Wednesday, September 6th, 2017
Today we will be sharing insights on unique trends in both the inbound and outbound Japanese real estate market. As Chinese capital becomes growingly uncertain, the next key driver for global real estate investments is Japan as large real estate players relaunch their overseas investments. Overseas investors are also looking into investing in Japan as the newly passed bill legalizing Integrated Resorts promises to boost the growing tourism market in Japan. We will explain the current status well as types of opportunities that come with these new trends.
Outbound – global diversified investment by Japanese institutional investors
While Japanese investors were hesitant on global real estate investments due to losses made in the late 80’s, large players like Japanese public pensions- GPIF and Chikyoren, and Japan Post Bank have made taken action to focus investments on overseas investments. Most recently, after a 26 year hiatus, it was reported that Dai-ichi life, Japan’s 4th largest insurance company is relaunching its overseas real estate investments through fund of funds in September 2017.
We expect more Japanese investors to follow suit and invest overseas. Rationale for this trend shift has been due to the low interest rates in Japan, and the growing necessity for players to look overseas for global asset diversification, long duration assets, and income generating assets.
On September 1st, Mitsui Fudosan announced a local partnership in which they will be investing USD 3.6 Billion to develop an Manhattan office building. We can predict more capital to be going out of Japan. Asterisk has held several seminars about overseas real estate investment for Japanese institutional investors in past 10 months, and more than 100 unique entities with total assets over 10 trillion USD have attended at our seminar. Excluding Mitsui Fudosan recent investment, in 2017, Asterisk estimate at least 5 billion USD has been deployed to overseas real estate by Japanese institutional investors (direct & indirect) and this trend has just began and to accelerate more in next 2-3 years.
Locally, the two biggest drivers for real estate investments within Japan are from the expected increase of tourism thanks to the upcoming Olympic games also the government’s measure to stimulate tourism industry for past 10years, and the passing of the Integrated Resorts bill. Japan is now the fourth most visited country in the world, falling behind Spain, the United States, and France (The Travel & Tourism Competitiveness Report 2017, The World Economic Forum). The industry is still growing faster than expected, with international visitors 24.04 million in 2016, with the Japanese government now targets 40 million annual visitors by 2020 for the Olympic Games.
Inbound – tourism & hospitality
With the Olympic Games, we see an increase of real estate investments catering to the hospitality needs for namely Tokyo, Osaka and Kyoto. To name a few scheduled, Moxy Hotels by Marriott International will open November 2017 in Tokyo, Park Hyatt Kyoto will open in 2019, The Langham Tokyo in 2021, and two Marriott Internationals luxury lifestyle hotel brand EDITION will come to Tokyo in 2020- one in Ginza and one in Toranomon.
Luxury Hotels, including luxury branded residences are also entering resort locations. The boost in resort locations developments can be are accredited to local governments actively promoting their cities to tourists. Aman has opened their Amanemu hotel in 2016, in Ise Shima National Park, Honshu’s Mie Prefecture. Ski resorts, namely in Niseko have also welcomed a number of overseas operators. For new developments, JW Marriott Hotel Nara will open spring 2020, Ritz Carlton will open a ski in and ski out reserve in Niseko in 2020, Park Hyatt Niseko will open in 2019.
Given the success luxury branded residences has had in the overseas market, Japan is beginning to introduce this concept to both its gateway cities and resort locations. Resort locations including Hakone, Hakuba, Karuizawa, and some destinations in Hokkaido have strong potential for luxury resorts and branded residences.
Asterisk is working on various opportunities of luxury hospitality and residential development with Japanese local developers, and forming investment structures for investors.
With the bill to legalize Integrated Resorts being passed last December, Japan hopes to keep up momentum from the Olympic tourism. On top of bringing overall economic revitalization to Japan, Integrated Resorts are playing a role in promoting local cities. There are 10 cities across Japan looking to host the incoming operators, with three of the locations being Japan’s central locations- Osaka, Yokohama and Tokyo. If the IR is to be developed in central locations, operators are promising to collaborate with governments to promote Japan’s local tourism.
The IR developments will bring a wide range of opportunity for further real estate developments surrounding the site. The luxury real estate sector may be the one that will grow the most from the introduction of this business model to Japan.
As these trends pick up in speed, it is important to keep an eye on their movements, and partner with a local player that understands the market and is able to advise you on how to capitalize on the upcoming opportunities in Japan
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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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