How the medical tourism boom impacts Japan’s real estate sector

Several firms may look to integrate their real estate investments in the healthcare field.

Japan stands out in terms of offering high-quality and advanced healthcare services, yet has relatively affordable healthcare compared to many developed countries, and draws affluent patients from across Asia. 

Indeed, high net worth individuals have greater capacity to travel abroad in search of premium healthcare, and according to a study done by IMARC group cited by Savills in a recent report, the global medical tourism market is projected to witness significant growth from US$97 billion in 2022 to an estimated US$337 billion by 2028. 

According to Savills, to promote medical tourism in Japan, the government introduced medical visas in 2011, which were designed to increase accessibility for foreign patients to receive treatment, undergo health check-ups, and simultaneously engage in sightseeing. Overall, Japan appears to be ideally positioned to cater to this demand, and the industry appears to have significant prospects for further growth.

Here’s more from Savills:

In recent years, specialist facilities dedicated to senior living and medical therapy have been emerging in Japan. The investment arm affiliated with major developer Mori Trust is investing JPY250 billion into developing a resort for wealthy patrons in Tomakomai, Hokkaido, including four hotels, ten condominium buildings and medical facilities, with a luxury hotel reportedly to be operated by the established high-end resort brand Jayasom. The developer has been drilling for natural onsen water, which will contribute to the resort’s treatment options, while the close access to nature and ski resorts will provide a range of leisure options for guests. 

Although perhaps scarcely known among non-Japanese nationals, toji culture has been alive for centuries in Japan. It is a traditional practice where guests spend an extended period of time (typically a week or longer) at an onsen resort town, regularly using hot spring baths to alleviate stress and improve their overall health and wellbeing. 

Certain types of accommodation, often traditional ryokan, would be focused on longer staying guests, and typically prepare healthy and locally sourced food to contribute towards the therapy process, while different types of hot spring baths are available that contain various minerals and nutrients, which are claimed to alleviate certain health conditions. 

Indeed, the global rise in mental health cases, in conjunction with a growing interest in traditional Japanese culture will likely lead to greater awareness of the therapeutic properties of Japanese onsen among foreigners, perhaps contributing to further growth in inbound demand for medical and healthcare services in Japan. 

Meanwhile, many large insurance firms in particular appear to recognise the strong growth potential in the medical and elderly care services sector, and may look to integrate their real estate investments in the healthcare field within their core insurance business strategies as platforms for further revenue growth. 

For instance, AXA Investment Managers has been active in the elderly residential care market in Japan in recent years. In 2022, it acquired a portfolio consisting of 15 elderly care facilities with 800 units for JPY21.9 billion, as well as a mixed-use elderly care services building in Yokohama, housing residential units, retail, and clinics. The company extended its healthcare platform in November 2023 by acquiring two purpose-built residential healthcare facilities with a total of 331 units in Hokkaido. 

Players with a significant presence in the market may be able to use their healthcare and senior care home assets under management as platforms to offer more integrated and streamlined health and wellbeing services possibly to visitors and residents of these facilities and generate additional revenues. 

That said, the sector is still underdeveloped and faces several issues common to other growing high-end sectors in Japan. For instance, specialist foreign language speaking workers are limited in Japan, so the cost of labour will likely be higher. Furthermore, developing large facilities in secluded municipalities such as Tomakomai will require the understanding of local communities, and planning permission may also take time. 

Also, additional dedicated infrastructure will be essential in many cases, including staff accommodation and transport, which may further increase development costs. Nevertheless, Japan’s strengths in the field of advanced medical treatments, in addition to its growing expertise in high-end tourism will likely position Japan as an appealing destination for medical tourism.