RESEARCH REPORTS

MAY 2025

We review the new flows around Trump’s tariffs and undertake a back-to-basics analysis of tariffs and the likely flow on effects to the broader economy.

APRIL 2025

Salter Brothers Research looks back on a record year in Japan’s hospitality market. Record international visitation, record room rates and record property acquisition volume delivered broad-based benefits to the sector across all regional markets and property types. Positive momentum remains in place for a strong 2025, with supply-demand dynamics favouring ongoing growth.

Economic Overview

It was a year of major change for Japan, with the Bank of Japan bringing an end to the era of negative interest rates and a scandal-induced national election ushering in a new Prime Minister overseeing a minority government. Amidst this shifting monetary and fiscal environment, Japan experienced mixed performance among its key indicators, with progress on wage growth the stand-out story of the year.

Demand

Demand rose strongly in 2024, driven by record international visitation eclipsing pre-COVID-19 peaks by almost 5 million. The story was less positive for domestic demand, falling slightly in the face of cost-of-living pressures and competition from international visitors.

Supply

Annual new supply continued to contract from its 2019 peak, with the current pipeline indicating further continuation of this trend. New supply remains heavily concentrated among upscale+ properties, with a particular focus on luxury growth.

Market Performance

Key indicator growth in Japan’s hospitality sector marked it as a global leader in 2024. Growth was well spread across the market, headlined by the key tourist cities and properties in the midscale and upscale segments.

Transactions

2024 was a record year for acquisition volume in the sector, with strong overseas and institutional interest. Volume was driven by high deal activity, with over 170 properties transacted, as well as the completion of a number of major deals, three of which came in at over US$400 million.

Outlook

Favourable supply-demand dynamics should continue to drive strong sector performance. It remains to be seen whether the market can continue to sustain high room rate growth, with gains in 2025 potentially being funnelled into lagging occupancy recovery.

November 2024

Identified as a premier real estate opportunity in Asia Pacific, Salter Brothers Research shares insights into Japan’s high performing hotel sector.

Strong Fundamentals

Japanese hotels are a fundamentals-driven investment opportunity. A large and heavily transacted market, the sector is supported by a strong base of domestic demand and fast-growing pool of international inbound.

Revenue Drivers

A strong base case is supported by a number of realistic upside revenue drivers. Prime exposure to fast-growing APAC outbound markets and a limited pipeline of future supply implies an encouraging supply-demand imbalance.

Growth Spurt?

Demand and performance growth has normalised globally but remains elevated in Japan. Japanese outperformance continues a trend of above average demand growth from the decade prior to COVID-19 border closures.

Domestic Decline

Japan’s hotels are exposed to the forecasted domestic population decline, with a considerable domestic share of the tourism market. This highlights the need for strategically positioning any investments towards international customer growth.

Sector Performance: Widespread Growth

The remarkable performance of Japanese hotels has been felt across all national markets and asset classes. Widespread growth has enabled diverse approaches, with investors and hotel chains pursuing strategies spanning from budget to luxury, across both urban and regional assets.

First Look: Retreats

The traditional Japanese Ryokan sector is experiencing notable investor interest. The unique features of the sector offer both opportunities and challenges for overseas investors.

September 2024

Salter Brothers is embarking upon a Japan investment strategy. As part of our commitment to communicating with our investors, Salter Brothers Research shares highlights from their market study.

An Active Market

The 4^th largest commercial real estate market in the world, and the 5^th largest recipient of global cross-border investment in 2023, Japan offers an active and accommodating environment for foreign investors.

A Diverse Opportunity

Average quarterly volume over the last five years has exceeded US$1 billion in all sectors. Long-term returns have also been strong, exceeding 5% per annum on average across all sectors over the last 15 years.

An Ideal Moment?

Abundant investment has been supported by a favourable macroeconomic environment, with low interest rates and an historically weak yen providing an ideal opportunity. Conditions should continue to remain favourable in the near term despite changes in Japan’s monetary policy.

Oncoming Headwinds

Japan’s population is aging and in decline, forecast to fall 20 million by 2050. Urban centres should remain attractive, with the burden of decline expected to be more keenly felt in the regions.

Sector Spotlight: Hotels

Hotels have delivered the best returns of any sector since 2021, attracting record investment in 2023Q3 and 2024Q2. Despite opening its borders relatively late, Japan is on track to break its 2019 tourist record in 2024.