The end of Japan’s ultra-loose monetary policy is unlikely to deter foreign investors from snapping up commercial real estate in the world’s fourth-largest economy, as Tokyo and other large metropolises remain attractive destinations for capital looking to acquire assets such as hotels, multifamily buildings and logistics facilities, according to analysts.
This view on Japan stands in contrast to the outlook for China, where various support measures and a loose monetary stance have failed to revitalise foreign investment demand for commercial property, they said.
Last month the Bank of Japan (BOJ) wound up its eight-year policy of negative interest rates, which had been put in place to encourage consumption and boost investment. The BOJ pegged rates to between 0 and 0.1 per cent and signalled a potential rate hike if consumer prices continue to firm up.
Meanwhile, China’s central bank has been on an easing trajectory, with its latest decision in February cutting 25 basis points from banks’ five-year loan prime rate (LPR), the largest shave since the LPR was designated as the main rate benchmark in 2019.
“From the commercial real estate perspective, the appetite is quite a tale of two countries: foreign investors continue to look for opportunities in Japan but remain very silent when it comes to China,” said Henry Chin, global head of investor, thought leadership and head of research for Asia-Pacific at CBRE.
Flows of foreign money into commercial property reflect the shift from China to Japan.
In 2019, foreign investment in Chinese commercial real estate reached US$12.3 billion, almost double the US$6.2 billion invested in Japan, according to CBRE’s tracking of all transactions worth US$10 million or greater.
By 2021, this gap had narrowed, with China getting US$10.1 billion and Japan US$6.5 billion. In 2022, the two countries received roughly equal foreign investment, US$8 billion for China and US$7.7 billion for Japan. Last year, the tables turned, with Japan taking in US$5 billion and China getting just US$3.2 billion.
China’s share of total foreign investment in property declined from 38 per cent in 2019 to just 8 per cent last year, while Japan’s has been relatively steady at 21 per cent in 2019 and 17 per cent in 2023, according to data cited by JLL.
“Foreign investor appetite could not be stronger for Japan at the moment,” said Pamela Ambler, head of investor intelligence for Asia-Pacific at JLL.
“Despite the recent BOJ announcement, Japan is still the only market with accretive cash-on-cash returns. In fact, monetary policy may drive domestics to look overseas, opening up opportunities for foreign investors to enter the market.” Source: SCMP
