- In 2H/2021, average 1F rents in Tokyo have once again increased slightly. Overall, the market has seen some slight improvements from half a year ago, although recovery in prime areas has been more apparent.
- In regional markets, rents have also generally increased. While vacancies have fallen in some areas, the situation in cities that were highly dependent on tourism remains grim.
- Transaction volumes in 2021 have surpassed levels in 2020. Some investors appear bullish as multiple large deals on high streets have been observed.
- Rising energy and commodity prices will apply inflationary pressure, although the CPI increase is only likely to be mild.
- The Bank of Japan has decided to keep interest rates low and Japan’s yield curve appears manageable because worldwide interest rate increments are likely to be mild overall due to ageing populations and the global savings glut.
- The yen may continue weakening if current interest rate differences persist, and this should create an opportunity for inbound capital. Although, if the world economy slows down more, the yen is likely to appreciate.
Recovery slow but underway
The retail sector has begun to see some improvements over the past half year as COVID-19 has gradually shifted toward an endemic state. Nonetheless, this recovery has not been evenly distributed, and there is still a stark dichotomy between prime and non-prime locations. Rising costs and a weak yen will apply inflationary pressure, but the impact is likely to be manageable, while a weak yen also presents an opportunity for inbound capital.
Savills Research & Consultancy