Florence Chong considers whether the level of investment will reach the heights of the 1980s. During the 1980s, Japan was the world’s most prolific real estate investor in multiple global markets, before it was eclipsed by Singapore and China. But since 2016, there have been signs of a second coming.
This time there is no speculative buying. No golf courses, trophy hotels or large tracts of land. Today’s Japanese investor wants institutional-grade assets, primarily offices that will deliver bond-like returns. And preferably assets located in key cities on the west and east coasts of the US, or – at a push – in Europe and Australia.
Some will invest direct, and others – indeed, most of the large pension funds – will initially invest through an asset manager.
Yukihiko Ito, the managing partner of Tokyo’s Asterisk Realty & Placement Agency, believes total outbound Japanese real estate could exceed US$10bn (€8.3bn) in 2017 – with 60-70% taking the form of direct acquisitions and the balance investments in real estate funds. It is a figure, he says, that is set to rise quickly from here. In 2018, Ito expects increased focus on Europe, which offers good buying opportunities.
Real Capital Analytics, which tracks direct transactions around the world, captured US$4.4bn of deals in 2017, up from US$4.2bn in 2016.
Reid Mackay, the partner with Tokyo-based EastGate EGW Asset Management, says Japanese outbound investment is driven in part by the high level of liquidity in corporate Japan – the highest he has seen in 15 years working there.