IntelligentInvestment

Market

Outlook2026

REPORT

JAPAN

REALESTATE

CBRERESEARCHASIAPACIFIC

AsiaPacificRealEstateMarketOutlook2026|Japan

2CBRERESEARCH?2025CBRE,INC.

Contents

01MacroEnvironment

02Investment

TheJapaneseeconomyisexpectedtoseemoderategrowththrough2026.Privateconsumptionshouldremain

firmgivengovernmentmeasurestoaddresseconomicandinflationaryissues,whilecontinuedaccommodative

lendingconditionsareanticipatedtoleadtoanexpansionofcorporatecapitalinvestment.Interestratesare

expectedtocontinuetotrendgraduallyupward.

Full-yearinvestmentvolumefor2025issettotopJPY6trillion,establishinganewsingle-yearrecordhigh.

Activityshouldremainrobustin2026,withCBREprojectinginvestmentvolumestoreachalevelnotfarfrom

2025,sfigure.Whileinterestrateincreaseshaveacceleratedsomewhat,theaccommodativestancemaintainedby

financialinstitutionsandsteadilyrisingrentsshouldsupportinvestors’appetiteforrealestateinvestments.

03Office

04Logistics

05Retail

Officerentsroseacrossallcitiesin2025onthebackofrobustleasingactivityfromtenantswhosestrongcorporateperformanceencouragedthemtoimproveofficeenvironmentsorexpandfloorspace.Structurallabordeficienciesshouldensurethatdemandremainssolidinto2026andbeyond.Vacancyratescontinuetohoveratextremelylowlevelsinmostcities,withanylooseningofthesupply-demandbalanceresultingfromlocalizedsupplyexpectedtobelimited.Rentsareprojectedtoincreaseinallcities.

ThevacancyrateinGreaterTokyohasalreadybeguntofallfromitspeakinQ12025,andisprojectedtodroptothe7%rangewiththesharpdeclineinnewsupplyin2027.GreaterOsakaisexpectedtomaintainarobustsupply-demandbalanceevenafterseeingrecord-breakingnewsupply.Onthebackofeffortstoachievelogisticsefficiency,tenantdemandisspreadingfromGreaterTokyotootherregionsacrossthecountry.

InQ32025,thesupply-demandbalanceinJapan’sretailmarketremainedextremelytightnationwide,withfouroftheninesurveyedhighstreetareasrecordingvacancyratesof0.0%andtwoareasbelow1.0%.Rentsareprojectedtocontinuerisingnationwideonthebackofrobustretailerdemandforstorefrontspace.

AsiaPacificRealEstateMarketOutlook2026|Japan

01

Macro

Environment

3CBRERESEARCH?2025CBRE,INC.

AsiaPacificRealEstateMarketOutlook2026|Japan

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01MacroEnvironment

Gradualeconomicgrowthsettocontinue

JapanrecordedpositiverealGDPgrowthforfiveconsecutivequartersfromQ22024toQ22025.WhilerealGDPdroppedby1.8%q-o-qinQ32025(firstpreliminaryestimate),privateconsumptionandcorporatecapitalinvestmentcontinuedtomakepositivecontributions,suggestingthattheeconomyiscontinuingtorecovergradually.OnApril2,2025,theTrumpadministrationannouncedtheimplementationofreciprocaltariffsontheU.S.’stradingpartners,creatingconcernsofeconomicstagnationinboththeU.S.andelsewhere.However,progressintradenegotiationsandtheremovalofsomeofthesetariffsensuredthattheU.S.economyremainsresilient.InJapan,whileincreasingtariffcostshaveexerteddownwardpressureonearningsforsomemanufacturingcompanies,corporateperformancehasbeengenerallystrong.Thishasbeendueprimarilytotheavoidanceofpricehikesinordertomitigatetheeffectsoftariffs,aswellasrobustperformancebyAI-relatedsectorsandgrowthinnon-manufacturingindustries.Thelargecorporatebusinessconditionsdiffusionindexinboththemanufacturingandnon-manufacturingsectorshasremainedstableandinpositiveterritory(Figure1-1).

Japan’sGDPgrowthisprojectedtoremainmoderatethrough2026(Figure1-2).Whileprivateconsumptionissomewhatunderwhelmingasaresultofincreasingprices,expectationsarehighthatgovernmentmeasurestoaddresseconomicandinflationaryissues,includingsupportforpayrisesforsmall-to-mid-sizedcompanies,taxreductions,andtheprovisionofstimuluspayments,shouldhelpsupportconsumption.Continuedaccommodativelendingconditionsshouldleadtoanexpansionofcorporatecapitalinvestment,particularlyintheareasoflaborreduction,AIanddigitization,andsupplychainreinforcement.However,shouldcompaniesseetheirprofitsdepressedbybeingforcedtocontinueabsorbingadditionaltariffcosts,orshoulduncertaintyaroundeconomicorforeigndemandincreasefurther,capitalinvestmentmaydecline.OtherheadwindsincludethepossibilityofacontinuationofthecurrenttensionsbetweenJapanandChina,whichcouldleadtoadropininbounddemandandastagnationofexportsfromJapanto

China.

Figure1-1:BankofJapanTankanSurvey-LargeCorporates’BusinessConditionsDiffusionIndex

40

30

20

10

0

-10

-20

-30

-40

-50

-60

2005.9

2006.9

2007.9

2008.9

2009.9

2010.9

2011.9

2012.9

2013.9

2014.9

2015.9

2016.9

2017.9

2018.9

2019.9

2020.9

2021.9

2022.9

2023.9

2024.9

2025.9

Non-manufacturersManufacturers

Source:Macrobond,CBREResearch,November2025.

Figure1-2:RealGDPGrowth(q-o-qchange,annualized)andContributionsofMajorComponents

8%

6%

4%

2%

0%

-2%

-4%

-6%

-8%

2021Q1

2021Q2

2021Q3

2021Q4

2022Q1

2022Q2

2022Q3

2022Q4

2023Q1

2023Q2

2023Q3

2023Q4

2024Q1

2024Q2

2024Q3

2024Q4

2025Q1

2025Q2

2025Q3

2024

2025

2026

4.63.85.3

2.6:2.92.3

1.71.8

-1.5-1.8-1.6-1.8-1.8

-3.7

1.10.6

1.1

1.1

0.9

0.9

0

-0.2

Forecast

PrivateconsumptionCorporatecapex

ExportImport

—o—GDPgrowthrate(annualized)

GovernmentspendingOthers

Source:Macrobond,CBREResearch,November2025.

AsiaPacificRealEstateMarketOutlook2026|Japan

5CBRERESEARCH?2025CBRE,INC.

01MacroEnvironment

Moderateratehikeseenasmostlikelyscenario

Severalunforeseeneventsoverthecourseof2025generateduneasewithregardtoJapan’seconomicoutlook,leadingtoincreasedvolatilityinthefinancialmarkets.TheTrumpadministration’sannouncementofreciprocaltariffsinApril2025triggeredfearsofadverseeffectsonJapanesecompaniesandtheeconomyasawhole,leadingtothepurchasingofbondsandthebenchmark10-yeargovernmentbondyield(long-terminterestrates)fallingfromabove1.5%attheendofMarchtojustover1.1%onApril7.However,thesubsequenteasingofU.S.-ChinatradetensionsandthesuccessfulconclusionoftradenegotiationsbetweenJapanandtheU.S.havealleviatedmuchofthisuncertainty,pushinglong-terminterestratesbackuptotheiroriginallevels.InOctober2025,SanaeTakaichiwonasurprisingvictoryintheLiberalDemocraticPartyleadershipelections,withtheKomeitosubsequentlywithdrawingfromtherulingcoalition.WhileconcernsregardingpoliticalinstabilityeasedfollowingtheestablishmentofanewrulingcoalitionwiththeJapanInnovationParty,newPMTakaichi’splanstopursueapolicyofaggressivefiscalspendinghaveonceagainraisedconcerns,leadingtoafurtherriseinlong-terminterestrates(Figure1-3).

AtitsJanuary2025monetarypolicymeeting,theBankofJapan(BoJ)lifteditspolicyrateby25bps,to0.5%.Whilefurtherrateincreaseslaterintheyearwereanticipatedatthetime,theimpactofU.S.tariffpolicyandchangesinthedomesticpoliticalscenehavepushedtheseback.DuringapressconferencefollowingtheBoJ’slatestmonetarypolicymeetinginOctober2025,BoJgovernorUedastatedthatdownsideriskstotheU.S.economicoutlookhavereceded,andthathewouldbecloselymonitoringmovementsleadinguptothe“shunto”springwagenegotiationsinearly2026.

Theconsumerpriceindex(thecoreindex,excludingfreshfoodstuffs)hasnowmaintainedtheBoJ’stargetlevelofabove2%forthreeandahalfyears(Figure1-4).TheBoJanticipatedinitslatestoutlookreportthattheratewouldcomedownto+1.8%inFY2026butriseagainto+2.0%inFY2027.WhiletheTakaichiadministrationissaidtobemaintainingacautiousstancetowardratehikes,itshouldbekeentoavoidadrasticweakeningoftheyenthatcoulddriveupinflation.ThemarketisthereforeexpectingtwoorthreefurtherpolicyratehikesbetweenDecember2025andtheendof2026.Themostlikelyscenarioforlong-terminterestratesisalsoagradualincrease.However,thepaceofincreasehasacceleratedmorerecentlyduetothepossibilityoffurtherpolicyratehikes,aswellastheriseinconcernsregardingJapan’sfiscalconditionandthelooseningsupply-demandbalanceinthebondmarketundertheTakaichi-ledgovernment’s“responsibleandproactivefiscalpolicy”.

Figure1-3:Japan’sInterestRates

2.1%

1.8%

1.5%

1.2%

0.9%

0.6%

0.3%

0.0%

-0.3%

2022.1

2022.4

2022.7

2022.10

2023.1

2023.4

2023.7

2023.10

2024.1

2024.4

2024.7

2024.10

2025.1

2025.4

2025.7

2025.10

3mTIBOR10yJGByieldPolicyrate

Source:Macrobond,CBREResearch,November2025.

Figure1-4:ConsumerPriceIndex(y-o-ychange)

5.0%

2.5%

0.0%

-2.5%

2022.1.1

2022.4.1

2022.7.1

2022.10.1

2023.1.1

2023.4.1

2023.7.1

2023.10.1

2024.1.1

2024.4.1

2024.7.1

2024.10.1

2025.1.1

2025.4.1

2025.7.1

2025.10.1

——CPI("Core",excludingfreshfood)CPI("Core-core",excludingfreshfoodandenergy)

Source:Macrobond,CBREResearch,November2025.

AsiaPacificRealEstateMarketOutlook2026|Japan

02

Investment

6CBRERESEARCH?2025CBRE,INC.

AsiaPacificRealEstateMarketOutlook2026|Japan

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02Investment

InvestmentMarketSummary

Investmentsettoremainrobustin2026followingrecord-breaking2025

Full-yearinvestmentvolumefor2025(transactionsofJPY1billionormore)issettocomfortablyoutstrip2024,sfigureofJPY4.97trillionandisprojectedtoexceedJPY6trillion.Thiswouldsurpass2007,sJPY5.4trillionandestablishanewsingle-yearrecordhigh(Figure2-1).

FollowingtheBoJ,spolicyratehikeinJanuary2025,bothlong-termandshort-terminterestrateshaverisen.Despitethis,investmentappetitehascontinuedtobestrong,withseveralmajortransactionscompletedduringtheyear,mostnotablyintheofficesector,whichcontinuestoseesteadyrenthikes.WhileseveralJ-REITsandcorporationsdisposedofrealestateassetsduringtheyear,astrongappetitefornewacquisitionsbybothdomesticandforeigninvestorspusheduptotalinvestmentvolume.

Marketactivityshouldcontinuetoberobustin2026,withCBREprojectingtransactionvolumetoreachlevelsclosetothoseof2025(Figure2-2).

Whileinterestrateincreaseshaveacceleratedsomewhatrecently,theaccommodativestancemaintainedbyfinancialinstitutionsandsteadilyrisingrentsshouldsupportinvestors’appetiteforrealestate.Intermsofforeigninvestment,severaloverseas-basedfundshaveindicatedtheirintenttoinvestinJapaneserealestateoverthenextseveralyears.Domesticinvestorsshouldcontinuetoproactivelyseektoinvestinrealestateinaninflationaryenvironment.OtherbuyersshouldincludeJ-REITs,whichmayfacechallengesduetohigherfinancingcosts,butmakemoreacquisitionsviaequityfundraisingonthebackofrisingunitprices.TransactionsforSecurityTokens(ST)targetingretailinvestorsarealsoexpectedtoincrease,andthoseduetobusinessrestructuringcouldfurtheraccelerate.Suchrobustactivitymakesitlikelythatyieldspreadscouldtightenfurther.

Figure2-1:InvestmentVolumebyInvestorType(Acquisition)

6,000JPYbn

5,000

4,000

3,000

2,000

1,000

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Q1-Q32024

Q1-Q32025

0

wDomestic(J-REITs)nDomestic(Others)wOverseas

Note:IncludestransactionsofJPY1bnorlarger,excludingacquisitionsbyJ-REITsatIPO.

Source:MSCIRealCapitalAnalytics,CBREResearch,Q32025.

Figure2-2:RealEstateInvestmentVolume

Forecast

JPYbn

7,000

6,000

5,000

4,000

3,000

2,000

1,000

20162017201820192020202120222023202420252026

Note:IncludestransactionsofJPY1bnorlarger,excludingacquisitionsbyJ-REITsatIPO.

Source:MSCIRealCapitalAnalytics,CBREResearch,November2025.

AsiaPacificRealEstateMarketOutlook2026|Japan

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02Investment

InvestmentMarketin2025

Totalinvestmentvolumeoverfirstthreequartersof2025exceedsinvestmentvolumeforentire2024calendaryear

Full-yearinvestmentvolumefor2025isanticipatedtoexceedJPY6trillion,wellabovethepreviousannualrecordofJPY5.4trillionsetin2007.

Commercialrealestateinvestmentvolumefor2025uptoandincludingQ32025(transactionsofJPY1billionormore)grew45%y-o-ytoreachJPY4.99trillion.Thetotalforthefirstthreequartersof2025exceededtheJPY4.97trillionininvestmentvolumerecordedacrosstheentire2024calendaryear.

LedbyseveralmajordealsofinexcessofJPY100billion,includingtheTokyoGardenTerraceKioichotransaction(JPY400billion)andtheTokyuPlazaGinzatransaction(JPY150billion)inQ12025,acquisitionvolumebyoverseasinvestorsreachedatotalofJPY1.87trillionacrossthefirstthreequartersof2025,ariseof2.4xthefigureofthesameperiodin2024,andexceedingthefull-yearrecordofJPY1.63trillionsetin2007.WithforeignacquisitionvolumeoutstrippingsalesvolumebyJPY540billionasofQ32025(Figure2-3),netinvestmentvolumeisalsosettohititshighestannualmarksince2022.

Amongnon-J-REITdomesticinvestors,acquisitionshavebeenobservedfromabroadrangeofinvestors,includingprivatefundsandREITs,andinsurancecompanies,withtotalacquisitionvolumeintheyearuptoandincludingQ32025upby43%y-o-ytoJPY2.36trillion.Meanwhile,severalmajorassetsalesbycorporationswereseenduringtheyear.NissanMotor,sannouncementinNovember2025ofitsintenttosellitsYokohamaheadquartersforJPY97billionbeforetheendoftheyearislikelytopushupthefullyearinvestmentvolume.

TotalacquisitionsbyJ-REITsacrossthefirstthreequartersof2025slippedby26%y-o-ytojustJPY760billion.Incontrast,totalsalesvolumehasrisenby36%toJPY750billion,onlymarginallybelow2024,sfull-yearfigureofJPY760billion,theall-timerecord.SalesvolumebyJ-REITsforretailandlogisticsfacilitieshasalreadyexceededpreviousannualrecordlevelsinjustthefirstthreequartersoftheyear.WithJ-REITacquisitionvolumeandsalesvolumealmostperfectlybalanced,thisindicatesthatJ-REITsaremakingaggressivemovestooverhaultheirassetportfolios(Figure2-4).

Figure2-3:OverseasInvestorsSaleandAcquisitionVolumesandNetInvestment

bn

JPY

2,000

1,000

0

-1,000

-2,000

3,000

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Q1-Q32025

AcquisitionSaleNetinvestment(=Acquisition-Sale)

Note:IncludestransactionsofJPY1bnorlarger.

Source:MSCIRealCapitalAnalytics,CBREResearch,Q32025.

Figure2-4:J-REITs’Acquisition,SaleandNetInvestmentbyAssetType

1,000

750

500

250

0

-250

-500

-750

-1,000

JPYbn

TotalOfficeRetailIndustrialResidentialHotel

aAcquisitionuSaleNetinvestment

Note:Includestransactionsforthefirstthreequartersof2025ofJPY1bnorlarger,excludingacquisitionsbyJ-REITsatIPO.

Source:MSCIRealCapitalAnalytics,CBREResearch,Q32025.

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02Investment

InvestmentMarketin2025(cont.)

Majordealsdriveupofficeinvestmentvolumeby80%y-o-y

Drivenbyseveralmajortransactions,officeinvestmentvolumefortheyeartoQ32025totalledJPY2.15trillion,up80%y-o-y(Figure2-5).ThelargestofthesetransactionswasthesaleofTokyoGardenTerraceKioichoforJPY400billion.AnotherfeatureofnoteisthatseveralmajortransactionsrelatedtoSTofferingstargetingretailinvestorswereobservedduringtheyear.ShiodomeCityCenterandOsakaDojimahamaTowerwereeachacquiredbySPCssetupbyKKRfortheformer(forJPY130.1billion)andMitsubishiUFJFinancialGroupforthelatter(forJPY100.0billion).BothpropertieswereacquiredasunderlyingassetsforSTs.

Residentialhasbeenthesecondmostpopularsectorin2025,withtotalcumulativeinvestmentvolumefortheyeartoQ32025up74%y-o-ytoJPY690billion.Majordealsincludedseveralportfoliotransactions,headlinedbyU.S.investorWarburgPincus’sacquisitionofthesharehouseportfolio,TOKYOβ,consistingof1,195assetsandover16,000rooms.ResidentialportfoliotransactionsaloneaccountedforJPY490billioninthefirstthreequartersof2025,eclipsingtherecordfull-yearfigurein2022(Figure2-6).

Thelogisticssectorsawcumulativeinvestmentvolumeacrossthefirstthreequartersof2025dropby8%toJPY640billion.WhileacquisitionsbyJ-REITswerelimited,severalmajoracquisitionsweremadebyfundsfinancedorestablishedbydomesticinvestors.

WhilehotelinvestmentvolumewasaboveaverageatJPY630billionintheyeartoQ32025,activityhaslagged2024’srecord-breakinglevelsby12%.Inadditiontoforeignpurchases,J-REITscompletedseveralacquisitionsin2025.Intheretailsegment,cumulativeinvestmentvolumetoQ32025rose89%y-o-ytoJPY470billion,drivenbythesaleofTokyuPlazaGinzaforJPY150.0billion.

InvestmentinotherassetsloggedJPY410billionintheyeartoQ32025(2.5xthefigureofthesameperiodin2024),alreadyexceedingthefull-yearrecordofJPY320billionsetin2022.Thiswaspredominantlyunderpinnedbyseveraldatacentertransactions,withseveralacquisitionsbyoverseasinvestorsincludingthepurchaseofadatacenterinChibaPrefecture’sInzaiCitybySingaporeanlistedREITKeppelDCREITforJPY82.1billion.

Figure2-5:InvestmentVolumebyAssetType

6,000

5,000

4,000

3,000

2,000

1,000

0

JPYbn

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Q1-Q32024

Q1-Q32025

OfficeRetailIndustrialResidentialHotelOthers

Note:IncludestransactionsofJPY1bnorlarger,excludingacquisitionsbyJ-REITsatIPO.

Source:MSCIRealCapitalAnalytics,CBREResearch,Q32025.

Figure2-6:InvestmentVolumeofResidentialPortfolios

600

500

400

300

200

100

0

JPYbn

●

20142015201620172018201920202021202220232024Q1-Q3Q1-Q320242025

Investmentvolume(portfoliotransactionsonly)

Proportionofportfoliotransactionsinresidentialinvestmentvolume(RHS)

80%

60%

40%

20%

0%

Note:IncludestransactionsofJPY1bnorlarger,excludingacquisitionsbyJ-REITsatIPO.

Source:MSCIRealCapitalAnalytics,CBREResearch,Q32025.

AsiaPacificRealEstateMarketOutlook2026|Japan

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02Investment

Outlookfor2026

Figure2-7:OfficeExpectedNOIYield,Benchmark10-yearGovernmentBondYield,andYieldSpread

6%

5

3

2

1

-1

YieldspreadExpectedNOIyield-averageSource:CBRECapRateSurvey,Macrobond,Q32025.

Benchmark10-yeargovernmentbondyield

Financingenvironmentprojectedtoremainaccommodative

CBREprojectscommercialrealestateinvestmentvolumetoapproachthelevelseenin2025.

4

0

2003/7

2004/1

2004/7

2005/1

2005/7

2006/1

2006/7

2007/2

2007/10

2008/4

2008/10

2009/4

2009/10

2010/4

2010/10

2011/4

2011/10

2012/4

2012/10

2013/4

2013/10

2014/4

2014/10

2015/4

2015/10

2016/4

2016/10

2017/4

2017/10

2018/4

2018/10

2019/4

2019/10

2020/3

2020/9

2021/3

2021/9

2022/3

2022/9

2023/3

2023/9

2024/3

2024/9

2025/3

2025/9

Interestratescontinuedtoclimbthroughout2025,withlong-terminterestrates(benchmark10-yeargovernmentbondyields)risingfrom1.08%atthestartoftheyeartoreach1.65%bytheendofSeptember,anincreaseof57bps.AccordingtotheresultsofCBRE’squarterlyinvestorcapratesurveys,robustdemandfrominvestorsledexpectedNOIyieldstomaintainrecordlowlevelsthroughout2025forallmajorassettypes.Asaresult,yieldspreads,asameasureofthegapbetweenexpectedNOIyieldsandlong-terminterestrates,areshrinking,withtheyieldspreadfortheofficesectorfallingtojust1.50%attheendofQ32025,afigurebelowthelevelsrecordedjustpriortotheglobalfinancialcrisis(Figure2-7).

Figure2-8:LoansOutstandingtoRealEstateSector

(TotalofDomesticallyLicensedBanks,ShinkinBanksandOtherFinancialInstitutions)

160JPYtnJPYtn

140

20

15

10

5

0

Investmentvolumeforthe2025calendaryearisneverthelesssettoreachanewrecordhigh,asfinancialinstitutionsremaingenerallyaccommodativetowardrealestatelending.BoJdatashowoutstandingrealestateloanvolumebyJapanesefinancialinstitutionsreachedJPY141trillionasoftheendofSeptember2025,withthegrowthofthisfigureacceleratingsince20