Japan’s property market: overview of sector dynamics
Japan’s property market is experiencing a decline in foreign investment inflows. In 2024, acquisitions by this category of buyer fell by 5%. The total volume of transactions amounted to around US$51 billion. Compared with the previous period, the indicator fell by 3.4%.
According to MSCI, the share of foreign investors in Asia’s second-largest market fell to 14%. The presence of foreign buyers in the Japanese property sector is expected to peak in 2020. They will then account for 27% of the total transaction volume.
The tendency to reduce investment is particularly pronounced among global funds. They expect interest rates to fall further in other markets. In the meantime, funds are reallocating their assets in Japan. Private companies have reduced their acquisitions by 13%. They have also changed the strategy that dominated in 2023. Companies are now doing fewer large leaseback deals.
At the same time, acquisitions in the REIT sector increased by 3%. The merger of Advance Logistics Investment and Mitsui Fudosan Logistics Park Investment was a key driver. The company now operates as a single trust worth US$3.8 billion.
Among private investors, analysts noted the following trends:
– they are actively interested in buying multifamily properties;
– demand for retail property has increased;
– the number of hotel property transactions has increased.
Cushman & Wakefield analysts note that more buyers are investing in the tokenisation of retail distribution assets.
Overview of Japan’s property market dynamics
Individual sectors of the Japanese real estate market performed well. The 2024 results are summarised below:
– the volume of hotel property transactions increased by 36%;
– growth in the residential segment was 30%;
– logistics property transactions fell by 21%;
– retail property transactions decreased by 19%.
The increased need for housing in the Japanese market drove the growth in apartment demand. At the same time, the decline in the retail property sector was due to oversupply. This is the case in the Greater Tokyo area, where the number of vacancies exceeds the demand.
The situation is different in the prestige urban property sector. There is a strong need but limited supply, and as a result, the volume of transactions has not increased, stagnating the market.
Tokyo Garden Terrace Kioicho acquisition was the most significant transaction in the second half of the year. US giant Blackstone bought it from Seibu for US$2.6 billion, the largest deal with a foreign investor in the Japanese market.