May 22, 2020
Episode 10 - What are real estate investors investing in Tokyo?

In the previous episode, we mentioned that there are likely to be the most lax regulations on foreigners in Asia for real estate transactions in Tokyo. Although domestic sources of information (such as information only in the Japanese language) can be a bottleneck when entering the Japanese real estate market, there are companies like ours that support foreign investors, so let’s leave this issue aside for now. In this episode, let's delve a little deeper into the breakdown of real estate investment targets in Japan.

As you know, real estate investments include not only investments in actual real estate, but also securitized real estate that is often talked about. In fact, several Japanese laws related to the securitization of real estate have been put in place (such as the Act on Specified Joint Real Estate Ventures). As a result, data has been released showing that the evaluation of domestic investors toward the development of laws has improved by at least 10% between 2009 and 2013.

In this manner, although the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) is working to expand securitized real estate such as J-REITs, according to the latest information (as of April 2020) from a survey on foreign investors by MLIT, most (83.8%) of foreign investors (limited to those who responded to the survey) invest in actual real estate, the investment destination is different depending on each individual decision for securitized real estate (or there is no product that the absolute majority is jumping on at the moment).

 

Investment targets

 

 

 

 

 

 

 

 

 

 

 
*Prepared by International Interface based on an excerpt from the “Overseas Investors Questionnaire Survey Report” (FY2018) from the Ministry of Land, Infrastructure, Transport and Tourism.
 

Furthermore, something that is obvious if you compare schemes is that investment in actual real estate is predominate in terms of the true joys of real estate investment in which there is a considerable degree of discretion by the investor while also having the attraction of low risk.

Although we will discuss real estate investment instruments other than physical real estate investment sooner or later, there are actually various applications among physical real estate that come to mind. What are the real estate investors in Japan investing in? Let’s take a look at some data from the MILT released in 2018.

 

Investment applications

 

 

 

 

 

 

 

 

 

 

*Prepared by International Interface based on an excerpt from the “Overseas Investors Questionnaire Survey Report” (FY2018) from the Ministry of Land, Infrastructure, Transport and Tourism.

 

Nearly 90% invest in offices, followed by residential facilities (76.9%), and logistics facilities came in third place. While the first two places are easy to understand, it was logistics facilities that showed the most significant growth rate. A substantial increase can be seen from the response of only 7.7% for logistics facilities in the same survey released in 2017.

 One of the reasons behind this is probably the changing trends of Japanese consumers. According to data from the Ministry of Economy, Trade and Industry, the size of the e-commerce market in Japan has been growing since at least 2010. This might be considered as an example of how changes in general consumer behavior have had an impact on real estate investment destinations, including the stabilization of the earnings of major Internet sales companies, as well as real estate developers who had not previously focused on logistics facilities beginning to focus on logistics facilities development.

Although the rankings may fluctuate somewhat by year, there is no doubt that there considerable needs for offices, residential facilities, and commercial facilities. In the next episode, we will focus on offices and consider real estate investment in the context of social trends in Japan. We hope that you will read it.

 

*Sources:
“Development of Real Estate Investment Market Conditions” (2014) from the Ministry of Land, Infrastructure, Transport and Tourism

“Overseas Investors Questionnaire Survey” (FY2017 and FY2018) from the Ministry of Land, Infrastructure, Transport and Tourism

“Basic Conditions (E-Commerce Market Survey) of Data-Driven Society” (FY2018) from the Ministry of Economy, Trade and Industry

 

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Disclaimer:

Neither International Interface nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.