Real estate investment appetite returns to pre-pandemic levels

Corporations in Japan are now taking a different approach to their real estate investment activities. Immediately following the initial shock of the pandemic there was a sudden move toward selling off key assets in order to prop up business sheets. Now that the pandemic is subsiding and business is returning to usual, corporations are back to seeking efficient real estate assets that provide stable revenue and allow for diversification out of traditional revenue streams.

In 2021, the total value of real estate transactions by corporations was 20% higher than in 2020 and close to pre-pandemic levels. With bidding for real estate becoming more competitive and pushing up prices, transacted prices in prime locations are expected to remain high. 

According to the Urban Research Institute Corporation, the total real estate transaction volume between corporations in 2021 reached 4.3707 trillion Yen (approx. US$34 billion). This is about 98% of the level seen in 2019, pre-pandemic. The transactions involved primarily real estate corporations and REITs, but there was also activity with ordinary, non-real estate companies. 

From late 2021 there has been a shift from asset disposals by companies struggling with the effects of the pandemic to one that is more demand-driven by real estate investors taking a more aggressive stance and looking to get ahead of the coming recovery. CBRE estimated that total real estate transactions in the first quarter of 2022 are around 150 billion Yen (US$1.18 billion), double the amount seen in the first quarter of 2021.

Real estate brokerages are also expecting favorable conditions, particularly from foreign investors. With other countries switching to monetary tightening measures, Japan is expected to benefit from a weaker Yen making its real estate appear cheaper from a foreign perspective. Furthermore, Japan is known for having low geopolitical risk, legal transparency, and safe and stable returns on real estate.

In an April 2022 report from CBRE, foreign investors were said to have accounted for 30% of the total real estate investment in Japan (note: this is on an institutional level) in 2020-2021, and demand is expected to remain high this year. In January 2022, ANREV’s Investment Intentions Survey 2022 had Tokyo multifamily assets ranked as the most preferred investment target in Asia pacific 

As of 2018, the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) estimated that Japanese corporations have around 520 trillion Yen in real estate holdings, including land and buildings. About one in five domestic companies own real estate.

Source: The Nikkei Shimbun, May 29, 2022. 

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