JAPAN: Commercial Property Transactions Drop 25% Year-Over-Year in Q2

Global property consultant CBRE reported this week that Japan's commercial real estate transaction volume for Q2 2024 fell by 25% year-over-year to JPY 663.0 billion.

Notably, significant hotel transactions pushed the sector's acquisition volume to JPY 280.0 billion, roughly 2.6 times higher than the volume recorded in the same quarter last year, and representing about 40% of the total transaction volume for the quarter. The hotel sector's cumulative transaction volume for the first half of 2024 increased by 49% compared to the previous year. Additionally, office transactions rose 47% year-over-year to JPY 180.0 billion. However, investment volumes in the retail, residential, and logistics sectors saw declines.

CBRE also highlighted that the J-REIT acquisition volume for the quarter (including transactions below JPY 1 billion) decreased by 22% year-over-year to JPY 169.8 billion. This represents a significant drop from the January-March quarter, which saw several major J-REIT deals. Over half of the J-REIT transaction volume this quarter was in the hotel sector. Despite the decline in the TSE REIT Index since the start of the year, hotel REITs have shown positive returns.

According to CBRE's Cap Rate Survey for this quarter, expected yields for prime Tokyo assets across all sectors either fell or remained stable. No regional office areas saw an increase in expected yields, suggesting that recent interest rate hikes have been largely offset by narrowing yield spreads.