Japan MarketDynamics
Japan’s
own practice prohibitingreal estatego green?
Author Research
SeniorDirector
YutoOhigashi
The "Global Real Estate Transparency Survey" conducted by JLLonce every two yearsrankshowopeneachglobalmarket is, or in other words, how "transparent" your home market is relative to other countries This year's survey, the 13th edition since 1999, covered 151 cities in 89 countries, and examined 256detaileditemsineachmarket.
Real estate sustainability is a relatively new concept, and all
countries around the world have low scores for this item
However, as Japan has experienced earthquakes and other disasters for a long time, resilience to climate change, sustainable architecture, and urban development, which are attracting particular attention these days, are making progress in the world, and this time it was ranked second afterFrance
France,whichis themostcommittedtoenvironmentally friendly real estate in the world, has an index that can objectively measure the returns obtained by owning and investing in environmentally friendly real estate and this is established only in France in the world There are also so-called "green lease" clauses that require owners and tenants to discuss and agree to reduce energy and carbon dioxide emissions associated with realestate.
In Japan, rents are called "common charge inclusive" which include a uniform common service fee in the monthly rent, making it difficult for tenants to keep track of their own utility bills and it is unclear whether it is being used or disposed of carbondioxide
In highly transparent markets, we are seeing efforts by owners to disclose the energy costs of the buildings to tenants, with the aim of reducing energy cost by both parties. In order to accelerate efforts toward environmentally friendly real estate in Japan in the future, owners will need to make detailed disclosure of common area fees and efforts will be made by tenants to reduce them In the deflationary environment lasted for about 30 years, owners who have been able to make profits bycollectingcommonareafees across theboardarenowasking tenants for details of common area fees as energy costs rise and environmental initiatives are required It is expected that disclosingandworkingonthiswillhaveapositiveeffectfromthe perspective ofeconomic rationality.
Sustainabilityindex
02
Recentand futuretrendsin CentralTokyo’s leasingmarket
Author Research
AssistantManager
TomoyoNakamaru
Gross leasing volumes1 of Tokyo Grade A offices in the final quarter of 2024 reached approximately 143,800 sqm, marking a 4%increasequarter-on-quarter anda47%riseyear-on-year
Due to the rise in new supply, leasing volumes are robust. In the same period, vacancy of Tokyo Grade A office was 28% and average rents in central Tokyo for grade A office was 35,042 yen/tsuboora4.4%riseonayear-on-year basis.
According to data tracked by JLL Research Tokyo, average rents inTokyo grade Aofficestartedfromthefirstquarterof2024.
Leasing activity remains strong as more companies require workers, particularly junior staff, to return to the office. Additionally, businesses are expanding and hiring new employees, thus requiring more workspace, while stable economic growth and record-high corporate earnings are boosting leasingactivity.
Redevelopment in Shinagawa submarket sees large-scale preleasing
Recently, the most active sectors in relocation have been information services, manufacturing, financial services, and metalsandmining.
A yearago,one ofthelargestdeals sinceleasingactivitytracking began occurred Over 90,000 sqm of space was signed for Takanawa Gateway City Linkpillar I North, an office redevelopment near the bay area scheduled to open next May.
Surge in New Supply in 2025 and 2026 Set to Drive Further Rise ofLeasingVolumes
In the fourth quarter of 2024, the share of precommitments compared to leasing volumes increased This rise is due to the anticipated new supply ofTokyoGradeA officespace,whichwill surpass 500,000 sqm in 2025, with an additional 480,000 sqm entering themarketin2026
Despite rising construction costs and an owner-friendly environment, leasing activity for future projects remains strong, asmostexistingbuildingshavelittletonovacantspace
Japan’s real GDP in 2025 is expected to increase by 1.2%1 compared to0.1%intheprioryear.
Amid a favourable macroeconomic backdrop, large corporates are expected to remain forward-looking, keeping leasing activity inCentral Tokyo robust
1 Gross Leasing Volumes represents space leased for occupation A unit is registered as leased whena legallybindingagreement hasbeencompleted Assuch,space that is ‘under offer’atthesurvey dateisnotincluded (‘UnderOffer’referstospace wheretermshaveonly been agreed between parties and legal representatives, but legally binding contracts for leasinghaveyettobeexchangedand/orcompleted)
It includes pre-leases (ie pre-commitments on space under construction or planned) It excludesleaserenewalsandrent reviews Renewalsthatreferto abiggerspace thanbefore the renewal are included with the additional space signed only It excludes owneroccupied/self-usespace
2OxfordEconomics
Since the Start of Tracking
Source: JLL
Figure 1: Tokyo Grade A Office Leasing Activity and Vacancy
Investment
Keytrends
1
Globalinvestmentrecoveryhasbecome clear
Therecovery ofglobalrealestateinvestment volume,whichstartedtoincrease from3Q, becameclear,withtheincrease ininvestment volumesexpandingin4Q.Investmentvolumein theAmericas,whichhadbeenslowtorecover, alsoincreased significantlyinthefourthquarter.
3
Investmentdemandremainsstrong despiterisinginterestrates
Interestratescontinuetorise,buttheycanbesaid tobeamongthelowestintheworld,andthe aggressivelendingstanceofbanksremains unchanged.Investmentdemandcontinuestobe strongduetothediversificationofassetsunder managementbydomesticinvestorsandthe returnofoverseasinvestors,resultingina continuedactiverealestateinvestmentmarket.
2
Japan’sinvestment volumesexceedsJPY fivetrillionforthefirsttimeinnineyears
Thereweremanylarge-scaletransactionsin offices,retail,logisticsfacilitiesandhotelsacross thecountry,andinvestmentvolumeinJapan increased by63%fromthepreviousyear, exceeding JPYfivetrillionforthefirsttimeinnine years.Hotelinvestmentvolumeexceeded JPYone trillionforthefirsttime,accountingfor19%oftotal domesticinvestmentvolume.
4
Outlook
Thefirstquarterof2025hasalreadyseenseveral large-scaletransactions,andtherealestate investmentmarketisshowingevenmoreactivity. Therealestateinvestmentmarketin2025is expected tocontinuetooutpacethatof2024,with increasinginvestmentopportunitiesduetothe saleofcorporaterealestate,andsoon.
Japaninvestmentvolume
• In4Q24,domestic realestateinvestment volume was up31%q-o-q and166%y-o-ytoJPY1,630.8billion (USD10.7billion,up149%y-o-y).
• Investment volume infull-year2024totalledJPY 5,487.5billion,up63%y-o-y, exceeding JPYfive trillionforthefirsttimeinnineyears.Inthehotel sector, therewere large-scaletransactions,including theGrandNikkoTokyo Daiba,inthefourthquarter, andthetotalinvestment volume for2024exceeded JPYonetrillion.
Source:JLL
HistoricalJapaninvestmentvolume
Historicalinvestment volumesharebySector
Sectoranalysis
• Theshareofofficeinvestment in2024was36%, expanding from33%in2023.Transactions oflargescaleofficebuildingsincentralTokyo, including MeguroGajoenandOtemachiOneTower, recovered in4Q2024.
• Hoteltransactionswere seenalloverJapan, from HokkaidotoOkinawa.Thetotalinvestment volume forhotelsin2024exceeded JPYone trillionforthe firsttimesinceJLLbegan trackingitin2008, accounting for19%ofthetotaldomestic investment volume.
• Theretailsharewas7%,thelogisticsfacilitiesshare was24%andmultifamilyhousingwas12%,down slightlyfrom11%,26%and13%in2023,respectively.
Source:JLL
Historicalinvestment volumesharebylocation
Locationanalysis
• In2024,theshareofTokyo CBD(5-kus)was27%, down slightlyfrom28%in2023.
• TheshareofGreaterTokyo (excluding Tokyo), or Chiba,SaitamaandKanagawaprefectures, was13%, alsodown from17%in2023.
• TheshareofGreaterOsakawas22%,thehighest sinceJLLstartedtrackingitin2008.
Source:JLL
TokyoCBD(5-ku)
GreaterOsaka
Other
Tokyo(Excluding5-ku)
GreaterNagoya
GreaterTokyo(ExcludingTokyo)
GreaterFukuoka
Note:TokyoCBC(5-kus)referstoChiyoda-ku,Chuo-ku,Minato-ku,Shinjuku-kuandShibuya-ku;GreaterTokyoreferstoTokyo,Chiba,SaitamaandKanagawa;GreaterNagoyareferstoAichi, GifuandMie;GreaterOsakareferstoOsaka,Hyogo,KyotoandNara; GreaterFukuokareferstoFukuoka,Saga,Nagasaki,Kumamoto,Oita,Miyazaki,KagoshimaandOkinawa.
Office
Tokyo
• Limitednewsupplyandflighttoqualitykeepsnet absorptionpositive.
• Netabsorption amounted to+291,000sqmandvacancy ratefallsbelow3%.
• Strong demand underthelowunemployment condition leadsrentscontinue toriseforafourthquarterinarow.
According totheTankanSurveyinDecember, thediffusionindex of largemanufacturersrosefrom13during theprevious quarterto14, thefirstriseintwoquarters.Theindex oflargenon-manufacturers fell 1point to33.Strong appetite forleasesinbothexistingsupplyand pre-commitments wereseen. NetabsorptionintheGradeAoffice marketinTokyo was31,000sqminQ4.Byindustry,thefigurewas driven byinformation andcommunications, manufacturingand finance andinsurance.
NonewGradeAofficebuildingswere completed inQ42024.Tokyo's vacancy rateintheGradeAofficemarketinQ42024averaged 2.8% andfell30bpsq-o-q and180bpsy-o-y. Bysubmarket,thevacancy ratefellsignificantlyinbothOtemachi/Marunouchiand Akasaka/Roppongi.
Rents inTokyo's GradeAofficemarketaveraged JPY35,042per tsubo,permonth, up1.2%q-o-q and4.4%y-o-ybyend-Q4 2024.
Rentscontinued toincreaseinbothAkasaka/Roppongi and Otemachi/Marunouchi, particularlyinthelatter.CapitalvaluesinQ4 rose1.9%q-o-q and7.3%y-o-y, supported byriseinrents andascap ratesareunchanged fromQ32024.Notabletransactionsincluded BlackstoneGroup'sacquisitionofTokyo GardenTerrace Kioicho for JPY400billion,closingin2025.
Outlook
According toOxfordEconomics' forecastasofDecember 2024, expected GDPgrowthin2025is1.2%,whiletheforecastforCPIin 2024wasunchanged at1.6%.Risksincludeinflation, volatilityin financialmarketsandpoliticaluncertainty. Leasingvolumesinthe nextyearareexpected tooutpace thisyearasthedemand-supply balanceremains tightandrentincreasesareexpected toshowno signsofabating.Capitalvaluesareexpected tocontinue torisewith capratesexpected toremainatlowlevels.
Fundamentals
Note:Financialandphysical indicatorsareforthe5KusGradeAofficemarket.Datais onanNLAbasis.
Historicalsupplyanddemandtrends
Osaka
• Infull-year2024, newsupplytotaled 270,000sqm,markingthelargestfigure.
• Netabsorption amounted to+210,000sqm,alsotherecord high.Solid demand curbriseofvacancy ratesurge.
• Talent-oriented wasanotabledriver ofrelocation forbuildingstosuperiorlocationsand better-grades,inlinewithbusiness expansion
TheDecember TankanSurvey forGreaterOsakashowedthat businesssentiment fellto13pointsfrom14forlargemanufacturers andto28pointsfrom 33forlargenon-manufacturers. However, net absorptiontotalled +96,000sqmin4Q24,andfurtherreached +210,000sqmforthefullyear, markingthelargestfigure.Awaveof headquarterrelocations wasseenamong majormanufacturerswith highcostawarenessaspartofcorporate reform. Relocation demand seemed tobecome apparent, driven bycompanies forced to postpone buildingnew workplacesinatightsupply-demand market justpriortotheCOVID-19era.
Thenewcompletion in4Q24wasGrandGreen Osaka,amixed-use development covering offices,hotels,anopen innovation facility, commercial facilities,parksandresidentialareasin320,000sqmof GFA.The4Q24vacancy rateroseto4.4%,arelativelymodest increase of60bpsq-o-q and190bpsy-o-ydespite thelargestyearlysupply amount. Robustabsorption ofvacancies wasseeninnew completions, aswellasexistingbuildings,driven byconsolidation in
linewithbusinessexpansion andimprovements inlocation.
Theaveragemonthly grossrentpertsubowasJPY23,408,anincrease of2.1%q-o-q and4.0%y-o-y. Newcompletions withhigherrents pushedupthemarketaverage, asdidupwardrentrevisionsin existingbuildingswithhighoccupancy rates.
Outlook
Oxford Economics predicted inDecember thatOsakaCity'srealGDP wasprojected togrow by0.1%in2024and0.4%in2025.Intherental market,while2025willseesubstantialnewsupplywithtwobuildings, demand fornew buildingswithbetterandfavorablespecifications for workersremains solidduetotheriseincompanies’ interestintalent. Theriseinvacancy ratesisexpected tobemodest, asthistrend is likelytocontinue. Intheinvestment market,the2024yearly investment volume inGreaterOsakaexceeded JPY1trillion.Office dealswerebriskandofrow-level yieldswereseen. Whilesolid appetitesseemsettocontinue in2025,thedealvolume isexpected tofallduetoarebound from2024decreasing salesassets.
Fundamentals
Note:Financialandphysical indicatorsareforthe5KusGradeAofficemarket.Datais onanNLAbasis.
Historicalsupplyanddemandtrends
Fukuoka
• Record highnetabsorptiondriven bylargenewsupply
• Thevacancyraterisesto7%,withimpactfrommajornewsupply.
• Rentalgrowth accelerateasnewsupplyentersmarket.
IntheDecember 2024Kyushu-OkinawaTankansurvey,theDIfor businessconditions foralllargeenterprises improved by1point from September to26.TheDIformanufacturing was19(up1point), while theDIfornon-manufacturing was32(unchanged). Netabsorptionin 4Q24exceeded 41,000sqm,thelargestrecorded inasinglequarter sinceJLLstartedtracking.Absorption inthesignificantnewsupply wasthemainfactor.Thefigureforfullyear2024exceeded 57,000 sqm,againthehighestfiguresinceJLLstartedmonitoring.
Newsupplyin4Q24exceeded 53,000sqm, increasingthestockby 12%q-o-q and15%y-o-y. OneFukuokaBuilding(NLA49,000sqm) andHulicSquare FukuokaTenjin (NLA4,200sqm)were completed. Thevacancyratewas7.0%,up1.8pointsq-o-q, markingthefifth consecutive quarterofincreasewithgrowthaccelerating fromthe previous quarter. Thevacancy raterosesignificantlyintheTenjin, AkasakaandYakuinareasduetovacanciesfrom newsupply,whileit fellinotherareasduetofirmdemand.
Rentsin4Q24averaged JPY20,853pertsubo,per month, up3.1%qo-qand4.4%y-o-y. Theincreasewasdriven byhigherrentsfornew supplyintheTenjin, AkasakaandYakuinareas,andagradualrise wasalsoseenintheHakataStationareaonthebackoffirmdemand.
Capitalvaluesroseby2.5%q-o-q and4.5%y-o-y. Asinvestment yieldsremained flat,therisereflected higherrents.NocasesofGrade Aofficetransactionswereobserved during thequarter.
Outlook
According toOxfordEconomics, GDPgrowth isexpected to accelerate to0.9%in2025.Risksinclude theimpactofoverseas economic andpricetrends ontheFukuokaeconomy.
Going forward, newsupplyisexpected tooutstripdemand inthe FukuokaGradeAoffice rentalmarket,andvacancy ratesareexpected torise,puttingdownward pressureonrents.Intheinvestment market,investment yieldsareexpected toremainflat,butpricesmay decline moderately, reflecting weakerrents.
Fundamentals
Note: FinancialandphysicalindicatorsareforFukuoka’sGradeAofficemarket. DataisonaNLAbasis.
(thousands)
Retail
• International anddomestic brandscontinue todrivenewopening demand.
Fundamentals
• Anew standalone buildingsetforcompletion alongGinzaChuo-dori in2027;ground floorspaceisalreadypre-leased.
• Capitalvaluescontinue growthataslowerpaceforsecond consecutive quarter.
Retailsalescontinued toincreasey-o-yinOctober, supported inpart bystableconsumer confidence. Meanwhile,salesofluxurygoods in Tokyo's department storesdecreased y-o-y fortwoconsecutive months untilOctoberbutrecovered growthinNovember. Againstthis backdrop, demand fornewstoreopenings remained stronginQ4 2024.Newopenings duringthequarterincluded JilSander inGinza, alongMarronnier-dori, andCarlHansen&Son inOmotesando, alongside Aoyama-dori.
NewsupplyinQ4included theGSproject inGinza.Theten-storey above-ground buildingoffersaGFAof4,000sqmon3-chome along Chuo-dori. TheAppleStore, whichiscurrently inatemporary location, isscheduled toreopen. Futuresupplyconfirmed inthe quarterincludestheNK-G3buildingreconstruction inGinza.The project willofferGFAof2,100sqmalongChuo-dori andisduein2027. Theground floorwillbeleasedtoaninternational jewellery brand.
Rentsaveraged JPY98,714pertsubo,permonth inQ42024, increasing1.2%q-o-q and12.2%y-o-y. Thiswasthe11thconsecutive quarterofincreases,butthepace ofincreaseslowedforthethird consecutive quarter.Capitalvaluesincreasedby1.6%q-o-q and 14.3%y-o-yinQ42024.Transactionsconfirmed inthequarter included LVMHGroup'sacquisitionoftheAbercrombie &FitchGinza storealong Chuo-doriinMayformore thanJPY40billion,according tomarketplayers.
Outlook
According totheDecember Oxford Economics' GrowthOutlook, privateconsumption isexpected toincreaseby1.3%in2025.Risks include trends inconsumer confidence. Intheleasingmarket,rents areexpected tocontinue togrow, albeitataslowerpace, duetoalull indemand. Intheinvestment market,downward pressuremaybe exerted oninvestment yields,reflecting theimpactoftransactions prioritisinglong-term assetvalue.
Note:FinancialindicatorsarefortheprimeretailmarketsofGinzaandOmotesando, whileretailsalesgrowthfiguresareforTokyoPrefecture.DataisonanNLAbasis.
Retailsalesgrowth
Logistics
• Continued Expansion ofE-Commerce and3PLDemand.
• Overallvacancy decreasesbutremains above9%.
• Averagerent growsmoderately.
Fundamentals
2024completions
Demand from3PLsandonline retailerspushednetabsorptionto 221,000sqminQ42024.Infull-year2024,thefigurewas1.5million sqm.Compared to2023,demand hasfalleninlinewithlesssupply. Astransportcostsrise,demand isstrongforproperties closetothe citycentre andwithshorttransportation distances,whileproperties infringe areaswithhighertransportcoststothecity centre are struggling.
Newsupplytotalled 152,000sqminQ42024,increasing totalstockby 0.7%q-o-q and9.3%y-o-y. Twofacilities,LogiSquare FujiminoBbldg (NLA101,000sqm)andLogicross Atsugi3(NLA51,000sqm),entered themarket.Botharelocated intheInland area.Thevacancyratein GreaterTokyo stoodat9.5%forQ42024,decreasing 40bpsq-o-q and increasing140bpsy-o-y. Thevacancy rateintheBayareafellto7.3%, decreasing 90bpsq-o-q, Tokyo Inlandfellto10.4%,decreasing by20 bpsq-o-q.
GrossrentsinGreaterTokyo averaged JPY4,688pertsubopermonth inQ42024,flatq-o-q andup1.8%y-o-y. Newproperties withhigh rentspushedtheaveragesup,whileexistingproperties withvacant spacespulledthemdown, resultinginoverallflatrents.Capital valuesinGreaterTokyo increased 0.1%q-o-q and1.3%y-o-y inQ4 2024,reflecting stablecapratesandrentgrowth. Anotable sales transactioninvolved Nippon LifeInsurance, whichacquireda portfolio withthreeproperties fromGLP.
Outlook
Asdemand continues togrow andconstruction costsrise,overall rentsareexpected togrowmoderately; however, given thehigher vacancy rate,rentsareunder downward pressureinsomeInland areas.Thelong-term interestrateisexpected toriseover thenextfew years.However, thereisstrong investment demand, especiallyfrom core investorssuchasinsurancecompanies. Capitalvaluesare expected togrowasrentsgrow.
Note:TokyologisticsreferstotheGreaterTokyoprimelogisticsmarket.Dataisonan NLAbasis.
Historicalsupplyanddemandtrends
(thousands)
Osaka
• Vacancyratefallsduetoabsorptionofvacantspacewithoutnewsupply
• Strong demand continues, withtenants beingsecured forproperties underconstruction
• Rents expected tocontinue risingduetoincreasingconstruction costs
In4Q2024,thestrong demand forlogisticsfacilitiesintheOsakaarea continued. Thenetabsorption ofexistingproperties was14,000sqm, andforthefullyear2024,itreached 699,957sqm.
Therewasno newsupplyin3Q,andthetotalstockareaincreased to 6,973,000sqm, up14%y-o-y. Asvacancy absorptionprogressed in existingproperties, thevacancy rateinGreaterOsakafellto2.8%, down 20bpsfromtheprevious quarteranddown 60bpsyear-onyear.Thevacancy rateintheOsakaBayarearemained unchanged qo-qat2.2%,whiletheinlandareafellby40bpsto3.5%.
Rent increased toJPY4,152pertsubopermonth, up0.2%q-o-q and 1.6%y-o-y. Existingproperty rentsarerising,following thehighrents ofnewly suppliedproperties.
Reflecting therentincreases,capitalvaluesforlogisticsfacilitiesin GreaterOsakacontinue on anupwardtrend.
Outlook
Anincreaseinnew supplyisexpected ininlandareasfrom2025 onward, whichislikelytoresultinariseinvacancyrates.However, duetostrong demand, tenants arealreadybeingsecured for properties underconstruction. Asaresult,theincreaseinvacancy ratesisexpected tobelimited, withthevacancy rateforGreater Osakapredicted toremainbetween 4-5%.Inparticular,properties withadvantages intermsoflocation, buildingspecifications andrent areexpected tohavehighoccupancy ratesupon completion.
Duetosoaringconstruction costs,rents fornewly constructed properties areexpected tocontinue rising.Existingproperties are alsolikelytoseerentincreases,driven bythetrends innew properties. Whilethereareconcerns abouttheabilityoftenants to bearhigherrents,existingproperties continue tomaintainhigh occupancy rates,suggesting thatrentincreasesarelikelytopersist.
Fundamentals
Note:OsakalogisticsreferstotheGreaterOsakaprimelogisticsmarket.Dataisonan NLAbasis.
Historicalsupplyanddemandtrends
Fukuoka
• Nonewsupply,vacancy ratesdecrease
• Rents fornewproperties continue toriseduetoincreasingconstruction costs
• Existingproperties maintainhighoccupancy ratesandcontinue toseerentincreases
In4Q2024,thestrong demand forlogisticsfacilitiesinGreater Fukuokacontinued. Thenetabsorption was2,000sqm,andforthe fullyear2024,itreached 271,127sqm.
Therewasno newsupplyin4Q2024,andthetotalstockarea increased to1,526,000sqm,up27%y-o-y. ThevacancyrateinGreater Fukuokadecreased to5.4%,down 10bpsq-o-q and340bpsy-o-y.
Rent increased toJPY3,534pertsubopermonth, up1.4%q-o-q and 5.4%y-o-y. Existingproperty rentsarerising,following thehighrents ofnewly constructed properties. Insome cases,rentshaveincreased by10-20%duetotenant turnover.
Reflecting theriseinrents,capitalvaluesforlogisticsfacilitiesin GreaterFukuokacontinue anupwardtrend.
Outlook
Properties withvacanciesarefew,andmanyexistingproperties continue tomaintainhighoccupancy rates.Tenants arealsobeing securedforproperties under construction, andthesupply-demand situationisexpected toremaintightin2025.However, thereare concerns aboutincreasingvacancies from2026onward, asmultiple development projects arescheduled intheTosuarea.
Duetosoaringconstruction costs,rentsfornewly constructed properties areexpected tocontinue rising.Existingproperties are alsolikelytoseerentincreases,driven bythetrends innewly suppliedproperties.
Investor interestinFukuoka'slogisticsfacilitiesremains high,partly influenced bytheattention drawntoKumamoto duetothe semiconductor factorydevelopment. Withstrong investment demand andrisingrents,property pricesareexpected tocontinue increasing.
Fundamentals
2024completions
Note:FukuokalogisticsreferstotheGreaterFukuokaprimelogisticsmarket.Datais onanNLAbasis.
Historicalsupplyanddemandtrends
Hotel
• Strong tourismgrowthledbyincreasinginternational visitors.
• Newinternational hotelsonthehorizoninthenext fewyears.
• Continued record highperformance.
Fundamentals
RevPAR growth trendY-o-Y
Stage inRevPAR cycle
Note:TokyoHotelsrefertoTokyo'soverallhotelmarket.
Source:JLL,industrysources,STR
International arrivalsin2024were15.6%higherthanin2019,reaching arecord highof36.9million. Thedelayed recovery ofChinesevisitors wasoffsetbysignificantincreasesinarrivalsfromtheothertop four markets,SouthKorea, Taiwan, USAandHong Kong. According to JTA,overnight staysinTokyo inYTDOctober2024exceeded the annualtotalachieved in2019.Domesticguestshavehistorically accounted foraround 60%ofthetotal,butinYTD2024,international gueststook over themajority,reaching 51%ofthetotal.
YOTELTokyo Ginza,whichisthefirstentryofanupscalelifestyle hotelinJapan, opened inDecember 2024.Otherwise,therewereno newinternational brandhotelopenings inQ4.International brands arestillkeen toopen newhotelsinTokyo. From2025onwards, many luxuryhotels,suchasJWMarriott,Fairmont, WaldorfAstoria,Raffles andDorchesterCollection, arescheduled toopen.
Tokyo continued toseeanincreaseintradingperformance acrossall
hotelsegmentsinQ4,driven byrisinginternational arrivals.Inthe luxuryandupper-upscale segments, althoughthepace ofgrowthhas slowedin2024compared to2023,bothADRandRevPAR have continued toreachrecord highseachquarter.Occupancy in2024has improved slightlyy-o-ybutisstillrecovering to2019levels.
Outlook
Withstronginbound demand andtheweakyen, hotelsarefocusing onincreasing ADRratherthanoccupancy. Therefore, while international arrivalsareatrecord highs,ADRisexpected tocontinue toreachnewhighs,butoccupancy willtakesometimetoreturnto 2019levels.Inaddition totheemerging apartment hotelsegment, branded residences arealsoattractingtheattention ofdevelopers andinvestors.Theabilitytorecoup theinitialinvestment earlyby sellingtheunitsandtokeeptheminthehotelrentalprogram for ongoing income isattractive.
Historicalnewsupplytrends
Sustainability
GreenBuildingsinJapan
• Green growthrateexpands
• Wellness growthrateshrinks
Fundamentals
• TheJapaneseversion ofSustainabilityMarketDynamics featuresSBTiBuildingsSector Criteria.
NineteenprojectsacquiredLEEDcertificationin4Q24.Platinum-awarded projectsincludedGoldmanSachsTokyoToranomonOffice(LEEDv4ID+C: CI).Forfull-year2024,52certificationswereacquired,significantly exceedingthe30ofthepreviousyear.Thetotalnumberofcertifiedprojects since2009hasreached306,anincreaseof6.6%q-o-q.
Thirty-eightprojectsacquiredCASBEE-BD certificationin4Q24.The numberofacquisitionsduringthequarterdecreasedq-o-qandy-o-yand wasdown10%forthefullyearof2024comparedtothepreviousyear.The totalnumberofCASBEE-BD-certified projectsincreasedby5.4%q-o-qto 486.
CASBEE-REcertificationwasacquiredby214projectsin4Q24.Thenumber ofacquisitionsduringthequarterincreasedq-o-qandy-o-y;forthefullyear of2024,itwasup20%comparedtothepreviousyear.Thetotalnumberof CASBEE-RE-certifiedprojectsreached2,141,anincreaseof9.9%q-o-q.
SixprojectsacquiredWELLcertificationin4Q24.Platinum-awarded projectsincludedGoldmanSachsTokyoToranomonOffice(WELLv2Pilot: OfficeSpaces).Forfull-year2024,24certificationswereacquired, significantlyexceedingthe18ofthepreviousyear.Thetotalnumberof
WELL-certifiedprojectshasreached55,anincreaseof7.8%q-o-q.
NoprojectsacquiredFitwelcertificationin4Q24.Thetotalnumberof Fitwel-certifiedprojectsremainedatfive.AlthoughFitwelisstillrelatively unknowninJapan,therewereabout2,000validcertificationsin38 countriesandregionsaroundtheworldasofend-4Q24.
EightprojectsacquiredCASBEE-WO certificationin4Q24,butnineprojects reachedtheirexpirydate,asmorethanfiveyearshadpassedsincethestart ofCASBEE-WOcertification.ThetotalnumberofCASBEE-WO-certified projectswas168,adecreaseof1.2%q-o-q, thefirstnegativeq-o-qdecline.
Specialfeature:SBTiBuildingsSectorCriteria
TheJapaneseversionofSustainabilityMarketDynamicsfeaturesSBTi BuildingsSectorCriteria.InAugust2024,SBTireleasedtarget-setting guidanceforthebuildingsectoralignedwiththeParisAgreement's1.5°C target.Companiesintendingtocomplywillnowberequiredtosetin-use operationalcarbonreductiontargetsusingthePathwaytool,developedin collaborationwithCRREM,aswellasupfrontembodiedcarbonreduction targetsfornewconstructionandlarge-scalerenovations.
Note:LEED,WELLandFitwelrefertoallratings.CASBEE-BD,CASBEE-REand CASBEEWOrefertoB+andabove.
Source:JLL,USGBC,IBECs,IWBI,Fitwel
Historicalvalidgreencertificationbycertifiedyear
Source:JLL,USGBC,IBECs
JonesLangLaSalleK.K.
Tokyo Headquarters
KioiTower, Tokyo Garden Terrace Kioicho
1-3Kioi-cho Chiyoda-ku, Tokyo 102-0094
+81343611800
Fukuoka
FukuokaDaimyoGardenCity
2-6-50Daimyo, Chuo-ku,Fukuoka-shi
Fukuoka810-0041
+81922336801
Kansai
Nippon Life
Yodoyabashi Building
3-5-29KitahamaChuo-ku, Osaka541-0041
+81676628400
Nagoya
JPTowerNagoya
1-1-1Meieki, Nakamura-ku,Nagoya-shi
Aichi450-6321
+81528563357
ResearchatJLL
JLL’s research teamdelivers intelligence, analysisand insight through marketleading reports and services that illuminatetoday’scommercialrealestatedynamicsandidentifytomorrow’schallengesandopportunities Our more than 550 global research professionals track and analyze economic and property trends and forecast future conditions in over 60 countries, producing unrivalled local and global perspectives Our research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantageforourclientsanddrivessuccessfulstrategiesandoptimalrealestatedecisions
AboutJLL
For over 200 years, JLL (NYSE: JLL), a leading global commercial real estate and investment management company,hashelpedclientsbuy,build,occupy,manageandinvestinavarietyofcommercial,industrial,hotel, residential and retail properties A Fortune 500® company with annual revenue of $234 billion and operations in over 80 countriesaroundthe world, our more than 112,000 employees bring the power of a global platform combined with local expertise Driven by our purpose to shape the future of real estate for a better world, we help our clients, people and communities SEE A BRIGHTER WAYSM JLL is the brand name, and a registered trademark,ofJonesLangLaSalleIncorporated Forfurtherinformation,visitjllcom
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This reporthasbeenpreparedsolelyforinformationpurposesanddoesnotnecessarilypurporttobeacompleteanalysisof thetopicsdiscussed, whichareinherentlyunpredictable.Ithasbeenbasedonsourceswebelieve tobereliable,butwe havenotindependentlyverified thosesourcesandwedonotguaranteethattheinformationinthereportisaccurateor complete.Anyviewsexpressed inthereportreflectourjudgmentatthis dateandaresubject tochangewithoutnotice. Statementsthatareforward-lookinginvolveknownandunknownrisks anduncertaintiesthatmaycausefuturerealitiesto bemateriallydifferentfromthoseimpliedbysuchforward-lookingstatements.Advice wegivetoclientsinparticular situationsmaydifferfromtheviews expressedinthisreport.Noinvestmentorotherbusinessdecisionsshouldbemade basedsolelyontheviewsexpressedinthisreport.