Hotel investments account for 40 percent of all commercial transactions in Japan

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

Significant hotel transactions boosted the sector’s acquisition volume to JPY 280.0 billion, which is about 2.6 times the volume recorded in the same quarter the previous year and accounted for approximately 40% of the total transaction volume for the quarter. The cumulative transaction volume for the hotel sector in H1 2024 increased by 49% from the previous year. Office transactions also saw a rise this quarter, with a 47% year-over-year increase to JPY 180.0 billion. Conversely, the investment volume for the retail, residential, and logistics sectors declined.

CBRE noted that J-REIT acquisition volume for the quarter (including all transactions below JPY 1 billion) dropped by 22% year-over-year to JPY 169.8 billion. This also marked a significant decline from the January-March quarter, which saw several major J-REIT transactions. Over half of the J-REIT transaction volume this quarter was in the hotel sector. Despite the TSE REIT Index declining since the beginning of the year, hotel REITs posted positive returns.

According to the results of this quarter’s CBRE Cap Rate Survey, expected yields for Tokyo prime assets across all sectors either fell or remained unchanged. For offices in regional cities, no areas saw an increase in expected yields. The recent rises in interest rates appear to have been largely absorbed by shrinking yield spreads.