Global real estate investors seek safe havens amid pandemic, rediscovers Japan

Most of these investors previously shied away from the country because of high market prices 

Crowds pass below the colourful signs in Akihabara, Tokyo, Japan. SeanPavone/Shutterstock

Real estate investors from around the world are searching for deals in major cities of Japan. The Investor by JLL revealed that most of them have been looking for opportunities in safe havens worldwide due to the economic uncertainties brought by the pandemic.

Before the outbreak, Japan’s commercial real estate market has always been dominated by local investors with global capital valued at about 20 percent in the past 10 years, dropping from a whopping 35 percent in 2007.

Fortunately, global investors who previously avoided the high prices of the market and tough local competition now have their eyes set on the country as the pandemic spread across the globe and increased the potential for a drop in values.

“Japan will probably emerge as one of the more attractive investment destinations for cross-border capital in the second half of 2020,” says Stuart Crow, the CEO of Capital Markets, Asia Pacific, JLL. “Global investors have long-desired greater exposure to Japan, and with a slight price correction, there will be greater opportunities.”

More: Investors gear up to re-enter Asia Pacific’s commercial real estate market

Traditionally, the cross-border capital that has been surging into the country entered through its mature office market in the Greater Tokyo area. The stiff local competition, however, made global investors less prominent in the commercial real estate market compared to other similar markets in other countries.

“Pricing has usually been the main challenge faced by investors, as well as tight supply in Tokyo,” says Kenichi Negishi, the head of Capital Markets, Japan, JLL.

“When international investors look at Japan, they see a safe haven and the opportunity to access a core investment market within global and regional strategies. They are also looking for stable income, and typically office is one of the sectors that provide a very stable cash flow, which becomes more attractive if there is a price adjustment.”