Japanese real estate investment expected to increase

World's largest pension fund targeting $1.8B in global real estate spending

Takahiro Mitani
Takahiro Mitani (credit: Kyodo)

The city’s real estate market could see increased investment from Japanese institutional investors, with Japan’s Government Pension Investment Fund (GPIF) – the world’s largest pension fund – expected to increase global real estate investment.

The GPIF is anticipated to allocate up to 5 percent of its roughly $1.2 trillion in assets into “alternative investments” that would include real estate, according to a report by commercial brokerage CBRE.

That means the pension fund’s total investments in overseas real estate markets alone over the coming years could reach $1.8 billion – equal to total Japanese outbound real estate investment in 2014, CBRE said.

“GPIF is more than twice the size of Norway’s Sovereign Wealth Fund, so it’s easy to see that a shift to hold a material allocation to real estate in its portfolio would rapidly make it one of the largest individual players in the global market,” Chris Ludeman, global president of CBRE Capital Markets, said.

Japanese interest in overseas real estate assets is driven by ongoing economic recovery, the brokerage said, with investment steadily increasing in recent years. The U.S. has been the focus of much of that capital, receiving $1.3 billion – or 75 percent of Japan’s total overseas investment – in real estate funds in 2014.

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Most of that was directed toward the office sector, CBRE said, while New York City was the most targeted destination with $488 million in investment – ahead of Honolulu ($288 million), Boston ($220 million) and Los Angeles ($210 million).

The trend has continued this year, with Japanese firms making waves in the city’s real estate market through several large, notable deals. Japanese investors purchased $1.5 billion worth of property in the city in the 12 months through September, with the likes of Mitsui Fudosan and Unizo Holdings leading the way.

Mitsui Fudosan invested $259 million in Related Cos.’ 55 Hudson Yards late last year and more recently picked up a majority stake in Taconic Investment Partners’ 525 West 52nd Street residential development in Hell’s Kitchen.

Unizo, meanwhile, recently acquired 370 Lexington Avenue for $247 million and bought two Madison Square Park office buildings for $210 million earlier this year.