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Rent growth was solid in both the C5W and the 23W, with the latter leading the way over the quarter and year. That said, given current market conditions, growth looks likely to pause until the impact of COVID-19 becomes clearer.

•  Rent growth in the Tokyo 23 wards (23W) was solid during Q1/2020. Rents now stand at JPY4,155 per sq m – an increase of 2.7% quarter-on-quarter (QoQ) and 5.8% year-on-year (YoY).
• A verage mid-market rents in the central fi ve wards (C5W) continued their ascent towards JPY5,000. They are now at JPY4,928 per sq m after growth of 1.8% QoQ and 5.4% YoY.
• T he C5W saw its premium over the 23W average contract to around 19%. Elsewhere, discounts widened in most other submarkets.

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As we move further into the Covid-19 crisis and transaction activity continues to dwindle, investors are becoming increasingly concerned about market liquidity. Given the long-term nature of commercial real estate investment one should expect a certain amount of cyclicality during the period of ownership. However, at times of extreme stress the need for liquidity becomes paramount in order to preserve cash and lock in performance.

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With 2019 being an average year in terms of new office supply, amid the intense competition for space, Grade A office vacancy in the C5W was close to nil. Meanwhile, underpinned by solid corporate profit growth – particularly in the technology sector – rents continued their upswing. Specifically, by year end, average Grade A rents in the C5W had reached JPY37,373 per tsubo per month – an increase of 8.0% year-on-year (YoY). Indeed, fundamentals appeared solid heading into the new decade, only for the COVID-19 outbreak to scupper the sector’s previously optimistic prospects.

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• Asia Pacific REITs outperformed the broader market in May against a backdrop of falling number of new COVID-19 cases and phased re-openings of the region’s economies.  There continues to be a wide array of fiscal policy responses across the region including further subsidies to sectors most strongly impacted by social distancing policies and travel restrictions, as well as to small and medium-size enterprises (SMEs).
• By sector, industrial remained the top performer, posting double-digit gains in May. By country, Australian real estate equities outperformed on the back of strong returns generated by the residential and industrial sectors. 
• Japan REITs led the region’s in May, mainly driven by the hotel and retail sectors. Japan's lower house of parliament approved an emergency budget that include rent subsidies for SMEs and thus bode well for the office sector. Singapore REITs were also an outperformer, buoyed by a solid performance of the industrial and retail REITs.

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