Foreign real estate investors are increasingly turning to Japan as a prime investment destination, driven by low borrowing costs and attractive opportunities in logistics facilities and offices. The country’s low interest rates have become a key factor in financing these investments.
The tightening of restrictions on delivery drivers’ working hours has created opportunities in warehouses and storage spaces, contributing to the appeal for investors. Japanese office buildings have also experienced positive impacts as workers return to offices.
Anthony Couse, CEO of Asia Pacific for Jones Lang LaSalle, highlights Japan’s attractiveness, stating that it has always been appealing and is even more so now, given the less attractive conditions in other countries.
According to CBRE, Japan has witnessed the highest number of real estate transactions in the Asia-Pacific region over the past five years. Surveys by JLL and CBRE further indicate that Japan is considered the most attractive country for cross-border investment in the region.
The availability of cheap credit is a significant factor for foreign investors who often finance their deals with yen-denominated loans. Japanese banks have become more willing to lend against real estate assets in recent years.
Despite anticipations of policy modifications by the Bank of Japan (BOJ) in response to sustained inflation and a depreciated yen, analysts remain optimistic. The recent rise in 10-year government bond yields to 0.8%, the highest in over 13 years, is being monitored.
Japan’s stability and lower geopolitical risks compared to other countries, such as China, contribute to its appeal. Foreign investors are diversifying their portfolios, with a shift towards investments in logistics facilities, residential and hotel sectors.
Massive construction projects, including towering office complexes, continue in Tokyo, signaling confidence in Japan’s office market. Despite some Japanese companies relocating headquarters to embrace remote work, the demand for office space remains high.
In the first half of 2023, inbound investment in Japanese real estate surpassed $5 billion, with Singapore leading the way with a fourfold increase from the previous year. Singapore’s City Developments, GIC, CapitaLand Investment, and other international players have made significant investments in Tokyo and Osaka.
Canada has also emerged as a major investor, acquiring prominent assets in Osaka, including the Rihga Royal Hotel. The overall trend underscores Japan’s sustained appeal to foreign investors and its robust real estate market.