Meanwhile, the People's Bank of China is on an easing path, with its latest decision in February cutting the bank's five-year loan prime rate (LPR) by 25 basis points, the most since the LPR was designated as the main interest rate benchmark in 2019. was lowered. .
“From a commercial real estate perspective, the demand is quite a story across both countries. Foreign investors continue to look for opportunities in Japan, but they're very quiet when it comes to China,” Global Investments said. said Henry Chin, Head of Home and Thought Leadership. Head of research for CBRE's Asia Pacific region.
The flow of foreign funds into commercial real estate reflects the shift from China to Japan.
Foreign investment in commercial real estate in China reached $12.3 billion in 2019, nearly double the $6.2 billion invested in Japan, according to CBRE, which tracks all deals over $10 million. By 2021, this gap had narrowed to $10.1 billion for China and $6.5 billion for Japan. In 2022, both countries received roughly the same amount of foreign investment, with China at $8 billion and Japan at $7.7 billion. Last year, the tables were reversed, with Japan receiving $5 billion and China just $3.2 billion.
According to data cited by JLL, China's share of total foreign real estate investment fell from 38% in 2019 to just 8% last year, while Japan's share rose from 21% in 2019 to 17% in 2023. % is relatively stable.
“Foreign investor appetite for Japan has never been stronger at this time,” said Pamela Ambler, head of investor relations for Asia Pacific at JLL. “Despite recent announcements from the Bank of Japan, Japan remains the only market with increasing cash-on-cash returns. In fact, monetary policy has encouraged domestic investors to look overseas and This could open up opportunities for investors to enter the market.”
Japan falls to the world's fourth largest economy after the United States, China, and Germany
Japan falls to the world's fourth largest economy after the United States, China, and Germany
Hong Kong-based private equity fund Ax Management Partners is among investors placing big bets on Japan's commercial real estate outlook. In March, it completed the acquisition of three hotels in Osaka for 10.7 billion yen (US$71 million).
Currently, there are 500 guest rooms under the names WBF Honmachi, WBF Kitasemba East, and WBF Kitasemba West. They are scheduled to reopen in the final quarter of this year as part of Garner Hotels, a brand of his UK-based IHG Hotels & Resorts. These will be the mid-sized brand's first hotels outside of North America.
“It's very easy to see that this is an attractive market,” said Gary Kwok, founder and CEO of Ax Management. “In terms of interest rates, there is positive carry and obviously it has attracted a lot of foreign capital looking for positive yields. And in our view, one of the key asset classes is hospitality.”
Kwok said Ax Management has spent more than US$85 million on acquisitions and renovations, and is aiming for a return of up to 20 percent on the investment.
CBRE says office rental outlook in Hong Kong and mainland China is bleak
CBRE says office rental outlook in Hong Kong and mainland China is bleak
Sam Lau, founder and managing partner of Ax Management, said opportunities still exist when it comes to China, especially as there are many distressed assets in the market.
“The market is so huge that China is a place we can't afford to ignore,” he said. But the company is more selective about its investments there, looking at hotels, retail and student housing in tier-1 cities, but avoiding residential areas and offices, he added.
Both CBRE's Chin and JLL's Ambler expect Japan's commercial real estate market to remain strong.
“Japan has strong fundamentals: a strong, stable and transparent economy,” Ambler said. “The yen is also depreciating against major currencies such as the United States and the Singapore dollar, and there is a difference in interest rates with other countries, leading to favorable loan terms and yield differences.There is also a clear exit in Japan, and comparison It is also a highly liquid market.”
Meanwhile, foreign investors are likely to have limited interest in China for some time, Chin said.
Chinese real estate: Investment decline slows, official statistics show
Chinese real estate: Investment decline slows, official statistics show
“Japan and mainland China are in different cycles when it comes to commercial real estate,” he says. “While we continue to see growth in Japan, we are currently seeing price revisions in China due to limited leasing demand.
“Japan's economy continues to outperform as it experiences real wage growth…However, China's economy faces challenges as unemployment remains high.”
