Japan MarketDynamics
I J p ’ estategreen enough?
Author Research Manager TomomiKemmochi
Japan aims to reduce greenhouse gas emissions by 46% compared to 2013 levels by 2030, with further efforts towards a 50% reduction. This goal is a part of the Nationally Determined Contributions (NDC) based on the Paris Agreement on climate change. Real estate is crucial in this effort as it accounts for about one-third of CO2 emissions in Japan As green building certification is considered to be an
objective way to measure the greenness of real estate, a survey was conducted on the green building certification status of domestic properties owned by the top 15 J-REITs by asset size, out of a total of 58 J-REITs* These top 15 J-REITs can be a snapshot of the overall greenness of real estate in Japan.
Offices are more likely to acquire green building certification than other sectors. Although preferences for CASBEE (CASBEEfor BuildingsandCASBEEfor RealEstate) orDBJ-GB vary depending on J-REITs, the majority of properties (66% by number, 81% by area, and 79% by asset acquisition price) have obtained some certifications For retail, the certification acquisitionrateislower,at43%bynumberand68%byarea.
Logistics facilities have even lower rates, with 48% by number and 57% by area , but notably, some logistic properties have acquired LEED, an international certification. Another characteristic for logistics facilities is that improving energy-saving performance is more important than overall environmental performance. As a result, the number of properties certified by BELS, which evaluates energy-saving performance, is overwhelmingly higher than in other sectors This leads to certification acquisition rates (including BELS) of71%bynumberand85%byarea.
ByNumberofBuildings
Source:JLL JapanResearch, June 2024
For residential properties, CASBEE for Real Estate operation only started in 2021. As a result, the certification acquisition rates are 27% by number and 53% by area As for hotels, CASBEE for Real Estate is not applicable and DBJ-GB certification only began in April 2024. Consequently, the certification acquisition rates are only 4% by number and 13% byarea.
Many of the 15 J-REITs are promoting the greening of their portfolios by setting numerical targets for the share of their properties withgreen buildingcertificationasaKPI However, only 40% of 1,886 properties have acquired green building certification, and just over 10% have achieved the highest rank (LEED Platinum, CASBEE S, or DBJ-GB 5-star) as of June 2024. In addition, most certifications are domestic, such as CASBEE and DBJ-GB, which are easier to obtain than LEED. Accelerating the greening of real estate is required to reduce greenhouse gas emissions and meet the 1.5℃ target of the Paris Agreement. One quick way to achieve this is by aiming for more and higher ranking rewards in a stricter green buildingcertificationsystem.
*Based on information obtained from each J-REIT's website in mid-June. The total number of domestic properties owned by the top 15 J-REITs is 1,886: 498 office properties, 266 retail properties, 336 logistics properties, 139 hotels, and 647 residential properties. The area is a reference value as some properties are listed with GFA, and others are listed with NLA
* For properties that have acquired multiple certifications, if they have LEED, they are counted as LEED-certified, if they do not have LEED but have CASBEE, they are counted as CASBEEcertified, and if there is neither LEED nor CASBEE, they are counted as DBJ-GB-certified.
Figure1:Shareofgreen-building-certified propertiesamongtop15J- EIT ’p p
DBJ-GB
CASBEE
02
Strategiesand opportunities inJapanese R&Dsites
Investment in the Japanese real estate market increased by 21% year-over-year in the first half of 2024, partly due to increased divestiture activity among listed companies.
Supported by a new trend in corporate real estate (CRE) strategies, companies are also exploring the future of workspaces and industrial assets such as research and development (R&D), manufacturing and logistics. This article focuses on corporate R&D centres, comparing in-house properties (including single-tenant and company-owned) with multi-tenant properties. We also examine corporate attitudes toward opening new R&D centres, and explore the
real estate features that align with new strategies and derive business opportunities in the next-generation real estate market.
JLL analysed 214 cases of domestic companies establishing new R&D centres from 1 January 2020 to 31 August 2023. The majority were in-house properties (146 cases), but there were also 54 multi-tenant properties. Figure 1 shows the distributionofrealestate-relatedmotivations(fourcaseswith unspecifieduse).
Author Research Manager YukiMatsumoto
Source: Complied by JLL based on company disclosures and various media reports, using 214 cases of R&D centre openings by companies that opened, or announced planstoopen,inJapan between January1,2020,andAugust 31,2023
Note: In cases where multiple establishment motives were applicable, they were categorized accordingly, resulting in instances of duplication Additionally, only cases supported bycompanyreleasesormediareportswereincluded. Hence,thetotalnumberofcasesmaynotcorrespondtotheoverallcount.
Figure1:Motivationforchoosingalocationbasedonrealestate
The motivation for establishing R&D centres on in-house properties was often the need for space for expansion (32%) or consolidation (21%) However, multi-tenant properties were often chosen for new establishments (76%), offering the flexibility and speed to choose a suitable location This is particularly popular with companies exploring new or unexplored R&D areas Recent trends indicate an increasing preference for larger R&D properties, suggesting that multitenant locations may become even more attractive for expansionandconsolidationinthefuture
Considering motivations related to the R&D activity, regardless of property type, promoting knowledge exchange is a key factor (Figure 2; 54% in total, 42% in in-house, and 76% in multi-tenant).Consolidationandestablishingabaseinarental facility in an urban area or around a university can enhance interaction with customers and external research institutions and improve communication. In many cases, the motivation for acquiring talent was included in the decision to locate a multi-tenant property (20%). Research-focused companies often require highly skilled researchers and face fierce internationalcompetitiontoacquiretalentedpersonnel.Stateof-the-art facilities and a high-quality working environment are important considerations regardless of property type. Still, due to the difficulty securing space in urban areas, talent-focused companies are increasingly likely to choose multi-tenant properties.
The rapid growth of the life sciences sector and associated demand for rental R&D space has driven a significant increase in R&D real estate investment in the United States This industry is also growing in Japan, and the current socioeconomic backdrop of shifting corporate CRE strategies and a tight talent supply is expected to accelerate the demand for rental real estate in the Japanese R&D sector Reflecting the growing demand, rental R&D spaces with a variety of locations and concepts are expected to be developed, providing more optionsfortenantcompaniesandinvestors
Source:Complied byJLLbased oncompany disclosures andvariousmedia reports,using 214casesofR&D centreopenings by companies thatopened, orannouncedplanstoopen,inJapan between January1,2020,andAugust 31,2023
Note:Incaseswheremultiple establishment motives wereapplicable, they werecategorized accordingly,resulting ininstances ofduplication
Additionally, onlycasessupported bycompany releasesormedia reportswereincluded.
Hence,thetotalnumber ofcasesmaynotcorrespondtotheoverallcount.
Figure2:MotivationforchoosingalocationbasedonR&Dactivities
Investment
1
Globalinvestment volumesreturnto growth
Globalrealestateinvestment volumes in1Q-3Q
2024increased y-o-yforthefirsttimeinawhile.
Investment volumesintheAmericas,whichhad been declining y-o-y,leveled offfromtheprevious quarterandseemed tohavebottomedout.
Investment demandremainsstrong despiterisinginterestrates
Evenamidrisinginterestrates,theaggressive lending stance ofbanks remainsunchanged, and investment demandremainsstrong,resulting ina limitedimpactontherealestateinvestment market.
Japan’sinvestmentvolumesincrease significantly
Numerous hoteltransactionstookplace across Japan,andinvestmentvolumesincreased significantlyy-o-y.
Largetransactionswereseen inavarietyof sectors, including largeoffices bydomestic investors andlargelogisticsfacilitiesbyoverseas investors.
Outlook
Considering thepipeline ofmultiplelarge-scale transactionsandtheappetiteofinvestors to acquire properties, theinvestment volumein2024 isexpected toreachJPY5trillion.
In2025,withtherecovery ofoverseas investor investment andthediversificationofdomestic investors, continued activityinJapan'srealestate marketisexpected.
Japaninvestment volume
• In3Q24,domesticrealestateinvestmentvolumewas up38%q-o-qand110%y-o-ytoJPY1,246.2billion (USD8.00billion,up95%y-o-y).
• Investmentvolumein1Q-3Q24totalledJPY3,856.7 billion,up40%y-o-y.
Source: JLL
HistoricalJapaninvestment volume
Historicalinvestment volumesharebySector
Sectoranalysis
• Theshareofofficeinvestmentin1Q-3Q24was37%, expandingfrom33%forfull-year2023.
• HoteltransactionswereseenalloverJapan,from HokkaidotoOkinawa,andthesharewas21%,the highestsinceJLLbegantrackingin2008.
• Ontheotherhand,theretailsharewas8%,down slightlyfrom11%forfull-year2023.Theshareof logisticsfacilitieswas18%,downsignificantlyfrom 26%forfull-year2023.
• Theshareofmultifamilyhousingincreasedslightlyto 14%.
Source: JLL
Historicalinvestment volumesharebylocation
Locationanalysis
• In1Q-3Q24,theshareofTokyoCBD(5-kus)was27%, slightlydownfrom28%forfull-year2023.
• TheshareofGreaterTokyo(excludingTokyo),or Chiba,SaitamaandKanagawaprefectures,was12%, alsodownfrom17%infull-year2023.
• TheshareofGreaterOsakawas22%,thehighest sinceJLLstartedtrackingin2008.
Source: JLL
Note:TokyoCBC(5-kus) referstoChiyoda-ku, Chuo-ku,Minato-ku, Shinjuku-ku andShibuya-ku; GreaterTokyoreferstoTokyo,Chiba,SaitamaandKanagawa;GreaterNagoyareferstoAichi, Gifu andMie;Greater OsakareferstoOsaka,Hyogo,KyotoandNara; GreaterFukuoka referstoFukuoka, Saga,Nagasaki,Kumamoto, Oita,Miyazaki, KagoshimaandOkinawa.
Office
• Netabsorptionoutperformsexpectations.
• Vacancyratefallstothelow3%range.
• Rentscontinuetoriseforthreeconsecutivequarters.
Fundamentals
AccordingtotheTankanSurveyinSeptember,thediffusionindexof largemanufacturerswasinlinewiththepreviousquarterat13.The indexoflargenon-manufacturerswas34androseforthefirsttimein twoquarters.Relocationdemandamongcompanieshasbeen strong.NetabsorptionintheGradeAofficemarketinTokyowas 91,300sqminQ32024.Byindustry,thefigurewasdrivenby informationandcommunications,manufacturing,andfinanceand insurance.
OneGradeAofficebuildingenteredthemarketinQ32024,namely TodaBuilding(NLA:34,500sqm),increasingstockby0.3%q-o-q. Tokyo'svacancyrateintheGradeAofficemarketinQ32024 averaged3.1%andfell50bpsq-o-qand160bpsy-o-y.However,by submarket,thevacancyrateroseslightlyinOtemachi/Marunouchi, whileitvastlyimprovedinAkasaka/Roppongi.
RentsinTokyo'sGradeAofficemarketaveragedJPY34,610per
tsubo,permonth,up1.1%q-o-qand3.1%y-o-ybyend-Q32024. RentsroseinbothAkasaka/RoppongiandOtemachi/Marunouchias vacanciesfilled,particularlyinAkasaka/Roppongi.Capitalvaluesin Q32024rose1.4%q-o-qand4.8%y-o-y,supportedbyariseinrents andunchangedcaprates.NotabletransactionsincludedNomura RealEstateMasterFund'sdispositionofHarumiIslandTritonSquare OfficeTowerY(stratatitle)forJPY23billion.
Outlook
AccordingtoOxfordEconomics'forecastasofSeptember2024,the GDPgrowthfortheendof2024is0.2%andtheCPIis2.3%.Risks includehigherinflation,volatilityinfinancialmarketsandpolitical uncertainty.Tenantsareexpectedtorelocatetomorecompetitive buildingswithmoreavailableopportunities,whichwillcontributeto furtherrentgrowth.Capitalvaluesareexpectedtoriseintoyear-end duetorisingrents,andcapratestoremainunchanged.
Note:Financialandphysical indicators areforthe5KusGradeAoffice market.Datais onanNLAbasis.
Historicalsupplyanddemandtrends
(thousands)
Osaka
• Officedemandexpandsduetoactivecapitalinvestmentbycompanies,vacancyabsorptionprogresses
• Focusonleasingtrendsfornewlyconstructedbuildingswithhighrentlevels
• InvestmentinOsakaisbooming,andcontinuedgrowthofthetransactionvolumeisexpected.
Fundamentals
Note:Financialandphysical indicators areforthe5KusGradeAoffice market.Datais onanNLAbasis.
TheSeptemberTankanSurveyforGreaterOsakashowedthat businesssentimentroseto14pointsfrom10forlargemanufacturers, andthatoflargenon-manufacturerswasunchangedat33points.Net absorptiontotalled16,000sqminQ32024.Companieswithstrong performancerelocatedtoimprovebuildinggradeforrecruitmentand efficiency.Relocationswereseeninmanufacturing(e.g.,chemical industry),informationandcommunicationscompanies(e.g., softwaredevelopment),,andwholesaleandretailtradesectors.
TherewasonenewcompletioninQ32024,PRIMEGATEUMEDA(Kitaku).LocatedneartheUmekitaarea(NorthernUmedaandOsaka Station),itisa12-storeybuildingwithatotalfloorareaof15,000sqm. TheQ32024vacancyratedeclinedto3.8%,adecreaseof30bpsq-oqbutanincreaseof110bpsy-o-y.Absorptionwasseeninnewhighqualityandrelativelyinexpensiveexistingproperties.
Outlook
AccordingtoOxfordEconomicsforecastasofSeptember,Osaka City'srealGDPisexpectedtogrowby0.4%inboth2024and2025.In therentalMarket,soliddomesticdemandandtheupcomingKansai Expocontributetopositivecorporatesentimentandstrongdemand forofficespace.However,fewlargecompaniescanaffordhighrents, andsomenewhigh-specandhigh-rentbuildingshavesubstantial vacancies.Tenantattractionprogressforupcominglargeproperties maypressureexistinghigh-rentproperties.Gradualrentdeclineand risingvacancyratesareexpectedfromQ32024toQ32025.Inthe investmentmarket,theOsakaareaisbooming,particularlyinthe hotelandofficesectors.Solidinvestmentappetitestimulatedby robustrentaldemandwasevidentinlarge-scaleproperty transactions.Continuedgrowthininvestmentvolumeisexpected.
TheaveragemonthlygrossrentpertsubowasJPY22,935,anincrease of1.1%q-o-qand1.8%y-o-y.Affordablebuildingsareseeingupward rentrevisionsduetohighdemand.
Historicalsupplyanddemandtrends
(thousands)
Fukuoka
• Relocationdemandfornewofficeopeningsandupgradescomesfromindustriesincludingmanufacturing
• Vacancyratecontinuestodecreasewithlimitedsupplyofexistingbuildingswithgoodattributes.
• Rentscontinuetoedgeupmarginally.
Netabsorptionwas1,500sqminQ32024.Relocationdemandfor newofficeopeningsandupgradescamefromindustriesincluding manufacturing,informationandcommunications,andfinancialand insurance.Kyudenkoannounceditsheadquartersrelocationin spring2025,duetotheageingofthecurrentbuildingandtoadopt diversifyingworkstyles.ItwillmovetotheOneFukuokaBldg,which willbeanewlandmarkbuildinguponcompletioninDecember2024.
NonewsupplywasseeninQ32024.Thevacancyratereflected5.2%, down0.3pointsq-o-qand1.7pointsy-o-y.Thedeclinewasobserved forthefifthconsecutivequarter.ThevacancyratedecreasedinGion, GofukumachiandNakasuareas,whererelativelynewcompleted buildingssawavacancydecreaseonthebackoflimitedsupplyin existingbuildingswithgoodattributes.
RentsaveragedJPY20,218pertsubo,permonthin3Q24.Thiswasan increaseof0.2%q-o-qand1.9%y-o-yforthefifthconsecutivequarter
ofincrease.WhileHakataStationareasawrentgrowthontheback ofatightsupply-demandbalance,aportionofrelativelysubordinate buildingsadjustedrents,resultinginonlyasmallincreaseoverall. Capitalvaluesdecreased0.2%q-o-qandincreased2.2%y-o-y,the firstfallinfivequarters.Rent-freeperiodsremainedmostlystable whileneteffectiverentsfellslightly.Investmentyieldsremained unchanged.
Outlook
Intheleasingmarket,vacancyratesareexpectedtoriseandplace downwardpressureonrents;notwithstanding,demandisexpected toremainstrong,giventhemajorvolumeinfuturesupplywhere therearesignsofanexpansionofrent-freeperiodsinforward commitments.Intheinvestmentmarket,appetiteforinvestmentsby J-REITs,localcompaniesanddomesticandforeigninstitutional investorsremainshigh.Underthesecircumstances,investmentyields arelikelytoremainstableordeclinedependingontheproperty.
Fundamentals
absorption Newsupply Vacancyrate
Retail
• Domesticandinternationalconsumerssupportstrongluxurygoodssales.
Fundamentals
• Demandforprimeretailspaceremainedstrong,ledbyinternationalanddomesticretailers.
• RentscontinuetorenewrecordhighsinbothGinzaandOmotesando.
Withstableconsumerconfidenceandincreasesinemployeewages, therealconsumptiontrendindexwasstable.Meanwhile,Tokyo's departmentstoresluxurygoodssalesincreased26.0%y-o-yinJanJul,andtouristconsumptionincreased73.5%y-o-yinQ22024. Demandforprimeretailspaceremainedstrong,ledbyinternational anddomesticretailersinQ32024.Newopeningsinthequarter includedChaumetopeningatOmotesandoHills.Thereopeningof CelineatGinzaSixtookplace,withexpansionacrossfloors.
NewsupplyinQ32024includedOmotesando.OJProject(tentative name),alow-riseretail-ledbuildingwithtwostoreysaboveground. GinzaSonyParkwascompletedwithagrandopeningplannedfor January2025;however,itsusewillfocusonexperienceconsumption. TheoutlineoftheGinsenOmotesandoProjecthasbeenconfirmed.A retail-ledbuildingwiththreestoreysabovegroundwithaGFAof 1,300sqmwillbecompletedonasidestreetinOmotesandoin2027.
97,527p b , permonthinQ32024,increasing3.0%q-o-qand14.3%y-o-y. Ground-floorrentscontinuedtorenewrecordhighsinbothGinza andOmotesando.CapitalvaluescontinuedtogrowinQ32024, increasing3.3%q-o-qand16.5%y-o-y.Theincreasereflectedgrowth inrentsascapratesremainedstable.Notabletransactionsinthe quarterincludedKenedix'sacquisitionofretail-ledOndenFlatin Omotesando'sfringes.
Outlook
OxfordEconomics'October2024outlookhasprivateconsumptionin 2024at-0.2%;in2025thefigureisexpected toaccelerateto1.6%. Consumptionrecoveryisexpectedtoextendasrealwagesare improving.Intheleasingmarket,rentsareexpected togrow,albeitat aslowerpace,reflectingstrongdemandfromaffluentinternational brandsagainstalimitedsupplyofprimespace.Intheinvestment market,capitalvaluegrowthisexpected toreflectrentgrowth.
Grossrent JPY97,527pertsubop.m. RentgrowthY-o-Y 14.3% Stageinrentalcycle RentsRising RetailSales
Note:Financialindicators arefortheprime retailmarketsofGinzaandOmotesando, while retailsalesgrowthfigures areforTokyoPrefecture. DataisonanNLAbasis.
Retailsalesgrowth
Logistics
Fundamentals
• Robustdemandfrom3PLsandonlineretailers.
• Overallvacancyincreasesforthefirsttimeintwoquarters.
• Averagerentsgrowmoderately.
Strongdemandfrom3PLsandonlineretailers,coupledwithmajor newsupply,sawnetabsorptionreacharobust448,000sqminQ3 2024.Foryeartodate,thefigurewasmorethan1,251,000sqm.As transportcostsrise,demandforpropertieswithgoodaccesstothe citycentreisstrong,whilepropertiesinfringeareaswithhigher transportcoststothecitycentrearestruggling.
Newsupplytotalled566,000sqminQ32024,increasingtotalstockby 3%q-o-qand11%y-o-y.Sixfacilities,includingMFLPLOGIFRONT TokyoItabashi(NLA219,000sqm),HulicLogisticsHashimoto(NLA 55,000sqm)andCBREIMNoda(NLA98,000sqm),enteredthemarket. ThevacancyrateinGreaterTokyostoodat9.9%forQ32024, increasing30bpsq-o-qand230bpsy-o-y.Thevacancyrateinthe Bayareafellto8.1%,decreasing10bpsq-o-q,whileTokyoInland reached10.6%,increasingby40bpsq-o-q.
GrossrentsinGreaterTokyoaveragedJPY4,687pertsubo,permonth inQ32024,increasingby1.1%q-o-qand2.3%y-o-y.RentsintheBay
areaincreased0.5%q-o-qand1.4%q-o-qintheInlandarea, reflectingnewcompletionswithrelativelyhighrents.
CapitalvaluesinGreaterTokyohasincreasedby0.8%q-o-qandby 1.6%y-o-yinQ32024,reflectingastablecaprateandrentgrowth.A notablesalestransactioninvolvedGICacquiringDPLYokohama Totsuka.
Outlook
Asdemandcontinuestogrowandconstructioncostsrise,overall rentsareexpectedtogrowmoderately;however,giventhehigher vacancyrate,rentsarelikelytobeunderdownwardpressureinsome Inlandareas.AccordingtoOxfordEconomics,thelong-terminterest rateisexpectedtoriseforthenextfewyears.However,thereisstrong investmentdemand,especiallyfromcoreinvestors.Capitalvalues areexpectedtogrowascaprateswillremainrelativelystableand rentswillincrease.
Note:Tokyologistics referstotheGreaterTokyoprime logistics market.Dataisonan NLAbasis.
Historicalsupplyanddemandtrends
s.m.(thousands)
Osaka
• Vacancyraterisesduetovacanciesinnewlysuppliedproperties
• Steadydemandcontinues,withexistingpropertiesseeingvacancyabsorption
• Rentsexpectedtocontinuerisingduetoincreasedconstructioncosts.
In3Q24,theOsakaareacontinuedtoseesteadydemandforlogistics facilities,withnetabsorptionreaching242,000sqmduetodemand fornewpropertiesandtake-upatexistingones.For1Qto3Q2024, netdemandtotalled686,000sqm.
Thenewsupplyin3Qtotalled297,000sqm,increasingthetotalstock by4%q-o-qand14%y-o-yto6,973,000sqm.GLPALFALINKIbaraki1 andDPLOsakaMaishimawereamongthenewlysuppliedprojects. TheoverallvacancyratefortheOsakaarearoseto3.0%,up0.7ppts q-o-qbutdown0.4pptsy-o-y.TheOsakaBayArea'svacancyrate increasedby0.9pptsq-o-qto2.2%,whiletheInlandarearoseby0.4 pptsq-o-qto4.0%.
RentsincreasedtoJPY4,145pertsubo,permonth,up0.6%q-o-q and1.8%y-o-y.Highrentsfornewpropertiesarepushingupoverall rents,soexistingpropertiesarealsoseeinggradualrentincreases, followingthetrendofnewproperties.
Reflectingtherentincreases,capitalvaluesforlogisticsfacilitiesin theOsakaareacontinuedtoshowanupwardtrend.
Outlook
TheleasingmarketisexpectedtoseeincreasednewsupplyinInland areasfrom2025onwards,likelyleadingtoariseinvacancyrates.The overallvacancyratefortheOsakaareaisprojectedtoincreaseto around6–8%.However,propertieswithcompetitivelocations, buildingspecificationsandrentsareprogressingwithprecommitments,suggestinghighoccupancyratesuponcompletion.
Newpropertiesareexpectedtocontinueseeingrentincreasesdueto soaringconstructioncosts.Existingpropertiesarealsolikelyto experiencerentincreases,drivenbynewpropertyrents.Whilethere areconcernsabouttenantabilitytobearhigherrents,existing propertiescontinuetomaintainhighoccupancyrates,andrent increasesareexpectedtocontinue.
Fundamentals
YTD
Note:Osakalogistics referstotheGreaterOsakaprime logistics market.Dataisonan NLAbasis.
Historicalsupplyanddemandtrends
(thousands)
Fukuoka
• Vacanciesarelimitedtosomenewlyconstructedproperties
• Steadydemandcontinues,withhighoccupancyinexistingproperties
• Rentsexpectedtocontinuerisingduetoincreasedconstructioncosts
In3Q24,theFukuokaareacontinuedtoseesteadydemandfor logisticsfacilities,withnetabsorptionreaching48,000sqm,primarily drivenbydemandfornewproperty.For1Qto3Q2024,net absorptiontotalled266,000sqm.
Thenewsupplyin3Qwas83,000sqm,increasingthetotalstockby 6%q-o-qand27%y-o-yto1,516,000sqm.LogiportFukuokaKasuya wasthenewlysuppliedproperty.Theoverallvacancyrateforthe Fukuokaarearoseto5.6%,up2.1pptsq-o-qbutdown1.4pptsy-o-y.
RentsincreasedtoJPY3,482pertsubo,permonth,up1.2%q-o-q and4.4%y-o-y.Highrentsfornewpropertiesarepushingupoverall rents,andexistingpropertiesarealsoseeinggradualrentincreases, followingthetrendofnewproperties.Reflectingtherentincreases, capitalvaluesforlogisticsfacilitiesintheFukuokaareacontinueto showanupwardtrend.
Outlook
Therearefewpropertieswithvacancies,andmanyexisting propertiescontinuetomaintainhighoccupancyrates.Properties underconstructionarealsoprogressingwithtenantprecommitments,suggestingthatthetightsupply-demandsituationis likelytocontinue.
Newpropertiesareexpectedtocontinueseeingrentincreasesdueto soaringconstructioncosts.Existingpropertiesarealsolikelyto experiencerentincreases,drivenbytherentsofnewproperties.
InvestorinterestinFukuoka'slogisticsfacilitiesremainshigh,partly influencedbysemiconductorplantdevelopmentsinKumamoto. Stronginvestmentdemandandrisingrentsareexpectedtodrive continuedincreasesinpropertyprices.
Fundamentals
Note:Fukuoka logisticsreferstotheGreaterFukuoka prime logisticsmarket.Datais onanNLAbasis.
Historicalsupplyanddemandtrends
Hotel
• Strongtourismgrowthledbygrowinginterestfromdiversemarkets.
• Futurehotelsupplysignificantlyimpactedbysoaringconstructioncosts.
• Record-highperformancecontinues.
Fundamentals
InSeptember2024,internationalarrivalsreachedarecordhighof 26.9million,10%higherthanin2019.Thetopfivesourcemarkets wereSouthKorea,China,Taiwan,USAandHongKong.Chinese visitorsarestillrecoveringto2019levels,butatanacceleratedpace. AccordingtotheJapanTourismAgency,domesticguestsaccounted foraround60%ofTokyo'sovernightdemandin2019and2023.Asof YTDJuly2024,internationalguestsreached51%oftotalovernight staysinTokyo,surpassingdomesticguestsforthefirsttime.
TherewerenoopeningsofnewinternationalbrandhotelsinQ32024. Noopeningsofupscaleorluxuryhotelsareplannedin2024. However,in2025onwards,someluxuryhotels,suchasJWMarriott, FairmontandWaldorfAstoria,arescheduledtoopen.
Tokyoregisteredacontinuedincreaseintradingperformanceinall hotelsegmentsinQ3.Therisingnumberofinternationaltouristshas
ledtoasignificantimprovementinaveragedailyrate(ADR).Inthe luxuryandupper-upscalesegments,ADRaswellasrevenueper availableroom(RevPAR)arecontinuingtoachieverecordhighsevery quarter,althoughoccupancyhasnotfullyrecoveredto2019levels yet.
Outlook
Withstronginbounddemandandweakyen,hotelsarefocusingon increasingADRratherthanoccupancy.Therefore,whileinternational arrivalsareatrecordhighs,ADRisexpectedtocontinuetoreachnew highs,butoccupancywilltakesometimetoreturnto2019levels.An emergingmarkettowatchistheapartmenthotel.Developersand investorsareincreasinglyinterestedinthistypeofhoteltargeting inboundfamilyandgrouptravel.Thisnewsegmentisexpectedto continuetogrow.
newsupplytrends Note:TokyoHotelsrefertoTokyo'soverallhotelmarket.
Sustainability
GreenBuildingsinJapan
• LEEDcertificationsacquiredin1Q-3Q2024exceedfull-year2023.
• WELLcertificationsawardedtothreeofficesinTokyoCBD.
• TheJapaneseversionofSustainabilityMarketDynamicsfeaturesrealestateresilienceassessment.
SixacquiredLEEDcertificationin3Q24.Noprojectswereawarded Platinumcertification.In1Q-3Q2024,33certificationswere acquired,exceedingthe30forfull-year2023.Thetotalnumberof certifiedprojectssince2009hasreached287,anincreaseof2.1%qo-q.
Forty-threeprojectsacquiredCASBEE-BDcertificationin3Q24in varioussectors,includingoffices,retail,logisticsfacilities,hotels andresidentialproperties.ThetotalnumberofCASBEE-BDcertifiedprojectsincreasedby7.0%q-o-qto461.
CASBEE-REcertificationwasacquiredby129projectsin3Q24,a decreaseq-o-qandy-o-y.ThetotalnumberofCASBEE-RE-certified projectsreached1,948,anincreaseof6.1%q-o-q.
ThreeprojectsacquiredWELLcertificationin3Q24.OnePlatinumawardedprojectwasarealestateofficeinTokyoCBD(WELLv2: projectsOfficeSpaces).ThetotalnumberofWELL-certifiedprojects hasreached58,anincreaseof5.5%q-o-q.
NoprojectsacquiredFitwelcertificationin3Q24.Thetotalnumber ofFitwel-certifiedprojectsremainedatfive.AlthoughFitwelisstill relativelyunknowninJapan,therewere1,773validcertificationsin 35countriesaroundtheworldasofend-3Q23,slightlymorethan theWELLcertifications.
TenprojectsacquiredCASBEE-WOcertificationin3Q24,including oneeachinTokyoCBD,Osaka-shiandFukuoka-shi.Thetotal numberofCASBEE-WO-certifiedprojectshasreached170,an increaseof6.3%q-o-q.
Specialfeature:Realestateresilienceassessment
Investigatingthedisasterriskofrealestateisbecoming commonplace,andinvestorsareusingresilienceassessment services,includingMunichREandJupiterIntelligence,thatcan easilygetthephysicalriskofclimatechangebasedonanaddress. However,inJapan,whereearthquakesandfloodsoftenoccur, therearehighexpectationsforthedevelopment ofResReal certification,whichevaluatestheresilienceofeachpropertyby consideringdisastercountermeasuresinadditiontogeographical conditions.
Fundamentals
Note:LEED, WELLandFitwel refertoallratings.CASBEE-BD, CASBEE-REand CASBEEWOrefertoB+andabove.
Source:JLL, USGBC, IBECs,IWBI,Fitwel
Historicalvalidgreencertificationbycertifiedyear
Source:JLL, USGBC, IBECs
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