Kensho Investment Group

【APAC living sector attracts investor attention】 Kensho is specializing in German and European investment in residential real estate in Japan. The background: As the head of the Kensho predecessor Kenzo Capital Corporation, our President and CEO Dr. Leonard Meyer zu Brickwedde launched the first German special fund for Japanese residential real estate in 2017.   Therefore, we are pleased to read that the so-called “living sector” in Asian-Pacific countries is continuing to attract the attention of foreign investors. A new report by CBRE explicitly states that Japan is leading the region in living sector investment volumes, with its multifamily sector being the most developed market, attracting institutional capital, REITs, and global investors.   “In Tokyo the yield spread for multifamily over office assets is 50-55 basis points,” told Ada Choi, Head of Research, Asia Pacific for CBRE, the journal Real Estate Asia. The living sector in Asia Pacific is encompassing student housing, co-living, serviced apartment, rental housing/multifamily, and senior living. Investors are attracted by the growth of the region’s expatriate population, low homeownership affordability, and the effectiveness of rental residential investments as an inflation hedge, says the CBRE report. https://lnkd.in/gQgY7RkZ

【Offices in Japan remain an attractive investment】 In contrast to the markets in Europe and the US with their rather high rates of people working from home, commercial real estate in Japan continues to benefit from an overall trend back to the office since the end of the pandemic. The most recent indicator for this trend: Central Tokyo’s office vacancy rate dropped to 4.76% in August, the lowest level seen since December 2020, according to brokerage Miki Shoji. For existing buildings, excluding new construction, the vacancy rate was 4.53%, down from 5.64% seen this time last year. Please also read our latest CEO Insight about how the higher prevalence of work-from-home in Germany slows down business with Japan. https://lnkd.in/gCqdEXiE https://lnkd.in/g5aAQBvn

【Japan land prices see sharpest rise since 1992】 The average overall price of land in Japan as of July 1 rose 1.4% from a year earlier, marking the third consecutive year of increase and the sharpest advance since 1992, amid growing inbound tourism and foreign investment due to the weak yen, government data showed. Commercial land saw a 2.4% jump and residential land a 0.9% rise, both also advancing for the third straight year and at the sharpest pace since 1992, when land prices tumbled as the country's asset-inflated economic bubble burst, according to the Ministry of Land, Infrastructure, Transport and Tourism. "Unlike the short-term buying and selling during the bubble period, prices are steadily increasing, reflecting actual demand," the ministry report said. Prices increased significantly across the board in Japan's three largest urban areas centered on the cities of Tokyo, Osaka and Nagoya, with residential prices climbing for the third consecutive year and prices of land for commercial use increasing for the 12th straight year. https://lnkd.in/gZ9aeZju

【Real estate investors should better not overlook Japan’s second city】 Experienced Japan real estate investors are looking beyond Tokyo. One good reason: Osaka, Japan’s second largest metropolitan has been emerging from the national capital’s shadow. Now, a new urban development provides Osaka with a big symbol of its comeback push. On Friday, the city officially opened Grand Green Osaka, a sprawling redevelopment that combines a park with mixed-use skyscrapers to transform the very center of the metropolis. A public-private consortium of developers led by Mitsubishi Estate spent 1 trillion yen (6.3 billion euro) for construction. They turned a disused former freight yard into an urban oasis. “Grand Green Osaka includes a Japanese development’s typical components: buildings that house restaurants, trendy cafes and office space; luxury hotels, including Japan’s first Waldorf Astoria (opening in 2025); co-working spaces aimed at attracting start-ups; expensive apartments with killer views,” writes Bloomberg. But its main upgrade for Osaka comes through the nearly 5 hectares of a green public park. The reasoning is simple, according to Tadao Ando, the Pritzker Prize-winning architect and Osaka native who has been involved in the redevelopment. “Osaka is lacking in greenery,” he told a crowd assembled for an opening ceremony last week. The correction of this deficiency will help increasing the value of real estate in Central Osaka. https://lnkd.in/gfwCUpS2

【Goldman Sachs acquires residential portfolio in Tokyo】 The appetite of foreign investors for Japanese residential real estate – our core competence – continues unrestrained. The latest acquisition has been made by Goldman Sachs. The US investment bank acquired a portfolio of eight rental residential assets in Greater Tokyo for 80 million dollars. Goldman made the transaction via a special purpose company managed by the firm on behalf of investors, the banking giant told the real estate journal Mingtiandi. The seller was described as a major financial institution. Quote from the report: Comprising more than 500 apartment units, the eight properties have an average age of six years and cater to young professionals and couples, Goldman said. The Manhattan-based firm highlighted the portfolio’s strong tenant demand and stable occupancy and rent growth, driven by continued migration to cities and urbanization. “The investment is a continuation of the strategic focus Goldman Sachs has had in the sector over the past five years,” the journal quotes Nikhil Reddy, head of Asia Pacific real estate at Goldman Sachs Alternatives. “Residential investment in Japan represents a high conviction strategy for Goldman Sachs, with the onset of inflation, continued urban migration and strong demand-supply fundamentals.” https://lnkd.in/gMzDSq-d

【Final stage for huge development project at Tokyo Station begins】 The redevelopment of the districts around Tokyo Station continues: A group of prominent developers and construction companies comprising Mitsui Fudosan, Sumitomo Realty & Development, Hulic, and Kajima, have started to build a 43-above-ground-storey building opposite the South-Eastern exit of Tokyo Station. The project is scheduled for completion on January 31, 2029.   This is the final stage in one of the largest redevelopments of three districts in front of Tokyo Station on a site of approx. two hectares with total floor area of about 390,000 square meters. It will feature offices boasting a scale suitable to serve as headquarters, retail facilities to encourage use by office workers, visitors, and others, a bus terminal operated in integrated manner with underground connections to places like Tokyo Midtown Yaesu, and a theater. Hotel-like serviced apartments to meet a wide range of accommodation needs from a one-night stay to medium- to long-term visits are planned for the 40th through 43rd floors. In addition to guest rooms, they are scheduled to be equipped with a restaurant, fitness center, and business support facilities. Concierge and reception staff proficient in English and Japanese will assist in providing a comfortable stay for non-Japanese guests. https://lnkd.in/g_VY2VWK

【Subsidies for demolition of old condo buildings】 Coming back to our CEO Insight from April 2023 ( https://lnkd.in/g-UEepDB ) where we talked about empty houses and condominiums in Japan (akiya): We reported that the government are considering subsidies for the demolition of old buildings. Now, the central government has indeed taken this decision. The background: As of the end of 2022, there were 1.26 million condominiums built 40 years ago or more across the country. The figure is expected to reach 4.45 million by the end of 2042. Often, owners repair funds are not sufficient for a full renovation or a demolition and reconstruction. The demolition subsidy system would mark a shift from the ministry's current policy of promoting renovation projects at a time when condominiums are becoming too old for habitation even after renovation. Some old apartment buildings also have environmental and security concerns, such as having a high risk of exterior materials falling off or being easy to break into. The policy change is also seen as necessary to curb public spending on the demolition of decrepit condominium buildings, as municipal governments have to shoulder the entire cost of tearing a building down if all unit owners become untraceable due to deaths or for some other reasons. https://lnkd.in/g2vVdmYi

【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