Many investors from Singapore and the US are looking at the Japanese property market, with more than $2 billion in deals already made since late 2009, most of them in Tokyo.
“Hotels, Tokyo offices, Tokyo residential, I would say, will be the three specific sectors and opportunities that are being most sought after by international investors," said Alistair Meadows, Asia Pacific director for International Capital Group at Jones Lang LaSalle (JLL).
Mapletree Investments, the property arm of Temasek Holdings, is one of the buyers that have already declared interest in Japanese real estate, with nearly $1 billion in new cash allocated for data centres, office buildings, and research and development facilities.
Joining Mapletree are US-based private equity firm Blackstone Group and Fortress, Deutsche Bank of Germany and JLL’s fund unit LaSalle Investment.
“While we are cautious around the country’s fundamentals, we do believe that the sheer size of the market allows for opportunities," said Peter Kim, managing director at ING Real Estate Investment Management.
Malaysian investor YTL Corporation also signed deal to acquire Hilton Niseko Village for approximately $48.3 million, marking its major investment in Japan.
As an indication that office buildings values are set to increase, the cap rates – the income that the property will gain divided by its value – have stopped rising.
“We reiterate our view that cap rates will decline in the second half of 2010 and that real estate prices are very likely to rebound,” Barclays Capital said last month.
Marked-down or distressed properties in Japan like debt backed by commercial properties are also appearing on the foreign buyer’s radar.
“We are finding a degree of success in finding deals through trust banks or lenders who have taken control of over-leveraged assets,” said Jacques Gordon, global investment strategist at LaSalle Investment Management.