Kensho Investment Group

【Japan is a safe spot for global real estate-oriented capital】 According to a recent Knight Frank release, Japan will attract 23% of APAC total cross-border investment flows into real estate in 2024. International investors are continually entering the Japanese market due to its favourable long-term prospects. This is most evident in established players seeking opportunities in prime locations and high-quality assets that offer stable yield spreads, reports the journal Real Estate Asia. The report mentiones as example that BentallGreenOak acquired Honmachi Garden City in Osaka, a mixed-use building, from Sekisui House REIT for 422.9 million dollars in May 2024. The deal cap rates at 3.0% for the hotel component and 3.4% for the office component reflect the premium placed on well-located, high-quality assets in Japan's major cities. The journal writes: “While the living sectors continue to draw investors' interest, cap rate compression has led to investors' increased selectivity in multifamily asset acquisitions. Interestingly, some investors are expanding their focus to include the senior living sector. This shift is strategic, capitalising on Japan's demographic trends toward an aging population.” Neil Brookes, global head, capital markets, Knight Frank, says, “We expect 23% of the total cross-border flows to target Japan in 2024. As Japanese companies accelerate the shedding of property assets, more motivated sellers are unlocking extensive opportunities in the country.” He is not worried about the interest rate step. “Japan remains a safe spot for global capital due to the Bank of Japan's cautious approach,” he added. “The Central Bank monitors market conditions, prioritising sustainable wage growth and moderate inflation before significant rate hikes. A short-term 10-30 basis point rise is possible with minimal impact on value-add players.” https://lnkd.in/gAKrAPX9

【Japanese companies seek more value from their real estate holdings】 The trend that Japanese companies are discovering their real estate holdings as valuable assets (we discussed this trend in earlier posts already) continues: The shares of Sapporo Holdings surged after the major beer browing company said it would solicit proposals for external investment in its real estate business. The company plans to start seeking offers for its real estate subsidiary, which runs properties including the upscale Yebisu Garden Place commercial complex, in mid-September, it said in a statement. It is also considering asset sales or a tax-qualified spinoff, it said. Sapporo will use the proceeds from its real estate decisions to “aggressively” invest in its beer brands and to aim for a 25% share of the domestic market as well as higher profit margins in the long term. https://lnkd.in/gaSef7bT

【Japanese real estate as high-performing asset for high-net-worth clients】 Daiwa Securities, the second largest brokerage and investment bank in Japan, is launching property loans in a wealth management push. The move expresses confidence that real estate in Japan will be a high-performing asset. More specifically, Daiwa will start providing loans for real estate investments of 300 million yen (1.9 million euro) or more with the aim to bolster its wealth management operations. Daiwa already brokers real estate purchases for clients who are looking to build their wealth or plan their estates. But clients have needed to go elsewhere to secure financing for the deals. By offering loans through online banking unit Daiwa Next Bank, the group aims to keep the entire process in-house. The market for real estate loans is growing, driven partly by rising property prices, writes the financial paper Nikkei. The outstanding balance of real estate loans to retail investors stood at around 28 trillion yen (467 billion euro) as of the end of March, reaching a more than three-year high, according to the Bank of Japan. https://lnkd.in/g7rEquQ2

【Hong Kong private equity investor acquires hotels in Japan】 With the booming number of visitors from abroad the Japanese hospitality sector has become a big target for foreign real estate investors. The latest deal is the acquisition of a pair of hotels in Osaka and Kyoto by Hong Kong-based AB Capital, bringing its collection of Japanese hotels to six, reports the journal Mingtiandi based on a press release. Working on behalf of a newly established fund, the private equity firm has picked up the Randor Hotel Namba Osaka Suites and Randor Residential Hotel Kyoto Suites, a pair of apartment hotels in Japan’s Kansai region developed by L’Attrait, a real estate development unit of Tokyo-listed LA Holdings, per public records, with financial details of the acquisitions remaining undisclosed. With Japanese hotels continuing to rank among the most sought-after asset classes for institutional investors, the twin acquisitions come just over a year after AB Capital picked up a 220-room hotel in Tokyo.   https://lnkd.in/gYFzHPsr

【More real estate assets at world’s largest pension fund in Japan】 We have been explaining this before: The institutional real estate market in Japan has further matured with big institutional investors diving into real estate assets. One of the prime examples is the Government Pension Investment Fund (GPIF), the world’s biggest public pension fund. Its wealth is used to supplement the payment of basic pensions in Japan. Here comes the news: The GPIF has continued to grow its real estate exposure by adding more direct investment mandates. It boosted its real estate assets under management by 27% in fiscal year 2023 from 919 billion yen (5.3 billion euro) to 1.165 trillion yen (6.7 billion euro) this year, according to its annual report for the fiscal year ended on March 31. Despite a decrease in the market value of its existing underlying assets and portfolio companies, GPIF’s real estate assets under management rose due to new investments and the impact of foreign exchange rate fluctuations, according to the report. The investor with 246 trillion yen (1.4 trillion euro) in total assets under management added at least two discretionary mandates with real estate fund managers to invest in domestic and overseas properties during its fiscal year 2023. We also reported these developments earlier.   https://lnkd.in/gpwYqqn9

【How demographic trends impact Tokyo’s residential market】 A popular wisdom is that Japan’s population is aging and declining. Therefore, the value of residential properties may go down because of less demand. But one big exception from this thinking is Tokyo. Its population is growing mainly because of urbanization and of a rising number of young immigrants settling in the capital. In a recent report, Savills revealed that Tokyo 23W’s population has grown from 9.6 million in May 2019 to 9.9 million in May 2024, writes the magazine Real Estate Asia. In addition, foreign nationals have grown to become an integral component of this population growth. In January 2019, there were around 550,000 foreign nationals in Tokyo prefecture or 4.0% of the population, which has grown to almost 650,000 in January 2024, comprising 4.6% of the population. https://lnkd.in/gH4rZWDH

【Real estate prices and rents in Japan continue upward trend】 Average land prices climbed 2.3% last year in Japan, rising for the third straight year, a National Tax Agency survey showed, extending gains from a 1.5% increase in 2022 and a 0.5% rise in 2021, Reuters reported.  https://lnkd.in/g94D4tC3 The tax agency assesses land prices as of Jan. 1 every year to calculate inheritance and gift taxes on properties acquired in that year.   In a similar development, Tokyo Central residential rents inched up by 0.7% in the second quarter. Shinjuku and Minato saw the largest rental growth at 2.2% and 1.7%. Tokyo’s Central Five Wards enjoyed moderate growth during the quarter with average rents increasing by 0.7% quarter-on-quarter to 5,063 yen per square meter, according to a Savills report.  https://lnkd.in/gxy3tBeC   “Indeed, centrally located residences in Tokyo have been extremely popular in the post-pandemic period, which can be reflected in average rental levels having exceeded pre-pandemic levels by a notable margin,” the report added.   Finally, according to the latest data issued by the Ministry of Land, Infrastructure and Transport (MLIT) for March,  https://lnkd.in/gxekq3HZ the national total residential index was up 0.4% from the previous month. The value of residential land increased by 0.7%, while condominium values were down 0.7% from February. On the other hand, the value of condominium buildings in the first quarter was up by 0.6% from the previous quarter.