Regional residential markets in Japan attracting more investment activity

Here are the recent landmark transactions in regional markets.

In the past year, Savills says there were several noticeable portfolio transactions that involved residential properties in Japan’s regional markets. 

Better yields and limited opportunities in Tokyo, as well as the positive fundamentals of these regional markets appear to have attracted investor interest. 

Here’s more from Savills:

For instance, Gaw Capital/Qatar Investment Authority acquired five residential properties in Osaka and three in Nagoya as part of a 32-property portfolio for JPY60 billion in May 2022. In the same month, it was also announced that Blackstone/Alyssa Partners had acquired a 19-property portfolio in Tokyo, Osaka, Nagoya, and Fukuoka, which is rumoured to be over JPY20 billion. 

Furthermore, M&G Real Estate acquired 30 residential properties in Japanese cities including Osaka and Nagoya from Blackstone for JPY49.2 billion in March 2020. 

While Tokyo remains the most popular market in Japan due to its status as the country’s economic centre, regional markets are likely to gain more traction as their performance continues to outpace Tokyo’s. That being said, it is challenging for investors to find residential assets available for sale in regional cities. 

Regarding this point, portfolio transactions are attractive in terms of scale, but the properties acquired from other institutional investors might have little room for improvement, thereby limited value-add opportunities. As such, it will continue to be difficult for investors with higher yield targets to find attractive deals in regional cities.