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Sky-rising opportunities in Japan’s flourishing real estate sector

Article - December 13, 2019

Strong fundamentals, attractive returns, zero-percent interest rates, rising demand across the board from commercial and offices to hotels and residential, and the growing number of both tourists and expat residents are some of the factors behind the surge in Japan’s real estate industry.

 

NORIMASA GAUN, PRESIDENT & CEO, JAPAN REIT ADVISORS CO., LTD.

Japan’s booming real estate industry has been an attractive segment for foreign investors in recent years. Such has been the influx of investment into Tokyo’s flourishing property sector that the Japanese capital surpassed London as the world’s busiest real estate market during the first quarter of 2018.

A stable macro-economic outlook, a zero-interest-rate environment, strong demand in the commercial and residential markets, stable and attractive returns, a construction boom linked with the upcoming 2020 Olympics and the fast growing tourism industry are just some of the factors behind the surge in Japan’s real estate sector.

“It is a great time to invest in Japan. We can see that the dividend payouts are still very high and stable, and the market takes advantage of the 0% interest rate policy still applicable. If a foreigner has extra money to invest, Japan is definitely a good place to do so,” says Norimasa Gaun, President and CEO of Japan REIT
Advisors Co.,Ltd., an asset management company of the Japan real estate investment trust (JREIT).

“We hold quality properties in various locations and our solid capital allows us enough flexibility to handle our business. In hotel and office buildings, there are ups and downs in the rent price on the market, but we have managed such fluctuation with sufficient capital to date. Finally, we also have a strong knowledge and experience to find the best time and opportunity to sell a property.”

For the past two years, Japan REIT Advisors has made acquisition investments of 47 billion yen ($433m) and its latest annual revenue figures totaled 48 billion yen.

 

Expat influx supports market surge

Aside from the growing number of tourist arrivals, which has experienced double-digit growth in recent years and is projected to reach 40 million in 2020, Japan is also seeing an increasing number of expat workers landing on its shores – something which also bodes well for the property market and particularly the companies focused on supporting this segment, such as PLAZA HOMES.

PLAZA HOMES specializes in arranging luxury accommodation, from spacious houses to high-rise apartments, for expats working for foreign trading companies, finance companies, manufacturing companies, legal offices and embassies – be it short, medium or long term rentals and sales.

 

Koya Kuwata, President, PLAZA HOMES Ltd.

 

Helping expatriate families new to Japan to relocate smoothly and safely, PLAZA HOMES employs bilingual sales associates that assist clients in finding suitable residences as well as provide general consultancy services on living in Tokyo and Yokohama. A lot of real estate property information is listed on the company’s website, but in addition to property information and the real estate guide, it is full of living information such as school information for foreigners, hospitals etc.

“We always make our best effort to ensure clients stay and life is extremely simple while adapting to Japan. We always think ahead, and we allow our customers to have the most comfortable living rooms, kitchens and bedrooms in their apartments, making us extremely detail-oriented about our recommended properties,” says president, Koya Kuwata.

“There are several companies that provide real estate brokerage services in English in metropolitan areas. Nonetheless, what really differentiates PLAZA HOMES from the rest is the comprehensive information and services we provide to foreigners. We also have what we call ‘life-support’, guidelines which help new  foreigners to understand their new environment. Our real competitive advantage is that we make customers happy and we ensure a smooth transition to the country.”

Japan’s demographic shift is one reason for the growing demand for foreign workers, but not only white -collar expats in the metropolitan areas. With the impact of the ageing population mostly felt in rural areas, the nation has also opened its doors to blue-collar workers and low-skilled laborers.

“As a consequence, the real estate market in rural areas is expected to prosper in the coming years,” says Hiroyuki Goto, President of Global Trust Networks Co., Ltd. (GTN), which was established in 2006 to help foreigners to find apartments in Japan. 

At that time, Mr. Goto explains that it was very challenging for an expat to find an apartment because the property owners were reluctant to rent to foreigners. Since then however, things have improved with GTN having contributed to changing the negative sentiment towards the expat renters segment by offering its guarantor services.

 

Hiroyuki Goto, President and Representative Director, Global Trust Networks Co., Ltd.

 

“Trust was the key element that we needed to solve in order to help foreigners find an apartment in Japan. The first mission of our company was precisely to serve as a guarantor for those people. By providing this service, we are able to be a bridge between the owner and the resident and protect both sides, provide information and increase common trust,” explains Mr. Goto.

“Today, we provide our services to more than 10,000 leasing firms and as a result, we are able to offer various types of apartments to our customers. We are now a guarantor for 140,000 people, and yearly, we solve 60-70,000 issues.”

Like PLAZA HOMES, GTN’s services also extend to assisting clients with other key matters, such as setting up cell phone contracts and opening bank accounts. “We are the best company that can really accompany foreigners in setting their lives up in Japan,” adds Mr. Goto.

 

Office segment

As the number of foreign workers has increased, so too has the number of foreign companies, which is having an impact on demand in the office market. But with scant supply for both domestic and foreign companies looking for prime office space in Tokyo, real estate firm Vortex has reoriented itself to offering properties in satellite areas, as well as continuing to invest in centrally located flagship commercial developments such as Ginza Six.

“When you look at the Ginza area, it is really hard to find properties with the same size as Ginza Six. We successfully acquired this Ginza Six floors via our particular channel for property information,” says Fumihiko Miyazawa, President of Vortex Co., Ltd.

“Due to our trustworthiness and proven track record on being specialized in the central business district of Tokyo, the opportunity to obtain this type of valuable property information has been increasing recently. In this way, our property information channel is one of Vortex’s strength.”

 

Fumihiko Miyazawa, President, Vortex Co., Ltd.

 

ESG investing

Environmental, social and corporate governance (ESG) investments have also played an increasingly key role in the Japanese real estate market.

“One example of this is Green bonds, which were launched on the JREIT market last year. Since then, more than 10 JREITs, including Mitsubishi Estate, have issued green bonds. They are mostly used in order to purchase or refinance the acquisition of green buildings,” says Ryuichi Horie, Co-Founder & CEO of CSR Design, a consultancy firm focused on sustainability aspects in property and infrastructure developments. According to Mr. Horie, environmentally and socially-conscious Japanese real estate players are at the forefront of ESG investing, and particularly JREIT firms, including the aforementioned Japan REIT Advisors.

“Moving forward, it is also important to discuss the importance of environmental, social and governance (ESG) benchmark for real assets,” he says. “It is becoming increasingly common for Japanese real estate companies to participate in the ESG benchmark. ESG wise, we can say that the JREIT market is currently one of the leading markets in the world.”

 

Ryuichi Horie, Co-Founder & CEO, CSR Design Green Investment Advisory Co., Ltd.

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