In 2020, the Japanese government introduced a range of policies suspending a broad range of economic activity in the hope of controlling the spread of COVID-19. As these restrictions took hold and began to affect people's everyday lives and behavior, the impact on the real estate market gradually became apparent. The drop in business activity caused office rents to decline; a sharp decline in inbound tourists led to an abrupt downturn in retail leasing demand; the rapid growth of e-commerce spurred increasing requirements for logistics facilities.

Following a resurgence in COVID-19 infections in December 2020, the Japanese government is once again likely to adopt a policy of restricting economic activity in the early months of 2021 to contain the spread of the virus. While this bodes ill for the domestic economic outlook (albeit to a lesser extent compared to the first declaration of state of emergency in 2020), the commencement of vaccination programs in several countries around the world has raised hopes for the gradual eradication of the pandemic, leading to the eventual normalization of the global economy.

CBRE expects the Japan real estate market to either bottom-out and/or commence a recovery in 2021, although the pace and timing of the rebound may vary across different sectors. However, all sectors are likely to feel the long-term impacts of short-term disruptions caused by measures to contain the pandemic. In the office sector, the rapid adoption of remote working is encouraging many companies to reexamine the role of the office, prompting them to consider introducing a range of new workplace formats. In the retail sector, both landlords and tenants are reviewing the design, positioning and function of brick-and-mortar stores in the digital age. In the logistics sector, accelerating e-commerce growth and a shortage of labor are further boosting demand for large, state-of-the-art facilities.

This report by CBRE casts a look back at 2020 and explains how last year's unprecedented events may influence Japan's commercial real estate market in 2021 and beyond.


Economy: GDP is expected to contract by 5.7% for the full year 2020, but is expected in 2021. Although there is a risk of another contraction due to the resurgence of infections, the economy is expected to start recovering gradually at least from Q1 2021 onward, given the expected supply of vaccines. However, recovery in real estate leasing market may take until the end of 2021 to bottom out.

Office: Vacancy rates will be on an upward trend nationwide and rents are expected to fall in most of the cities, including Tokyo, Nagoya, and Osaka, through 2023. However, in some regional cities where new supply is limited, rents are expected to bottom out at a relatively early stage.

Retail: Rents, which began to decline in 2020, are expected to fall further in 2021. The need for retailers to open new stores is expected to weaken for the time being, as it is likely to take time for inbound demand to recover and visitors to the city have not returned to pre-Corona disaster levels due to self- restraint in going out and the spread of telework.

Logistics: New supply will continue to be high in the Greater Tokyo area, Greater Osaka area, and the Greater Nagoya area. However, rise in vacancy rate is expected to be limited, as the accelerating growth of EC, together with the need for automation to solve operational issues such as labor shortages, are likely to continue to drive demand.

Investment: As low interest rate policies are expected to continue worldwide, real estate investments with relatively high yields are expected to continue to attract money. The easing of restrictions on travel for business purposes will further encourage foreign investors to resume their activities in Japan. In addition, an increasing number of business companies are considering asset sales from around the middle of 2020, and these deals will start to come to fruition in 2021. In addition, investments with an eye on post-Corona growth potential are likely to begin.




Asia Pacific
Real Estate Market Outlook 2021

Restart | The Uneven Recovery