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Non-prime offices accord more choices to investors

Unleashed in late 2012, Abenomics’ potent mix of reflation, fiscal stimulus and structural change has kick started a revival in Japanese real estate. Core assets in Tokyo’s central wards are tightly held and demand for such assets far outweighs the limited opportunities to buy. However, in terms of targets, Class B and C offices form a larger proportion of Tokyo’s office landscape and accord more choices to an investor, Cushman & Wakefield’s capital markets report “Tokyo : Moving up the yield curve” says.


Class B and C offices are usually occupied by small and medium sized enterprises (SMEs) which are prevalent in Japan, forming the bulk of companies in most sectors but more importantly, they are the backbone of the services sector and a crucial link in the supply chain of the manufacturing and export-led sectors. The huge tenant base to draw upon makes investment sense while demand fundamentals have also improved. While closures involving SMEs escalated in the aftermath of the financial crisis in 2008, leading to higher vacancies, it has recovered fairly well and is expected to improve continually. Rents are also more stable and just coming out of the trough – which would also provide more rental upside.


Tokyo’s retail assets are enjoying buoyant income streams, with rents returning to pre-crisis levels. Japan will continue to remain a priority for most international retailers looking to expand into the region as they know they are entering into a high income economy. Similar to the office sector, core retail assets available for sale in the central wards are limited. However, there are still opportunities in the regional submarkets for investors who are willing to take on an asset with unrealized potential – which would require some investment towards repositioning, through refurbishments and adjusting of the existing tenant mix to raise footfalls and increase rental yields.

John Stinson, Cushman & Wakefield’s head of Asia Pacific Capital Markets, said: Japan remains the number one Asia Pacific investment destination for foreign investors. The strong fundamentals across the retail, office and logistics sectors set against a backdrop of positive and sustainable macro-economic signals will continue to generate strong transaction volumes in 2015 and 2016 as investors seek exposure to one of the world’s largest property markets. “   

Brian DeFoe, Director, Investment Sales, Cushman & Wakefield Japan, said: “Japan last year hosted a record number of tourists (more than double the number in 2011); especially Chinese who are packing the shopping streets of Tokyo to take advantage of a weakened yen and the expanded sales-tax exemptions for overseas visitors. At the same time more overseas retailers are clamoring to enter into the Japanese market, leading to strong demand for Tokyo retail space until the 2020 Summer Olympics, at a minimum.

Keisuke Yanagimachi, Cushman & Wakefield’s head of Research Japan, said: Non-prime offices generally accord more stability in operating income as compared to prime grade buildings, due to its more stable rental profile and a lower peak-to-trough ratio.

For further detail about the market, please [view the full report – LINK].


For more information, please contact:

Keisuke Yanagimachi

Cushman & Wakefield

Tel: + 81 3 3596 7098

About Cushman & Wakefield

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