Stimulated by the global decline in property prices and the Japanese yen falling to a 50 year low against the US dollar, Japanese investors have returned to the global real estate market this year to purchase overseas properties on the largest scale in 20 years.

According to data from MSCI Real Assets, the trading volume of capital from Japanese investors in the global real estate market has reached $7.4 billion since 2023, more than three times the annual average level of the past 15 years. Since the late 1980s, Japan has rarely seen real estate investment expenditure of such scale. At that time, Japan's asset foam once promoted Japan's acquisition of landmark buildings such as Rockefeller Center and Pebble Beach Golf Course.

The increasing office vacancy rate and high global interest rates have deterred other buyers. Due to abundant cash and being the only developed economy that still maintains ultra-low financing rates, Japanese buyers have given the global real estate market a chance to breathe a sigh of relief.

According to MSCI data, Japan ranks fifth in the global real estate sector in terms of overseas investment funding sources this year, significantly higher than its 16th position in 2022. Among the five most active countries in the rankings, Japan is the only country to increase investment this year. Other countries, such as the United States and Canada, have significantly reduced their purchase amounts this year.

"Japanese investors see a window of opportunity during which they are more competitive," said Alex Foshay, head of International Capital Markets Group, a subsidiary of the real estate company Newmark Group. He added that their Japanese clients want to continue spending overseas, especially in the United States, Australia, and India. Given the low return on investment in Japan, most Japanese investors are focused on achieving long-term diversification of returns. They believe that although the weak yen has reduced purchasing power, the sluggish real estate market still makes current prices attractive.

Hiroyuki Takayama, head of cross-border transactions at Cushman&Wakefield in Tokyo, said that this year's investment boom also benefited in part from some Japanese companies' plans to allocate part of their funds to investment in overseas real estate before the epidemic. These companies were unable to carry out global travel and assessment goals during the pandemic, but this year's global recovery from the pandemic allowed their funds to be invested overseas.

Mori Trust Co. purchased a 49.9% stake in 245 Park Avenue, a skyscraper behind Manhattan Central Station, from SL Green Realty Corp. for approximately 100 billion yen ($680 million) in June. "Our advantage lies in our strong financial foundation," said Miwako Date, CEO of the trust. "Even with an investment of 100 billion yen, we can raise funds on our own and execute quickly without summoning investors."

In order to achieve investment diversification, Mori Xilang Trust began international expansion in 2016, selectively entering stable markets that the institution believes have growth potential. The trust primarily focuses on the US real estate market, having previously acquired several office buildings around Boston and Washington. For many years, Mori Heilang Trust has been focusing on investment opportunities in the New York area until the emergence of 245 Park Avenue. If it is a unique asset, we will make every effort to acquire it when opportunities arise. Dete revealed that the company's current goal is to achieve a commercial investment of 1.2 trillion yen by 2030, of which about a quarter will be used overseas.

Some market insiders believe that the enthusiasm of Japanese investors for "sweeping away" goods may also help unfreeze the largely frozen US commercial real estate market. After completing the transaction at 245 Park Avenue, Mori Trust has received real estate acquisition inquiries from around the world, but has not yet made further acquisitions.

Brandon McMenomy, Executive Director of US Capital Markets at CBRE Group Inc, a real estate broker, said, "When Japanese investors make direct purchases, they tend to buy well-known assets. This provides popular liquidity for the US commercial real estate market."

In other parts of the world, one of the biggest transactions for Japanese investors this year was the acquisition of a data center in downtown Toronto by mobile operator KDDI Corp. for CAD 1.35 billion ($996 million). A joint venture of Mitsui Fukushima Co., Ltd., the largest developer by market value in Japan, invested £ 315 million ($398 million) in a London office building near St. Paul's Cathedral. In addition, in Sydney, a fund under Mitsubishi Estate Co. purchased a commercial tower for AUD 779 million (US $513 million). The Japanese GPIF pension fund, which only started investing in global properties in 2018, has also increased its investment in global properties.

A spokesperson stated that Mitsui Property has been steadily investing overseas as part of its corporate strategy, taking into account economic and geopolitical risks, but not being affected by short-term foreign exchange trends. A spokesperson for Mitsubishi Property stated that the agency has been steadily investing overseas, which is also part of its corporate strategy. When making overseas investments, economic and geopolitical risks are considered, but not affected by short-term foreign exchange trends.

Although Japanese investors are enthusiastic about investing in real estate overseas, entering the fragile global market is not without risks. Korean institutional investors invested billions of dollars in global office buildings before the pandemic, but this year's valuations have plummeted significantly. In the late 1980s to 1990s, Japanese companies also experienced global real estate investment losses. In 1995, Mitsubishi Property acquired the iconic Rockefeller Center in New York at a high price during the peak of the market, but ultimately had to relinquish ownership of it. The Round Stone Beach Golf Course was ultimately purchased and sold by a Japanese company for 60% of the purchase price.

Benjamin Chow, head of Asia Pacific research at MSCI, said that these experiences have largely prompted Japanese investors to remain cautious about investing in overseas properties for a long time, "which is the first time they have violated this standard in a long period of time.".

Stephen Down, head of central London and international investment at Savills Plc, said that this investment was different from the investment in the foam era. Dawn worked in Japan in the early 1990s. Tang En, who advises Japanese clients on trading in the UK and Europe, said, "This investment is a healthy diversification strategy that can provide Japanese investors with more exciting investment returns than stable income in Japan."

Editor: Li Shuofang