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Increasing Japanese Investment in U.S. Commercial Real Estate

November 7, 2017

Increasing Japanese Investment in U.S. Commercial Real Estate

November 6, 2017 | James Sprow | Blue Vault

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In an exclusive article by Tom Yeatts at SNL, we learn that Japanese institutional investors are once again upping their investment in U.S. commercial real estate, totaling $1.27 billion in the first half of 2017, a 23% year-over-year increase.  The total Japanese investment in U.S. real estate is difficult to track because it is indirect via U.S. REITs or fund of fund structures, but CBRE said it could total more than $15 billion in coming years.

According to an interview with Hanako Tomimatsu, an associate director overseeing Japanese outbound capital at Jones Lang LaSalle, Japanese investors today are being extremely cautious, having learned from their mistakes in the 1980s when they were landing big-name trophy properties. 

The SNL article quotes Tomimatsu:  “”We learned from our mistakes,” Tomimatsu said of the runaway speculative investment in U.S. property in the late 1980s and early 1990s that predated the so-called Lost Decade in Japan, when interest rates spiked, the stock market tumbled and lending standards tightened. Ultimately, the Japanese exited their U.S. investments of that period at steep discounts, and then disappeared from the scene for years.”

“U.S. REITs are especially popular among the newly invigorated Japanese investor set, given the success of so-called J-REITs in recent years at home. Office, industrial and multifamily remain the preferred subsectors given their perceived stability, according to Tomimatsu.”

The main motivation for Japanese investment is diversification and the need for yield.  According to Spencer Levy of CBRE, the Japanese market does not offer enough investment opportunities, and negative interest rates have driven Japanese investors toward alternative investments.  “There is an enormous savings glut [in Japan] and they need large, high-yielding investments.”

According to Real Capital Analytics, the real estate development and investment firm UNIZO Holdings Co. Ltd. has invested $1.87 billion into 10 properties in the last 24 months.  The large majority of most Japanese commercial real estate investments have been in Washington D.C. and New York City, in both 2016 and 2017. 

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Derek Hayes
Blue Vault's Services
April 14, 2016

BlueVault saves a lot of time and effort in obtaining good numbers for analysis and provides good insights to compare against my own.