Commercial Magazine

International Investments: Japan

By Jeff Bond

After taking a wait-and see-attitude in 2021, Japanese cross-border investors came back to the U.S. in a big way in 2022. Businesses from the world’s third-largest economy (based on nominal gross domestic product) have a long history of being among the top overseas investors in U.S. markets, but the COVID-19 pandemic lessened their interest.

That hesitance appeared to dissipate in 2022 as Japanese investors pumped about $2.23 billion into the U.S. commercial real estate market, a 187% increase in dollar volume from the year before. The Asian nation’s investment volume accounted for 6.3% of the year’s cross-border monetary total and moved Japan from 15th position in 2021 to second place in 2022 among the countries placing capital into the U.S. Japan finished the year just ahead of South Korea’s investors but far behind the Canadian firms that claimed the top spot once again by spending more than $14.3 billion on American commercial real estate, according to MSCI Real Assets.

Japanese companies, which took part in deals involving 53 properties, were the only group among the top-five investor nations to increase their spending last year. Investors from the other top-five countries spent less in 2022, ranging from a 64% drop by South Korea to an 11% reduction by Germany.

According to MSCI, Asian countries (led by Japan) were most active in such markets as Dallas, Washington, D.C., Northern Virginia, California’s Inland Empire, San Francisco, Houston and Northern New Jersey. Japan’s top cross-border buyer last year was the Mori Trust Group, a real estate developer that began investing in the U.S. in 2015. The firm was involved in only two deals in 2022, but they were large enough to earn Mori Trust the No. 10 spot on the list of the largest cross-border buyers.

In March of last year, Mori Trust acquired Arboretum II (a pair of office buildings in the Northern Virginia city of Herndon) for $142 million. The complex totals nearly 324,000 square feet and was fully leased. In September 2022, Mori spent another $531 million on a 479,000-square-foot office building located in Washington, D.C. The deal was the largest office transaction in the nation’s capital to that point of the year. The building, located adjacent to the Walter E. Washington Convention Center and a short distance from the White House, was built in 2015 and has been awarded gold-level status with LEED, an international environmental design certification system.

The acquisition was part of Mori Trust’s “Advance 2027” plan to invest 200 billion yen (about $1.5 billion) in overseas real estate. In a press release about the acquisition, the company wrote that “people are tending to return to offices and the importance of a center office has been reconfirmed.”

Yamasa Corp., which is known for its variety of condiments for Japanese dishes, began buying single-family homes in the U.S. in 2018 and has since become a corporate player in housing markets across the country. Yamasa owns hundreds of homes in North Carolina, Texas and Arizona.

On the dispositions side of the ledger, Japan had one of the major cross-border sellers of 2022 in the Kajima Corp., one of Japan’s oldest and largest real estate developers. The company first came to the U.S. in 1964 to redevelop Little Tokyo in downtown Los Angeles. Today it is involved in building everything from automotive assembly plants to hotels. Last year, Kajima sold nine U.S. properties and ranked 16th on MCSI’s list of top cross-border sellers for 2022. ●


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