Japan’s property investment market unfazed by ongoing lockdowns

There were 18 en-bloc transactions with a combined value of USD2.3b in Q1 2021.

Despite ongoing border restrictions and a renewed state of emergency in major metropolitan areas, Q1 2021 saw large transactions across the logistics, residential and office sectors, marked by robust activity from cross-border investors with a Japan platform.

Following a better-than-expected economic recovery in the second half of 2020, a renewed state of emergency declaration and “soft” lockdown for Japan’s major metropolitan areas has once again weakened economic prospects and weighed on the office, retail and hospitality sectors, says Colliers. 

Despite border restrictions being a barrier to overseas capital, investment in Japanese real estate has continued apace. Logistics and residential assets remain the most sought after, the former given compelling demand fundamentals and the latter their defensive qualities. Interest in the high-grade office market appears to be picking up, with domestic corporates to sell and overseas buyers remaining bullish on long-term office demand. 

According to Colliers, Japan recorded 18 en-bloc transactions with a combined value of USD2.3b in Q1 2021. The biggest deal was in the hospitality sector with Kintetsu Group Kinki-Tokai & Fukuoka Hotels’ USD563M transaction.

Here’s more from Colliers:

With the “Go To” campaign to promote domestic travel suspended in late December and renewed lockdowns weighing heavily on demand once again, an increase in distressed hotel assets is likely in the months to come. Even so, given the high pent-up demand for such assets, there may be fewer opportunities than investors would hope for. 

Over the course of 2020 and early 2021, opportunistic buyers have anxiously awaited distressed opportunities in the hospitality sector – to little avail. Core-type capital will continue to pursue logistics and residential assets, with an emphasis on portfolios that offer exposure to major cities outside Greater Tokyo. Office investment to continue at a modest pace.

Key market deals:

Logistics & residential portfolio
Location: Tokyo and Osaka
Value in USD: 321 million
GFA in sqm: Undisclosed
Buyer: LaSalle Investment Management
Seller: Undisclosed

Recruit Ginza 8 Building
Location: Chuo, Tokyo
Value in USD: 191 million
GFA in sqm: 16,800
Buyer: Hulic
Seller: Recruit

Takara Leben Residential Portfolio
Location: Tokyo and Yokohama
Value in USD: 120 million
GFA in sqm: 11,800
Buyer: PGIM
Seller: Takara Leben