BMI View: In 2016 we expect a fall in vacancy rates in all three commercial real estate sub-sectors we cover, as demand continues to outstrip supply. In the longer term, government efforts to kick-start real GDP growth will have favourable effects on the real estate sector, leading to new development opportunities. Rental rates are stable and are not expected to rise significantly, and with the introduction of new projects over the coming five years, the balance between supply and demand will become more even.
Japan is on a track for a slow recovery as its economy crawls out of a recession, reflected in 0.0% growth during 2014. We expect growth to remain sluggish in 2016, despite government efforts to boost real GDP. Historically Japanese exports have been the prime contributor to GDP growth, and in an effort to boost trade volumes, the government and the Bank of Japan have ensured that the yen remains weak. While this is expected to boost trade volumes, major trade partners in China are experiencing their worst period of financial instability and growth since the global financial crisis. Therefore, while we do forecast growth for Japan, it is dependent on trade, exposing the country to fluctuations in commodity prices and trade partner performance. For 2016 we forecast minimal real GDP growth of 0.6%.
Tokyo, as the capital city and financial centre, has a strong reputation internationally, and commands the highest rental rates for all real estate sub-sectors we cover. It has an established retail sector due to high levels of tourism, which are expected to increase over the coming five years in the run-up to the 2020 Olympic Games. Meanwhile, Yokohama is one of the main industrial centres in the country, located in close proximity to Tokyo on Tokyo bay. Osaka is a key commercial city with a strong base in the retail, service and manufacturing sectors. It houses the headquarters of several major domestic companies, such as Panasonic, Sharp and Sanyo.
The office real estate sub-sector is expected to see sustained demand over 2016, with vacancy rates continuing to fall. Tokyo is still expected to see the majority of demand and command the highest rental rates, in line with its reputation as a global business and financial centre. The government is planning to introduce special zones for new businesses, which could dilute the market and lead to a stabilisation in rental rates.
The retail real estate sub-sector is expected to see significant changes over the long-term, with an ageing population and a change in spending habits determining the type of space in demand. With a rising number of pensioners and falling workforce, spending will be drawn away from the luxury goods market, which is currently one of the major retail segments, while discount and online retailing is growing in popularity. In the short term, however, the major demand driver will be tourism, driven by the 2020 Olympics in Tokyo.
The industrial real estate sector has been seeing sustained demand for warehouse facilities despite the recent economic downturn. The weak yen means that Japanese exports are more competitive, and have been increasing in volume. Meanwhile, the growth of e-commerce is leading to more demand for distribution space. Rental rates are expected to rise slightly, as demand outweighs supply. In the longer term, the current stock of warehouse facilities, mainly of a lower grade, will not be adequate, and development activity will pick up. With the introduction of new supply, rental rate growth may taper off.
Japan is experiencing financial hardship, and GDP growth is expected to be subdued. However, from an investment perspective, it is a stable location. Many of the plans the government has to boost will be favourable for the real estate investment market. The government's plans to create new business districts will bring new, modern space into the market, while low barriers to entry for foreign investment will increase the country's attractiveness, while rental rates are expected to remain high, providing good returns for investors.
The Japan Real Estate Report features BMI Research's market assessment and independent forecasts of major construction projects in the residential and commercial markets, plus rental prices and yields in major cities. The report critically analyses the prospects for real estate within the broader economic and financial context - both domestic and global - via our econometrically-modelled and clearly explained banking and economic forecasts and follows this through to evaluate the implications for REITs.
BMI's Japan Real Estate Report provides industry professionals and strategists, sector analysts, business investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the real estate industry in Japan.
- Benchmark BMI's independent real estate industry forecasts for Japan to test other views - a key input for successful budgeting and strategic business planning in the Japanese real estate market.
- Target business opportunities and risks in Japan through our reviews of latest industry trends, regulatory changes and major deals, projects and investments.
- Assess the activities, strategy and market position of your competitors, partners and clients via our company profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering real estate and construction, regulatory changes, major investments and projects and significant national and multinational company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the real estate sector and within the broader political, financial, economic and business environment.
Industry Forecasts Outlook
Historic data series (2010-2013) and forecasts to end-2019 for the domestic real estate industry and for the local and global finance industry.
- Real Estate: Office, retail and industrial real estate yields for all major cities (%); short term forecasts on minimum and maximum real estate rental prices by sub-sector (USD per square metre and local currency per square metre).
- Construction: Industry value (USDbn); contribution to GDP (%); employment (‘000); real growth (%).
- economy: Economic growth (%); nominal GDP (USDbn); unemployment (%); interest rates (%); exchange rate (against USD).
BMI’s Real Estate Risk Reward Index
BMI’s Risk Reward Indices provide investors (real estate vendors, construction companies and financial investors) looking for opportunities in the region with a clear country comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide an indices of highest to lowest appeal to investors, with each position explained.
Overview of the real estate sector, including analysis of existing/planned real estate developments and emerging industry trends in the office, industrial and commercial sectors
Features detailed city-level data and analysis on rental prices, yields, contract terms and real estate availability with separate chapters covering the office, retail and industrial sub-sectors.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate Company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.