In this month's Asia Pacific Watch we re-visit the largest core market in the region: Japan. As expected, the implementation of the sales tax hike led to a slowdown in economic activity last year. Consumption aside, the latest manufacturing PMI suggests a solid recovery in production. The economy is also enjoying the sharp fall in "input prices" (mainly lower energy costs) and the Yen has stabilized after its rapid fall last year. BoJ continues to expand the monetary base at an annual pace of JPY 80 trillion per year until inflation settles at the target of 2%.
The real estate fundamentals have continued to trend in a positive direction. Rental growth appears to be moving up in all property types and grades with the recovery of office rents in Tokyo forecasted to be the strongest amongst all sectors. Prime yields have fallen considerably in the past two years. Given the current scarcity of core investment opportunities, investors with the appetite, might consider core-plus and value add strategies. These would target stronger submarkets where the repricing has not as yet reached and where there is repositioning value and/or potential to take on some leasing risk as vacancy rates fall.
Source : CBRE Global Investors