In Nikkei Real Estate Market Trend, around twenty professionals made their forecasts on the next 18months office market trend. This time, I would like to summarize their views and analyze the future trend by incorporating my views.
1 Macro economics>>> negative
Around half of professionals see almost no change, the current trend would be maintained. Around 6 researchers showed their positive views and only three forecasted negative trends.
My view is rather negative. Even though the economy has remained less active before COVID, the stock investment market has remained active and bullish. This is because people’s activities have focused on the investments. Once the COVID measure has been eased, people withdraw their investments and switch them into spending. This trend would happen in other markets in the world such as in the U.S and Europe. This also would be the trigger of downturn of the stock markets. The negative sentiments and mood would spread into Japan. Japanese people, regardless of individual or corporate, are well influenced with so called “mood”. This might be creating another “lost” time: lost five, lost decade, or lost decades.
2 Office demand >>> decline
Around 16 researchers said decreasing, three said remain the same, and no one mentioned the increasing demand.
For the past 18 months since COVID pandemic started, a large scale of relocations as well as reducing office spaces have been seen. In Japan, generally, companies are watching each other and gradually influenced by the so-called social mood. Thus, for future, not only service sectors but also manufactures or even conservative sectors, such as banking or financial institutions may consider moving their offices. Therefore, the entities may be moving or downsizing their office floors, leading to the decrease of office demand.
3 Supply >>>> increase
Around the half of professionals see the increase of the office supply, around 8, one third of researchers forecast the same level of office supply, one researcher shows his view of the decrease in office supply. Optimistic views point out the flexibility of owners’ attitude and this would not cause huge vacancies.
Personally, looking at the past events like the bubble clash early nineties and Lehman brothers’ clash in 2008, once it has become the tenant market, it seems to be a bit hard to change the market trend. The performance and profitability of Japanese companies have not grown for past decades. Corporates, under the recession, would refrain from investments. In the past, corporate physical activities have not changed that much, workers had to commute and needed certain office spaces. However, for the future, most of companies may not need that much office spaces, so given those fundamental changes, the office demand would not be so strong.
4 Overall assessment
Therefore, the macro economy would shift to downturn, the demand would not grow, the supply would increase in the market. The market may become more tenant market, causing the more vacancy, rent reduction and the eased investment market.
Further queries or doubts, please email to ytomizuka@abrilsjp.com
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