Alternative Investment Opportunities Through a Slowing Economy

We are also seeing differentiated real estate opportunities in certainAsian developedmarkets. For example, unlike otherparts of the world, COVID did not have a material disruptiononoffice occupancy rates in the commercial real estate market in Japan’s major cities. Higher return to office rates have beendriven by cultural preferences and demographic factors suchas age, childcare needs, and relativelysmaller residential space than other global markets such as the US or Europe.With a GDP of $4.9 trillion, Japan has the third largest economy in the worldand Tokyo is the largest real estate market in the worldwithapproximately 37.7millionpeople and 1.5 billion square feet of office space,more than 2x New York and 5x London. 17 In addition to the office demand, while interest rates have been rising in the rest of the world, theBank of Japan has aggressively kept interest rates low, creatingan attractive financingand currency environment for non-Yen denominated investors. Thus, Japan is one of the fewmarkets where the spread between cap rates and interest rates remain attractive for the office sector. As ofMarch 31, 2023, the spread between Japan 10-year treasuries and the average cap rates for grade A office space in Tokyo and Osaka was 242 bps. 18 17 CBRE Japan, as of March 31, 2023 18 Bloomberg and CBRE Japan, as of March 31, 2023 OPPORTUNITIES | WEALTH OUTLOOK 2023 | MID-YEAR EDITION │ ALTERNATIVE INVESTMENTS | 26