Institutional investors, meanwhile, say they’re not letting bleak demographic forecasts stop them from chasing gold nuggets.
For years, the news out of Japan has been pretty negative — declining growth, deflation and population decline — but for real estate, it’s worth looking beyond the headlines, said co-director George Agethen. of Asia-Pacific with Ivanhoé Cambridge Singapore, the true real estate subsidiary of the Montreal pension fund manager Caisse de Dépôt et Placement du Québec.
“When we say we’re investing in Japan, we’re really focusing on two or three of the biggest cities, like Tokyo, like Osaka, Nagoya,” which have GDP per capita more than twice the national average, backed by a constant flow of people from elsewhere in the country, Mr. Agethen noted.
At the end of December, Ivanhoé Cambridge announced a partnership with Allianz Real Estate to invest in Japanese multi-family residential properties, with the two partners committing $250 million for a platform which, with leverage, would be able to invest around $2 billion. dollars in the sector.
Six years after Ivanhoé Cambridge began adding Asia-Pacific exposures to its real estate portfolio, Japan accounts for about 10% of the C$6 billion ($4.7 billion) in regional investments, the team of the company seeking to increase the weight of the country to approximately 20% of the portfolio, said a spokeswoman for Ivanhoé Cambridge. The Caisse had C$390 billion in assets as of June 30, while Ivanhoé Cambridge had C$60.4 billion as of December 31, 2020.
Along with certain metropolitan areas, specific sectors of the broader real estate market are also shining now, according to investors.
“Despite Japan’s demographic challenges, we have focused on micro-themes and areas with positive structural factors that are driving particular industries,” such as the pandemic surge for data centers and logistics facilities, said said Hong Kong-based Asia property manager Jimmy Phua. -Pacific with the C$550.4 billion Canada Pension Plan Investment Board, Toronto. In October, the Office pledged 110 billion yen ($952 million) to Singapore-based logistics investment firm GLP Japan Development Partners IV’s fledgling Japan-focused logistics fund. .
Japanese real estate data from CBRE Group Inc., the Dallas-based global real estate services and investment firm, showed record logistics and residential real estate transactions of 1.04 trillion yen and 732 billion yen, respectively. , for the first pandemic year of 2020. For 2021 , logistics transactions amounted to 899 billion yen, down 13.6% from the previous year, but still the second highest total on record. Residential transactions, on the other hand, fell 45% to 404.7 billion yen, reflecting Blackstone’s record takeover of a 320 billion yen portfolio of residential properties from Beijing-based Anbang Insurance Group Co. Ltd. , in early 2020.
“It’s not all purely demographic,” noted Isabella Lo, chief investment officer at Gaw Capital Partners, a Hong Kong-based property boutique. For example, if “you have less population but people are taking millions of photos every day, that requires data centers,” a market segment Gaw Capital has recently invested in, she said.
About 15% of Gaw Capital’s $35 billion in global assets under management is invested in Japan.
Dan Klebes, managing partner and head of Japan at Toronto-based real estate investment firm BentallGreenOak, said 70% to 80% of his firm’s Asian real estate funds are invested in Japan, and 99% of that total is focused on growing hub cities like Tokyo and Osaka.