Japan’s niche real estate sectors are enticing investors

‘Living’ sectors in the ascendant as demographic changes roil the nation

Senior living, student accommodation, and co-living are luring international investors to Japan, JLL is reporting.

“In terms of yields, these three sectors can offer investors a 50-100 bps premium over the multifamily sector, which ought to draw out more interest in these sectors over the longer term,” said Koji Naito, director of JLL Capital Markets, Japan.

Demographics and changing lifestyles are driving investors to seek out these niche markets, with Japan now home to 35 million people who are over 65 years old.

Aged care or nursing homes that especially cater to the over-75s are particularly booming, reported Nick Wilson, head of Asia Pacific capital markets research at JLL. “The government is not rolling out many public sector facilities and instead is providing development incentives to encourage more private facilities. With long wait times in the public sector, demand is rising.”

More: Japan now home to almost 8.5 million empty houses

Meanwhile, the government is seeking at least 300,000 foreigners to study in the country every year. Investors are finding opportunities with international and domestic students who are seeking modern, trendy accommodation over outdated ones and looking to skirt high upfront costs commonly demanded by private landlords.

Finally, the ineluctable rise of the sharing economy is propelling co-living arrangements across the archipelago. Co-living brands, including Sakura House and Bamboo House, have established their presence in the country of late.

Operational elements of these businesses, such as specialist staff and management, are not necessarily a negative for real estate investors, assured Naito. “Many properties in these sectors are owned by the operators, so a relationship with operators is potentially one of the best ways to source product.”