Global investors are preparing to double down on Japanese real estate and deploy sizable chunks of the $40 billion of dry powder capital earmarked for Asia Pacific into the country.
In this podcast, our host, Art Patnaude, has a dialogue with JLL’s Stuart Crow, CEO Capital Markets, Asia Pacific speaking to us from his home office in Singapore and Kenichi Negishi, Head of Capital Markets, Japan, joining us from Tokyo.
The topic at hand - Why is Japan set to attract greater volumes of international capital.
“Japan will be one of the least impacted markets in Asia Pacific and will probably emerge as one of the more attractive investment destinations for cross-border capital in the second half of 2020,” says Stuart Crow. “Global investors have long desired greater exposure to Japan, and with a slight price correction, there will be greater opportunities.”
“Pricing has usually been the main challenge faced by investors as well as tight supply in Tokyo,” explains Kenichi Negishi. “When international investors look at Japan, they see a safe haven and a core investment market within global and regional strategies. They are also looking for stable income, and typically office is one of the sectors that provide a very stable cash flow, which becomes more attractive if there is a price adjustment.”
Diversification is a theme that we expect to continue. “We are anticipating global investors to increase allocations to Japan and accelerate plans to look beyond Tokyo into markets like Osaka and Fukuoka,” says Negishi. “Investors view Japan through a more diverse lens when looking into increased exposure, which can also be seen through the growing attraction to emerging asset classes like data centres, logistics, and multifamily”.
In the short term, the impact of COVID-19 on Japan’s real estate market is expected to be less than the global financial crisis. And despite expectations that transaction volumes for the whole 2020 will register a 25% decrease from the previous year, global investor sentiment towards Japanese real estate is already showing signs of a meaningful shift.