A strong corporate sector and recovering consumer spending continued in the third quarter of 2017, as Japan’s real GDP growth was estimated at around the mid 1% range. Despite remaining at a favourable level, the lending attitude of banks to the real estate industry continued to weaken recording two consecutive quarters of decline, with commercial real estate transaction volumes also dropping. The J-REIT index softened amid gradual long term interest rate rises and continuous capital outflows from J-REIT mutual funds. Leasing markets and real estate fundamentals remained broadly healthy. Office vacancy rates posted a further recovery in major cities, along with average rent and foreign visitors pushing up retail sales. Caution is warranted in the logistics market outside of greater Tokyo as vacancy rates remain elevated in response to recent new construction, although demand remains robust in greater Tokyo. Conditions also remain favourable in the hotel sector.
Source : Deutsche Asset Management