"The 23W market kept posting strong quarterly rental growth in Q1/2024. This was supported by positive quarterly net migration, particularly by the foreign population, which continues to increase unabated. Domestic migration is also likely to fare well during this spring moving season. Meanwhile, demand for rental units will continue to be bolstered by those priced out of buying condominiums."

"The Tokyo office market is expected to see further gradual growth in 2024. Average rents and vacancy rates have kept demonstrating positive performance. The large supply from 2023 has been absorbed well and the small supply in 2024 should provide breathing room for further absorption. However, older and less accessible offices continue to face challenges."

"The logistics sector continues to perform well overall, but the large new supply over the past year has loosened the market, with vacancy rates rising as some new properties struggle to fill available floors. The industry will face a number of challenges moving forward, including the sustained influx of new supply and labour regulations that may dampen operations. While prime logistics facilities remain fully occupied and even display rental growth, older facilities with outdated specifications in less desirable locations are expected to keep struggling."

"Japan’s retail sector is experiencing a notable resurgence, with areas that typically cater more towards inbound tourists seeing greater interest among potential tenants for new store openings. Despite the recovery, factors such as rising material and energy costs, on top of labour shortages, may continue to present hurdles for retail operators. As such, while the overall momentum in the sector looks favourable, observers may need to keep an eye on rental levels moving forward."

"The Tokyo office market looks to remain largely stable, with some marginal quarterly rental growth. Vacancy rates remain low and stable overall, and a majority of new major developments have been absorbed with limited issues. That said, bifurcation based on office age and location persists in the market, and large-scale new supply may threaten the current stability."

"Average rents in the 23W have increased slightly over the past quarter but experienced a mild dip on a yearly basis. Net-migration into the 23W has remained positive, and has surpassed pre-pandemic levels due to significant contributions from foreign nationals. Meanwhile, rental growth in the C5W remains stronger."

"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."