JAPAN - Slowing capital growth is accelerating Japanese property's downward growth trend, according to IPD, as new figures show there was a 5% fall in return to 11% between January and February.

"The overall trend is down and there's a dramatic slowing of the market. But it isn't in negative territory, although one usually precedes the other," said IPD director Kevin Swaddle.

Year-on-year capital growth in Japanese real estate was 5.8% so IPD has maintained its forecast of a 12% calendar year return, combining a 5.1% income return and a capital return of 6.7%.

However, Swaddle emphasised "the diversity and complexity of the market", with central Tokyo office holding up thanks to continuing international demand and low vacancy rates.

"The fact that central Tokyo is prime [real estate] may be a dimension, but this has more to do with premium occupiers than prime properties," he argued.

In contrast to Tokyo, the office market outside the capital has failed to benefit from economic recovery in recent years.

"Central Tokyo is still doing relatively well. It's ahead of the average. But offices outside the capital have not been beneficiaries of the mini-boom which has bypassed them. There was some uplift previously, if not as much as Tokyo, but now it's just taking the hit," he said.

The retail real estate market also continues to face pressure from a lack of consumer demand as Swaddle claims "of the sectors, it's been hit hardest".

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