Japan’s property sector looks strong. So why are investors going abroad?

When it comes to the performance of Real Estate Markets in the Asia-Pacific, Japan reigns supreme. Asia’s second largest economy is the deepest, most widely traded, and the safest market in the region. Last year, Japan accounted for 28 per cent of direct investment in Asia-Pacific Commercial Real Estate, data from MSCI shows.The average vacancy rate for grade A offices in Tokyo was 0.7 per cent in the first quarter of this year. Rents have risen for nine straight quarters, increasing 13.2 per cent in annualised terms last quarter, according to JLL. Strong corporate performance is underpinning robust leasing demand while supply is constrained due to a sharp rise in Construction Costs and acute labour shortages.In the residential sector, prices for new flats in Tokyo rose 58.5 per cent last year, the fastest rate among 100 of the world’s luxury housing markets tracked by Knight Frank. Over the past five years, prime residential prices in Tokyo grew nearly 160 per cent, the second fastest rate after Dubai.