In the mainstream for the week of October 20th
Bloomberg, Nikkei Asia and Kyodo News had a lot to say about Japan real estate related topics this week.
Nikkei Asia’s Jun Watanabe wrote that many Japanese firms are getting away from non-core real estate holdings in an effort to address low price-to-book ratios.
Kyodo News’ Dominican Lam reported that yacht docking restrictions nationwide in Japan will be relaxed in an effort to attract ultra-luxury tourists to areas of the country that currently don’t have luxury tourism infrastructure.
CNN ran a lengthy article regarding protests against Mitsubishi’s Meiji-Jingu Gaien redevelopment plan approved by the government.
Bloomberg’s Yuko Takao reported that a former BOJ board member said negative interest rates could be scrapped as early as year end 2023.
On October 12th, Jun Watanabe of the Nikkei Asia reported that Japanese firms are divesting non-core real estate assets to address low price-to-book ratios, as urged by the Tokyo Stock Exchange.
While this practice is prevalent among smaller companies, Mizuho Trust & Banking saw a significant increase in inquiries from firms seeking to boost these ratios by shedding rental properties unrelated to their core operations.
Mitsubishi UFJ Trust and Banking is reported to be engaging with around 10 companies on property sales to improve their market standing.
However, the key challenge is efficiently utilizing the proceeds from these sales for growth, with M&A as a potential avenue. Collaboration between Mitsubishi UFJ Trust and Mitsubishi UFJ Morgan Stanley Securities aims to provide companies with more options.
Also on October 12th, Dominican Lam of Kyodo News reported that the spending power of ultra-rich travelers holds the potential to revitalize post-pandemic economic recovery in regional areas of Japan.
These affluent tourists, seeking unique experiences beyond Tokyo, Kyoto, and Osaka, are key to showcasing lesser-known destinations and their distinct cultures.
Japan is easing regulations to accommodate luxury superyachts, attracting high-net-worth visitors to remote areas lacking luxury accommodations. This shift is a concerted effort by the government to boost tourism expenditure, while the Global Sustainable Tourism Council helps manage the potential environmental and cultural impacts of luxury tourism.
These developments aim to diversify and bolster the nation's tourism industry.
Earlier in October, CNN ran a lengthy piece outlining the challenges and protests regarding the redevelopment of Meiji-Jingu Gaien; one of Tokyo’s most loved parks and an important site for Japan's Shinto religion.
Protestors are rallying against the loss of historical Ginko trees that have become iconic in the region. Despite developers promising that more trees will be planted than removed, the promises are not being trusted by protestors who are determined to continue their rally.
Tokyo has less green space (7.5% of land in the capital) than comparable cities like New York (27%) and London (33%).
On October 9th, Mitsuru Obe of the Nikkei Asia reported that foreign real estate investors are turning to Japan as an attractive investment destination, seeking properties like logistics facilities and offices.
This trend is fueled by Japan's low interest rates, accessible financing options, and a favorable exchange rate with the yen at a 33-year low against the U.S. dollar. Furthermore, warehouses and storage spaces are in demand due to tighter restrictions on delivery drivers' working hours, designed to enhance safety and health.
Office buildings have also gained traction as Japanese workers return to the office.
Japan has recently become the focus of real estate transactions in the Asia-Pacific region and is considered the most attractive country for cross-border investments. The availability of cheap credit, stable occupancy rates, and low geopolitical risks make Japan an appealing choice for foreign investors, especially as other countries face rising interest rates and uncertainty regarding office work arrangements.
Industrial investment, particularly in logistics facilities, has overtaken office investment in the first half of this year. This shift is attributed to the expected labor shortage in 2024 due to stricter delivery driver regulations. Additionally, residential and hotel investments, including long-stay hotels, serviced apartments, and student housing, have become popular among opportunistic investors.
Despite some Japanese companies moving their headquarters away from downtown Tokyo and the rise of hybrid workstyles, developers are confident in the office market's fundamentals and continue with massive projects. Tokyo's office vacancy rate is lower than most global cities, further supporting this confidence.
In the first half of 2023, inbound investment in Japanese real estate more than doubled, with Singapore’s GIC, Canada’s BentallGreenOak, and others making significant investments in various real estate assets across Japan.
On October 19th, Bloomberg’s Yuko Takao reported that a former BOJ board member said the central bank could scrap negative interest rates by the of 2023.