While U.S. real estate markets in the U.S. have been taking a beating the last few months, Japan has been attracting investment from around the globe. Driven by low interest rates that have helped keep real estate fundamentals strong, Japan’s real estate market has been flourishing, and foreign investors are taking notice. Foreign investment in Japan is up 43 percent since the same period last year, with a total of $8.9 billion invested in the first quarter of this year, according to a JLL report. “Foreign investors have been actively trying to enter Japan because of its favorable interest rate differentials over other key markets,” said JLL’s Koji Naito. To put it in perspective, over the same time period, investment in the Americas and Europe fell 61 percent and 58 percent, according to JLL data.
Rising interest rates have been a key factor in the decline in investment in the U.S. over the last year, and since the Silicon Valley bank collapse in March, many industry leaders have been sounding the alarm over looming debt that will be coming due soon for commercial properties around the country. Most of the debt is held by smaller banks and will be due by year-end 2025. Adding to commercial real estate’s woes is the prevalence of remote work and its impact on the office market. Despite a lot of companies calling workers back more days out of the week this year, office occupancy rates have stalled, hovering around 50 percent nationally. But despite these challenges, experts are predicting conditions to improve later this year, with inflation expected to continue to fall and a more favorable interest rate environment starting to come into view.