inflationary environment and a shortage of labour that will have an adverse impact, especially on mid-market retail which may take longer to recover. Nonetheless, retail assets will benefit from increasing popularity due to their rental prospects."

"Tokyo’s ultra-luxury residential market has grown considerably over the past half-decade on the back of multiple large-scale developments that have reshaped the heart of the city, Tokyo’s large number of UHNWIs, and a shift in preferences toward living in prime central locations. Within ultra-luxury residences, leasing has grown to become an increasingly attractive option for many relatively young and newly wealthy people due to the flexibility it provides."

"The retail sector continues to experience a gradual recovery, although many subprime locations still lag. Lifestyle changes induced by the pandemic will likely influence the function and location of retail space going forward. While the resumption of visa-free travel will further improve the sector, benefits may be moderate due to uncertainties in the global economy."

"While the Tokyo office market as a whole continues to see modest corrections, submarket and property-level performance varies, and the divergence between overperformers and underperformers has become increasingly clear. Going forward, we expect a gradual improvement of overall market conditions, although a slowdown of the global economy could delay recovery. "

"The regional residential markets remain steady supported by stable demographic trends. Unlike Tokyo, the pandemic has not substantially affected demand in those markets, and rents have generally continued to grow moderately. With urbanisation expected to continue, the fundamentals of these regional markets appear sound. "