"The 23W residential market sustained its positive momentum over the quarter, with most wards recording robust quarterly rental growth, driven by tight demand and supply fundamentals. It is highly likely that average rents in our monitored portfolio appear higher than the reality and seasonality accelerates this momentum, but this should be a good indicator of the current hot market."

"Prospects for the retail sector look strong, with vacancies generally on a declining trend, and strong rental growth observed in prime areas. Inbound tourists continue to play an important role in shaping the market, especially for luxury and high-end retail. That said, non-prime areas have not seen similar levels of success, and vacancies in such areas are visible. On another note, the strong performance of high-end retail has spread to tourist hotspots, which could be areas with great potential for future growth."

"Improvements continue unabated and appetite for office space remains firm. This has contributed to rental growth, and raises the prospect of the uneventful absorption of incoming space. However, some weaknesses persist, with a few completions struggling to gain traction. In addition, high construction costs appear to be delaying relocations and development projects."

"The 23W residential market has extended its growth after a brief pause in the previous quarter, with most wards recording quarterly rental increments. Net migration into the 23W remains positive, and has surpassed historical records. Meanwhile, subdued supply and strong wage growth provide greater confidence for continued rental growth."

"Overall demand in the logistics sector remains sound, but high levels of new supply in recent years have kept vacancies on a rising trend. In addition, many challenges, including global uncertainties, labour shortages, interest rates, and construction costs, have kept many players on their toes. That said, the logistics market is evolving, with strong fundamentals in a longer-term timeframe. In the interim, prime logistics facilities with modern amenities in accessible areas should continue to perform well, although older facilities in less convenient areas are likely to face challenges."

"As recently as three decades ago, Japan was extremely successful, but its recent performance has become rather subdued. The declining population, and the abruptly weakened currency in recent years have raised some concerns regarding the prospects of the economy and real estate market. Nevertheless, looking ahead at the next ten years, Japan looks poised to normalise itself, and the economy and real estate market are likely to fare well in turn."

"The Tokyo office market has seen consecutive quarters of improvement, suggesting that the market has firmly transitioned to a recovery phase. Firm office demand levels are supported by moderate amounts of new supply in 2024. Looking ahead, 2025 will bring significant new supply, but pre-leasing appears encouraging. Bifurcation is expected to persist, largely influenced by location and age."

"Following the strong rental growth in the previous quarter, the 23W market posted a marginal quarterly rental correction, while the C5W experienced moderate rental growth in Q2/2024. This spring moving season brought a large net increment of over 65,000 people to the Tokyo 23W, while increasing office attendance and recent robust wage growth should also contribute to strong and stable rental demand."

"The branded residence segment has long been a niche one in Japan, and stock has been extremely limited. That said, changing preferences among domestic UHNWIs and greater interest in Japan as a global tourist destination has boosted the profile of the sector. A slew of branded residence developments located in central urban areas have been receiving significant interest, and the segment appears to be going from strength to strength."

"The retail sector has continued improving, especially in areas popular with inbound tourists, and there have been more store openings catering to international visitors. Lukewarm domestic consumption should also improve due to noticeable wage growth. While prime areas are performing very well, some non-prime areas are still struggling, showing some bifurcation in the market. The optimistic market sentiment has led some landlords to eye rental increments, in contrast to tenants who already have had operating margins thinned from rising costs, and this gap in expectations is likely to persist."