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  • Writer's pictureAdam German

Japan private RE fund market rises 12 percent in AUM since December 2022

The Real Estate Securitization Association (ARES) and Mitsui Sumitomo Trust Research Institute released the results of their third "Survey on Private Real Estate Funds" on September 15th.

 
Key Takeaways:
  • Japan’s private real estate fund market, as of June 2023, is estimated at ¥33.4 trillion, a 12.4% increase from the previous survey in Dec. 2022.

  • Private REITs experienced significant overall growth, with an 11.5% increase in assets, driving market expansion.

  • Majority of equity investors (78%) showed sustained investment appetite, although 12% reported a decrease from the previous survey.

  • Hotels and residential properties attracted the most investment, while logistics and office properties faced challenges.

 

The study highlights market dynamics and investor sentiment in Japan's domestic private real estate fund industry.


The survey solicited 149 local real estate asset management firms that have been involved in organizing and operating private real estate funds during the period of July to August 2023 (based on end of June 2023 data).


86 of the 149 firms contacted responded to the survey marking a similar response rate to the December 2022 survey.


The reported market size of domestic private real estate funds, including private REITs and global funds, is estimated at ¥33.4 trillion Assets Under Management (AUM) as of June, 2023.


This marks a 12.4% AUM increase when compared to the previous December survey.


The number of asset management companies that expanded their AUM outpaced those that decreased, leading to an accelerated growth in the private RE market size.


The breakdown of AUM includes ¥24.5 trillion for domestic-focused funds, ¥5.6 trillion for private REITs, and ¥3.4 trillion for global funds.


Among these, private REITs saw a significant acceleration in AUM growth, increasing by 11.5% from the previous survey's 2.8% increase, with both the number of funds and AUM steadily expanding.


Regarding the investment appetite of respondent equity investors, 78% of them stated that there was "no change in appetite" marking a decrease of 11% from the previous survey but still comprising the majority, reaffirming robust investment interest.


On the other hand, the number of asset management companies reported to have less of an investment appetite has slightly increased, with 12% responding as "decreasing" compared to 9% responding as "increasing."


In terms of investment amounts by property type, both domestic and foreign investors indicated that hotels had the highest response rate in terms of "increased" or "slightly increased" investments.


Residential properties also accounted for approximately 30% of the total responses. However, "logistics properties saw a decrease compared to the previous survey.


"Office" properties had an increased response rate of "slightly decreased," possibly indicating concerns about the future of office spaces leading to reduced investments by some investors.


Further Reading:

ARES & Mitsui Sumitomo Trust Research Institute joint Survey on Private Real Estate Funds report (September, 2023; Japanese only)

Survey on Private Real Estate Funds September 2023 JA
.pdf
Download PDF • 1.69MB

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