Institutional investors, meanwhile, say they aren’t letting gloomy demographic forecasts get in the way of pursuing golden nuggets.

For years, news about Japan has been fairly negative — falling growth, deflation and population declines — but for real estate, it pays to look beyond the headlines, said George Agethen, co-head of Asia-Pacific with Ivanhoe Cambridge Singapore, the real estate arm of Montreal-based pension fund manager Caisse de Depot et Placement du Quebec.

“When we say we’re investing in Japan, really we’re focused on two or three of the largest cities, like Tokyo, like Osaka, Nagoya,” which boast per-capita GDP more than twice the national average, supported by a steady stream of people moving in from elsewhere in the country, Mr. Agethen noted.

In late December, Ivanhoe Cambridge announced a partnership with Allianz Real Estate to invest in Japanese multifamily residential properties, with both partners committing $250 million for a platform that, with leverage, would be able to invest roughly $2 billion in the sector.

Six years after Ivanhoe Cambridge began adding Asia-Pacific exposures to its real estate portfolio, Japan accounts for around 10{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} of C$6 billion ($4.7 billion) in regional investments, with the firm’s team looking to grow the country’s weight to about 20{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} of the portfolio, an Ivanhoe Cambridge spokeswoman said. Caisse had C$390 billion in assets as of June 30, while Ivanhoe Cambridge had C$60.4 billion as of Dec. 31, 2020.

Along with certain metropolitan areas, specific sectors of the broader real estate market are likewise shining through now, investors say.

“Despite Japan’s demographic challenges, we have been focused on micro themes and areas with positive structural factors that drive particular sectors,” such as the pandemic’s boost for data centers and logistics facilities, said Jimmy Phua, Hong Kong-based head of real estate Asia-Pacific with the C$550.4 billion Canada Pension Plan Investment Board, Toronto. In October, CPPIB committed ¥110 billion ($952 million) to Singapore-based logistics investment firm GLP’s newest Japan-focused logistics fund, GLP Japan Development Partners IV.

Japan real estate data from CBRE Group Inc., the Dallas-based global real estate services and investment firm, showed record logistics and residential property transactions of ¥1.04 trillion and ¥732 billion, respectively, for the initial pandemic year of 2020. For 2021, logistics transactions came to ¥899 billion, down 13.6{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} from the previous year but still the second-highest total on record. Residential transactions, by contrast, dropped 45{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} to ¥404.7 billion, reflecting Blackstone’s record ¥320 billion buyback of a residential property portfolio from Beijing-based Anbang Insurance Group Co. Ltd. in early 2020.

“Not everything is purely demographically driven,” noted Isabella Lo, managing director of investments with Hong Kong-based real estate boutique Gaw Capital Partners. For example, if “you have less population but people are taking millions of photos every day, that requires data centers,” a market segment in which Gaw Capital recently invested, she said.

Roughly 15{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} of Gaw Capital’s $35 billion in global AUM is invested in Japan.

Dan Klebes, managing partner and head of Japan with Toronto-based real estate investment firm BentallGreenOak, said 70{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} to 80{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} of his firm’s Asia real estate funds are invested in Japan, and 99{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} of that total is focused on gateway cities enjoying growth such as Tokyo and Osaka.


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