Japanese overseas property investment jumps 60%
January-September figure on track for 21st-century record as firms hunt for yields
TOKYO -- Japanese businesses and investors sank $2.12 billion into overseas real estate in the January-September period, 60% more than in the same span last year, with an eye toward securing higher returns.
The amount, reported Tuesday by a Japanese unit of global real estate services giant Jones Lang LaSalle, already exceeds the full-year tally of $2.03 billion for 2016. At the current pace, total Japanese investment in overseas real estate will top the $2.42 billion in 2006, the standing record for this century.
The sharp uptick has been driven by real estate companies and insurers seeking new income sources as they struggle to generate yields in Japan's ultra-low interest rate environment.
Japanese money has been pouring into commercial real estate, mainly in the U.S. and Europe. Mori Trust purchased two office buildings in Boston, U.S., in January. Mitsubishi Estate acquired an office building in Munich in June.
Aside from purchasing existing properties, Japanese players have also been actively involved in overseas property development projects. Data from a Japanese unit of CBRE Group, another major global real estate services company, shows Japanese investment in such projects reached $700 million in the January-June period, up 35% from a year earlier. The trend is continuing beyond the first half. In September, Mitsui Fudosan announced its participation in a large-scale office building development project in New York City.
Japanese money has also been flowing into overseas real estate markets via investment funds. Dai-ichi Life Insurance has announced plans to put 10 billion yen ($87.6 million) in overseas property investment funds in the current fiscal year.
"Considering the size of the Japanese economy and other factors, there is still a large room for growth in Japanese investment in overseas real estate," said Manabu Taniguchi at Jones Lang LaSalle.