"Though investment potential appears good, investors have found deal flows restricted by the ongoing reluctance of local banks to clear bad debt from their balance sheets. A wide bid/ask spread has also limited transaction volumes."

The forecast's lowest-ranked city for real estate investment in 2013 is Osaka and ranks at the bottom in most survey categories, from investment and development prospects to office buy/sell recommendations.

One major reason is a glut of new office space that is still being completed. At the same time, PwC says "in small regional cities such as Osaka, investors simply do not know where the bottom is because of uncertain demand."

The silver lining is that Osaka's four-year oversupply of office space is coming to an end, PwC says.