JAPAN - The aftermath of the earthquake disaster and subsequent nuclear crisis in Japan will not discourage global real estate investors from investing in Tokyo, according to Jones Lang LaSalle.

In its latest research report, JLL said cross-border investors would continue to invest in the country's property markets following a short-term hiatus.

Turmoil in the financial markets immediately after the earthquake led to the cancellation of some real estate investment funding, but JLL said the hiatus was mainly down to the need for physical damage surveys for investors to assess the impacts on their assets.

German fund manager Union Investment Real Estate recently froze redemption requests for its global open-ended fund, which has a significant exposure to the Tokyo office market, attributing the move to an inability to value its assets in a highly uncertain market environment.

The JLL report said: "Not all but most foreign investors have expressed positive views toward investment in Japan and have flagged potential opportunities and their intention to increase their presence in the market."

However, Chris Reilly, director of property for Asia at Henderson Global Investors, said the outlook for Tokyo offices was already looking "rather fragile" prior to the earthquake.

Reilly, speaking during a Henderson online webinar on Asia Pacific real estate, said the aftermath of the natural disaster would put short-term pressure on the market, but vacancy rates had already been rising during 2009 and 2010.

"There is a bit of a supply bulge coming though in 2012", he said, adding that this would put pressure on rents.

JLL said the earthquake had not affected the real estate lending market in Japan, with foreign lenders not demanding higher risk premiums for Japanese property.

"Nor are lenders warning us of any appreciable change in domestic financing conditions, now or over the medium term," the report said.

The earthquake has increased awareness of the seismic compliance of buildings and increased tenant appetite for those to comply.

JLL said it expected a flight to quality in corporate location decision making in Tokyo.

Henderson's Reilly said he expected newer office developments in Tokyo to benefit from greater regulation in this area, while older buildings would suffer.

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