According to CBRE's recently released "Japan Investor Intentions Survey," a survey conducted between December 2019 and February 2020 with Japanese investors on their real estate investment strategies, commercial asset purchases were to rise in 2020.
But that was before COVID-19 exploded across the global.
In a pre-Coronavirus world, Japanese investors gave three major threats to real estate investment this year were identified as "global economic outlook," "overpriced property price," and "local economic outlook.
However, Japanese investors display strong appetite. The number of Japanese investors who stated that the amount of acquisition will increase was up 44% (+13 points) from 2019's survey and the percentage of investors who answered that the amount of sale will increase from the previous year was 28%, just 2 points higher than the previous time.
Most investors cited "stability of income stream" as their main reason to invest in real estate - a similar finding to last year's survey. However, 16% of investors stated that their risk appetite would be "much higher" or "higher" compared to the previous year, a 7-point increase from last year's survey.
Respondents selected "Prime or Core" (29%) and "Core-plus / Good Secondary" (26%) as their preferred investment strategies. Approaches remained varied, with "Prime or Core" and "Core-plus / Good Secondary" chosen by a lower proportion of respondents this year, but high risk-high return strategies such as "Value-Add" increasing in popularity.
Offices were selected as the most attractive sector, attracting 38% of responses, but this was 12 points lower than last year's survey. Logistics saw the biggest increase in responses, rising 20 points y-o-y to 34%.
When asked to identify the main occupier trends that will most likely affect property value in 2020, investors selected "sustainability," "smart buildings," and "automation in logistics facilities." The growing corporate focus on environmental issues and employee wellness appears to be shaping real estate investment decisions, with LEED or WELL - certified buildings increasingly sought after. Investors are also looking to utilize the latest technologies to maintain and enhance real estate value while mitigating challenges such as the labor shortage.
Other key survey findings include the growing adoption of Environmental, Social & Governance (ESG) criteria in investment decisions. 71% of respondents stated they had "already" adopted ESG criteria or were "currently considering adopting it."