In this month's Asia Pacific Watch we focus on Japan and specifically its office market. Why focus specifically on just one market? Well, from a global
allocations perspective it is large, with Tokyo alone estimated to have office stock of around 56 million SqM, according to JREI. It is also highly liquid with RCA tracking USD 118 Billion of office transactions in Japan since 2008 and USD 11.5 Billion of office transactions in Tokyo for the first half of 2014. Office
performance is improving in Japan and is the last property type to emerge from the steep declines experienced in the 2009 correction. As we had identified in 2012, the core Tokyo office market was a good buy – especially in the prime segments – but yields have fallen considerably as investors have raced to secure quality assets ahead of expected rent growth. Prime offices in second-tier cities and less prime stock in Greater Tokyo are also experiencing a re-pricing effect; although acquisitions can still make sense for core investors the optimal entry point has passed. Given the market conditions we believe that value-add strategies may be a more compelling alternative for many capital sources.
Source : CBRE Global Investors