Investors are cautious about Japanese REITs given deterioration in the real estate cycle, Citibank analysts write:

“We think many long/short investors are more likely to take profits going forward. Many real estate-focused investors are neutral or underweight on J-REITs and overweight on developers. Many said that they cannot be bullish in the face of upcoming deterioration in the real estate cycle. Some investors commented that a recent decline in J-REIT share prices has made valuations attractive. Overall, there were many questions about whether major real estate companies would focus on capital efficiency (e.g., ROE) to increase shareholder value, and whether they would implement policies that emphasize shareholder value (e.g., share buybacks). We think many of the investors we met are skeptical that major real estate companies will alter their strategies to take such actions.”