Wednesday, January 10th 2018
After the Japanese bubble in the 1980’s ~ 1990’s, the presence of “Japanese Buyers” in overseas real estate reminds some of the end of a market cycle. Those watchful of the global real estate trends are wary of their movements into the US – for example, when GPIF took its large step recently through its call for application for new global real estate and infrastructure asset managers. Some warn that these steps by Japanese investors mark the end of the markets peak.
In 2018, we expect over 20 billion USD could be deployed to global real estate (direct & indirect), if there are investable and reasonable opportunities.
Are Japanese investors repeating same thing again? What are their rationales?
To highlight key differences from the 80’s ~ 90’s, we can see differences in what investors are seeking to invest in, and also their methods. Japanese investors are now seeking global real estate for long term investment as a source of long term stable income and asset diversification. In the 80’s capital driven investments were observed. For method, fund investments with diversified approach as opposed to single larger direct investments can be observed (Large players opt for diversification in direct investment. ). Using Japanese insurance companies as an example, while they preferred direct real estate in the past for overseas investment, most of them opt for co-mingled funds. They also consider stay in the market for a few market cycles for their investments.
The driver of starting global real estate is necessarily of asset diversification, low income opportunity due to super low interest rate which is sometimes negative rate, and limited business growth in Japan.
What this means is, instead of entry timing, there is more focus on strategizing and understanding global mega trends when Japanese investors rationalize their initial action plans for long term investments into global real estate.
Some sample global mega trends that have caught the attention of Japanese investors include- urbanization, demographic changes, climate change, and technology. A very key topic is ESG, which has suddenly become a major theme in real estate investment, especially after GPIF and World Bank Group announced their partnership in October 2017 to conduct join research on the integration of ESG into fixed income portfolios. Considering the background, we analyze what important rationales for Japanese investors entering overseas real estate market in this timing are ESG and long lease with those global mega trends.
For overseas fund managers and real estate players looking approach the Japanese investor market at this time, understanding this backstory and tailoring opportunities to fit the current needs of the investor appetite can greatly increase chances of success.
Asterisk Realty & Placement Agency can help you better understand the Japan market as well as each investors unique background.
About Asterisk Realty & Placement Agency
Asterisk is a private fund placement agency for global alternative in Japan. Through our unique and extensive network of Japanese investors, we support global fund managers in accessing Japanese and Asian institutional investors (pensions, financial institutions, real estate developers, other business companies, etc.).
We provide access and strategies for overseas fund managers to bridge the gap between them and Japanese investors.
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