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The time is now foreign investors in Japanese real estate

Interview - November 17, 2020

In this interview with The Worldfolio, Tetsuji Hirano, CEO of leading property firm LEGAL CORPORATION, gives his insight into the opportunities in Japan’s strong and stable real estate sector and says his company can serve as the “bridge” for foreign investors looking to seize the opportunity in the Japanese property market.


Japan’s real estate market shows strong fundamentals. The effects of Abenomics combined with the attractive interest rates set by the Bank of Japan (BoJ) and the upcoming Olympic Games have motivated investments and driven real estate value. For example, land prices in Tokyo, Osaka and Nagoya have increased for six consecutive years in terms of residential properties; and seven consecutive years for commercial properties. What is your assessment of Japan’s real estate market today?

Japan’s real estate market is characterized by its stability. In comparison to the fluctuating markets of other countries, the Japanese real estate sector is supported by a series of strong fundamentals that stabilize performance.

Firstly, investors enjoy a steady operating income as well as stable rental prices, which naturally limits sudden fluctuations. On top of offering relatively high returns, the initial cost of investment in Japan is lower than that of other markets, which translates into an attractive investment yield.

Secondly, the Bank of Japan’s adoption of negative interest rates combined with the government’s policies have created a stable macro-economic situation and boosted confidence in the Japanese yen.

Thirdly, Japan is widely recognized as an innovative country that swiftly adopts new technologies, and real estate is no exception. For example, the Smart City megatrend is being rolled out at great speed and related technologies have already been implemented in industrial houses, offices and commercial facilities. These technological advancements attract investors and create confidence in the market’s future outlook.


In 2019, Tokyo’s average residential land price rose 3.0% from the previous year. Land prices in the eight wards of central Tokyo rose by an astonishing 6.0%, well above the national average. What areas of Tokyo would you invest in and why?

To leverage on Tokyo’s potential, we have released a series of Low-Rise Rental Condominiums entitled LEGALAND.

If one is to observe Tokyo’s metro map, one will see the famous “Yamanote Metro Line” that circles central Tokyo up until the 75th route of the highway. This circular line that runs from Shinjuku to Ueno passes by Suginami, Setagaya, Ebisu, Meguro and Shinagawa; all the areas inside Tokyo’s ‘ring.’

Out of Tokyo’s 23 wards, the zones inside this ring represent the most lucrative neighborhoods, and LEGAL CORP seeks to leverage on that potential.

For example, one of the most prioritized areas, namely, Shinjuku, has seen the rate of its square meter increase on an annual basis and land prices in the area have logically shot up within a short period of time.


With the 2020 Olympics about to begin, some investors have argued that Tokyo could be at the eve of a post-Olympic real estate crash. While this argument is based on past examples, it is important to note that certain cities have performed well since they hosted the Olympic Games. For example, since London hosted the Games in 2012, the value of its residential property market has increased by more than 40%. What are your predictions for Tokyo’s performance after the Olympics?

As a company and as an individual investor, I do not believe that Tokyo’s real estate market will suffer from a post-Olympic depression. Macro-economic factors and market fundamentals all indicate that land prices and operating incomes will maintain their steady upward grind long after the Olympic Games.

While Japan suffers from a decreasing demography, the population of metropolitan areas, including Nagoya and Tokyo, is increasing annually. People in rural areas, especially younger generations, are flocking to large cities, and metropolises are absorbing Japan’s population. Today more than ever, Tokyo is the core of the Japanese nation and that will not change after the Olympics.


With Fukuoka’s ‘Big Band Tenjin’ project, the renovation of Nagoya Station, and the increased value of Osaka’s commercial facilities, Japan’s real estate boom is not limited to Tokyo. Beyond the capital, what other cities should investors be looking at and why?

With strongholds in Osaka and around the Kansai region, LEGAL CORP has a presence throughout the country. Outside of the capital, we believe that the number one destination for real estate investment is and will continue to be Osaka.

Furthermore, the West territories of Japan, including Hiroshima, Fukuoka and Kyushu; all the way south to Okinawa, have experienced a positive momentum. While the specific features of these areas do not attract a lot of local investments, outsiders tend to appreciate them for their unique characteristics.

That being said, I believe the market most vulnerable to the decreasing demography is Osaka. As the country’s ‘second capital’ and one of its largest towns, the Osaka government is aware it must promote its region to attract more people. Consequently, it has been launching a series of policies and campaigns to attract more companies and individuals to the city. Their aim is to appeal both to Japanese people and foreigners. In order to attract more foreign investors, the local government must increase the attractiveness of its real estate sector by facilitating certain social policies. For example, we have heard that foreign labor regulations may be relaxed and visa processes simplified.

To counter their declining populations, local areas could introduce these types of reforms to inverse their demographic curb and render their regions more attractive to foreign investors.


In 2019, Foreign investments accounted for roughly 20% of the total investment volume of Tokyo, a number relatively low when compared to that of New York or London. What can be done to attract more investors to Japan?

We must enforce full-level information disclosure and transparency, both from a corporate and governmental level. The level of information accuracy we provide is directly correlated to the confidence of our stakeholders.

Furthermore, new added-values and products based on ESG investing (Environmental, Social and Governance) must be implemented.


How does LEGAL CORP plan to attract more foreign investors?

We recently announced that we will open a branch office in Singapore. Our first objective is to prove our commitment to Singaporean investors by allowing potential clients to discover more about our firm and the services we offer. Furthermore, we seek to acquire more information about the Singaporean market. By using this new office as a pipeline, we seek to create new income stream and introduce LEGAL CORP to Singaporean stakeholders.

Through our Singaporean channel, we will listen to the desires of local customers, fit their requirements, and identify the solutions to their problems. By having a direct communication channel, we will study the behaviour of this market and will promote co-development opportunities. Based on co-development with Singaporean entities, we will develop new products in Japan. 

Furthermore, we plan to enhance the value of our portfolio by promoting ESG investing. To that end, we will soon receive the accreditation for GRESB (Global Real Estate Sustainability Benchmark), thereby providing more business intelligence and engagement tools to investors interested in LEGAL CORP.


LEGAL CORPORATION was founded in 2000 with real estate consulting for financial institutions and lawyers at its core. Since then, the company has expanded its service and transformed into a comprehensive real estate development company offering real estate solution & recovery, rental, consulting, facility management and nursing care services. Can you run us through the history of your company and highlight your key milestones?

As a Japanese firm, we believe in the virtue of humbleness; and on many occasions, our milestones have been inevitable steps towards our survival. 

LEGAL CORP was established in 2000, just when the Japanese economy collapsed due to the burst of the first bubble period. As the economy gradually arose, we began by taking cases for lawyers, effectively mediating loan delinquencies and short sales from guaranteed companies. That model functioned adequately until the Lehman Shock raised havoc across the global economy.

Interestingly so, as most companies were struggling, 2008 marked our first milestone. At that time, Japan changed its SME Finance Facilitation Act. Under the new policy, banks were obliged to allow SMEs to reschedule and extend their loan repayments. On the one hand, it allowed companies to have another option instead of just filing for bankruptcy. On the other hand, loan restructuration negatively impacted market confidence and resulted in a decrease in real estate value. As no one would buy properties, land prices declined and we seized that opportunity to transform our business model by buying the properties we formerly mediated for. As banks were cash-empty and scared to lend money, the amount of solid developers in the Japanese market significantly decreased, and with it, so did supply. However, the demand for residential properties remained consequent. We spotted that gap in the market and became a developer.

At LEGAL, our philosophy and mindset is to step forward and advance without fear of change. After the Lehman Shock, we successfully transformed from a real estate broker into a real estate developer. Our past in real estate brokerage left us with strong fundamentals and a true knowledge of our clientele. Looking at the future, we seek to maintain that mentality by increasing our portfolio to different kinds of real estate facilities.


You recently released LEGALAND, a series of low-rise rental condominium located in the prime downtown areas of Tokyo. Can you tell us more about this project?

Each LEGALAND building enjoys an aesthetic design and an excellent location. As these buildings are systematically located close to main metro stations, they are both convenient and accessible. To conceptualize LEGALAND, we understood the priorities of our clients and fulfilled them. To make these five-story buildings compact yet comfortable, we eliminated unnecessary features, such as elevators and balcony, which allowed us to reduce maintenance fees and increase living space. LEGALAND properties are constructed by long-lasting concrete structures, and enjoy a superior lifespan. Today, we offer 76 LEGALAND buildings in Tokyo and five in Osaka.

LEGALAND Ebisu. Photocredit: LEGAL CORP

In Japan, there is an Inheritance Tax that applies to assets and money that are gifted. LEGALAND represents a lucrative investment to minimize one’s Inheritance Tax, and investors consider it to be a fine asset to store money.

To give you more details as to our business model, we do not sell LEGALAND per unit, but per building. Each building costs between 300 to 500 million JPY, which is the average market price, and is both attractive and affordable. In comparison, if one was to buy a similar facility in Singapore, one would pay the same price, but per unit!


What are the competitive advantages of LEGAL Corporation?

Our greatest strength is our ability to create new value. We promote a corporate spirit composed of accepting challenges and finding courage! Furthermore, our team is truly hardworking and devoted.

Secondly, even though most of our activities are based in Tokyo, LEGAL CORPORATION’s headquarter is located in Osaka. As Tokyo and Osaka are two very different markets, it is difficult to acquire expertise in both. Thanks to the location of our offices however, we are proud to boast an in-depth knowledge of both markets.

Thirdly, both the Japanese economy and real estate market must learn to cope with its aging population and declining birth-rate. To serenely face this demographic change, we have implemented a proper strategy based on adaptation. As our citizens are becoming older, we seek to assist them by fulfilling their real estate needs. Consequently, we have gradually expanded our business into nursing care services and activities.

Last but not least, we have the potential to become a bridge between the Japanese and the global market. Opening our office in Singapore is a first step to capturing more international attention, and to allow foreigners to discover what Japan has to offer.


What objectives would you like to have achieved in ten years?

In ten years’ time, we want to have employees coming from different countries; from Singapore to India, as well as Dubai and Russia. As a company that seeks to expand its presence internationally, we must become global from the inside.

On top of combining global ambitions with local knowledge, we seek to create a fusion between the digital and the real business world. For example, we recently launched a digital platform called Yanusy to provide useful information to real estate owners. In the future, we seek to increase the information we provide on that platform and go beyond real estate owners by offering news for developers, construction and renovation projects. The combination between digital business and real business will increase our efficiency and service quality. By investing in digital technologies today, we are investing in our future.