Japan’s full-year commercial real estate investment volume for 2024 is expected to exceed the previous year’s record, reaching well above JPY 4 trillion. CBRE expects real estate investment momentum to continue in 2025.

More investors expect real estate prices to appreciate

CBRE’s 2025 Japan Investor Intentions Survey, conducted in late November 2024, found that investors' willingness to purchase commercial real estate in Japan will remain high in 2025. When asked about their expectations for real estate price changes in 2025, the proportion of respondents who anticipate values to appreciate was higher than the results of the 2024 Survey for all asset classes except logistics.

This year’s survey uncovered a noticeable shift in investors‘ pricing expectations for offices. The percentage of respondents who expect prices for large offices to increase rose to 42%, up from 10% in the 2024 Survey. Demand for office space was strong nationwide throughout 2024, leading to a solid upward trend in rents. With some properties expected to see upside in rents outweighing the increase in costs for capital investment and financing, an increasing number of investors appear to be willing to accept low cap rates at the time of purchase.

Roughly one half of respondents expect residential (multifamily) property prices to rise in 2025; significantly higher than the 25% in the 2024 Survey. In addition to rapidly increasing condominium prices, many investors believe that it has become easier to negotiate rent increases, given that tenants’ ability to pay rents is growing on the back of rising wages.

High-street retail units and hotels, which continue to benefit from the recovery in inbound tourism, are also attracting higher expectations for price rises compared to the 2024 Survey. For hotels, three out of four respondents expect prices to rise, with 27% expecting rises of more than 10%. Hotel investment volume reached an all-time high in 2024, with this asset class sure to remain popular in 2025.

Leasing market fundamentals for offices and logistics are increasingly polarized by location and building quality. While CBRE’s survey asked investors for their views on prime assets, actual price trends will vary greatly depending on the specifics of individual properties.

Most investors expect to purchase more or the same as last year

When asked about their buying intentions, a larger proportion of respondents to the 2025 Survey expect year-on-year increases in purchase volumes compared to the previous year’s survey. Some 90% of respondents plan to purchase more or the same volume of real estate as last year, indicating that investors’ appetite will remain robust in 2025 .

Regarding selling intentions, the proportion of investors that expect selling volumes to increase compared to the previous year declined amid rising expectations for higher real estate prices.

However, those that expect selling volumes to remain flat year-on- year increased, suggesting that investors will continue to reshuffle their portfolios in 2025.

Investors anticipate gradual rise in interest rates

Investors' expectations for price appreciation and their strong purchasing appetite are based on the assumption that interest rate rises will remain moderate. Around 78% of investors said that they expect the Bank of Japan’s (BoJ) policy rate hike to be less than 50 basis points in 2025. While the percentage of respondents who expect a rise of 50 bps or more was only 13%, this was higher than the 5% reported in the 2024 Survey .

At its most recent Monetary Policy Meeting, held on December 18-19, 2024, the BoJ kept its target for the policy rate (uncollateralised overnight call rate) unchanged at 0.25%. BoJ’s Governor Ueda is maintaining a cautious stance regarding policy rate hikes, commenting that in order to embark on the next interest rate hike, it is necessary to further confirm that various data are trending in line with BoJ’s scenario, and that he would like to see the momentum of the spring wage negotiations on the sustainability of wage increases.

The main scenario of a gradual rise in the interest rate environment of around 50 basis points during 2025 therefore remains unchanged. However, should interest rates rise at a faster pace, investors’ sentiment could change.