Investment Market Conditions in Japan Remain Strong as 2025 Approaches

Market Overview: Japan's Real Estate Investment

Cushman & Wakefield (C&W), a global leader in real estate services headquartered in Chicago, has released its latest report on the investment climate in Japan, indicating continued optimism in the funding environment for real estate investment as we approach 2025.

Economic Context

The macroeconomic backdrop suggests a stable investment environment, with Japan's real GDP growth forecasted to be approximately +0.8% year-on-year in 2025. Concerns surrounding U.S. import tariffs negatively impacting manufacturing, alongside a global economic slowdown, remain significant. The International Monetary Fund (IMF) predicts a decline in the global real GDP growth rate from +3.3% in 2024 to +3.0% in 2025.

In terms of domestic interest rates, the Bank of Japan is maintaining a cautious stance on increasing policy rates, adjusting to the economic deceleration related to U.S. tariffs. As of the end of June 2025, the yield on 10-year bonds rose only marginally by 0.4 percentage points from the previous year. Despite a rising interest rate environment, rental income from commercial properties is climbing, contributing to over a 10% improvement in the Tokyo Stock Exchange REIT Index since its lowest point in December 2024. Additionally, the ratio of real estate lending to GDP shows a steady increase, underscoring a favorable funding situation for the investment market.

Transaction Trends: Office Deal Volumes Rise

Currently reported investment transactions for the past year total approximately 8.8 trillion yen, reflecting a 12.4% decrease from the previous year but exceeding the average of the past five years by roughly 9%. Notably, office transactions—especially high-grade properties in urban areas—have seen a remarkable increase, rising by 17%. Conversely, retail property transactions experienced the most significant decline at 44%, followed by residential rentals and logistics facilities, which fell by 25% and 21%, respectively. These declines are attributed to the rebound effect following a series of large-scale portfolio transactions in the previous year.

Analyzing buyer characteristics, overseas investors have been net buyers since the beginning of 2025, influenced by factors like the depreciating yen and rising rental incomes. Noteworthy transactions, such as the significant acquisition of 'Tokyu Plaza Ginza' by Gaw Capital for approximately 160 billion yen, demonstrate the interest from foreign investors. On the contrary, publicly listed firms, including REITs, have experienced a net selling trend, as evidenced by Yamato Holdings' recent sale of its headquarters, signaling off-balance-sheet strategies in play.

Outlook

Despite persistent uncertainties in the global economy, an acceleration in the Bank of Japan's rate hikes seems unlikely. Expanding fiscal deficits continue to exert upward pressure on U.S. long-term bond yields, suggesting that the interest rate differential between Japan and the U.S. will not narrow significantly, maintaining a trend of yen depreciation. Compared to other Asian nations, which face geopolitical risks and are significantly impacted by U.S. tariff policies, Japan continues to attract steady demand from overseas investors.

Moving forward, the Tokyo Stock Exchange REIT Index remains robust, indicating a healthy investment climate supported by increased fundraising activities targeting domestic institutional investors. Additionally, potential real estate liquidation needs among domestic companies, like Sapporo Real Estate Development and Sumitomo Realty, hint at rising transaction totals in the near term.

In summary, Japan's real estate market appears resilient, with various factors suggesting a promising investment landscape leading into mid-2025. For the latest reports and further information, you can download the Japanese or English version from our website.

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is a prominent global commercial real estate services firm listed on the New York Stock Exchange. With approximately 52,000 employees across 400 locations in around 60 countries, the company reported revenue of $9.4 billion in 2024 through its core services, which include facility management, investment sales, appraisal, tenant representation, leasing, and project management. Valued for its award-winning corporate culture under the motto