At the PERE Tokyo Forum, property investors in the country say America remains their top choice despite some policy concerns.
While Japanese investors have a growing interest in European property markets, the US continues to dominate as their preferred destination for real estate investments.
Speaking at the PERE Tokyo Forum last week, Megumi Watanabe, head of the real estate investment team at Japanese real estate advisory firm and gatekeeper Sumitomo Mitsui Trust Bank, highlighted the rising opportunities in Europe’s real estate debt market, driven by the growing acceptance of alternative lenders. Still, she emphasized, the “depth, transparency and freedom” of Europe’s capital markets do not compare to those of the US.
Yuki Yoshinaga, senior manager at Japanese endowment Japan Science and Technology Agency, echoed this sentiment, noting that while his firm is exploring real estate investments in both regions, Europe’s growth engine lags behind the US. “This is one major concern for us,” he said.
Koji Someno, head of the real asset fund investment division at Japanese insurer Dai-ichi Life Insurance, pointed out a key distinction between the two markets: Europe’s stronger emphasis on ESG principles, particularly in infrastructure and real estate, stands as a potential source of risk for investors. In real estate, European funds often require energy performance certificates, which are essential for leasing properties. “You have to get the certificate, or else you will not be able to lease, and this could strand your investment or asset,” Someno explained.
Investors are still grappling with how much capital expenditure is needed for these ESG-compliant investments and how it will impact returns, he added, making European investments more challenging.
Despite these hurdles, Yoshinaga sees selective opportunities in Europe, particularly in the housing sector. He expressed a preference for rental housing, which is more affordable than owned housing in Europe. While some countries have rent control policies, the limited supply of housing has generally supported rental pricing.
Additionally, Yoshinaga noted that Europe could benefit from a shift in enrollment among international students. “If you look at the situation at Harvard University, there was a lot of pressure on US universities,” he said. “International students may now prefer Europe over the US, and if that’s the case, it will support purpose-built student accommodation. This is something I want to focus on.”
Too big to ignore
Despite the rising interest in Europe, Japanese investors continue to view the US as their top market, particularly for first-time overseas real estate investments. Watanabe noted that the US is often the starting point for Japanese investors due to its market depth and established infrastructure. “The first investment for many Japanese investors tends to be in the US, which is a common trend,” she said.
Jun Mizuno, chief portfolio manager at Japanese insurer Nippon Wealth Life Insurance, reinforced this view, stating that investing in the US is “unavoidable.” While his firm has yet to make any private real estate investments, they are actively monitoring opportunities in the country.
Someno also shared his perspective on the US market, noting that President Donald Trump’s policies, including tariffs, have not yet significantly impacted real estate investments in the country. He believes the current challenges, such as trade tensions, are cyclical issues that could fade with a change in leadership or policy. “If it’s a cyclical issue, it won’t affect the firm’s long-term strategy,” he said.
However, Someno acknowledged that tariffs could impact specific markets, particularly logistics properties near US West Coast gateway ports. “Logistics used to be a clear winner, but now outcomes may vary by location, with some properties performing better than others,” he explained.
This cautious view was shared by Yoshitaka Todoroki, managing director of Japan’s Government Pension Investment Fund. With logistics assets comprising 45 percent of GPIF’s real estate portfolio, Todoroki expressed concern about potential disruptions in the sector due to tariffs and other geopolitical factors, as PERE previously reported.
That said, both JST and GPIF noted that while they remain cautious about their investments on the back of geopolitical uncertainties, they will need to continue to build their real estate portfolio and have no plan to reduce their exposure.
