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Analyst Explains Popularity of Japanese REITs

01/09/2014 | By Allen Kenney

Koji Sawada, senior researcher with the Association for Real Estate Securitization (ARES) in Japan, joined REIT.com for a video interview at REITWorld 2013: NAREIT’s Annual Convention for All Things REIT at the San Francisco Marriott Marquis.

Sawada offered an explanation as to the recent rise in investor interest in the Japanese REITs (J-REITs).

“J-REIT market prices recovered in the last year,” he said. “The Asian market experienced a price adjustment period. Now, prices are hovering 30 percent higher than last year’s level. This trend change is due mainly to the high expectations for (Japanese Prime Minister Shinzo Abe’s economic policy), including monetary easing policy by the Bank of Japan. Also, the Japanese real estate market’s fundamentals are recovering.”

Sawada noted that rents are rising in Japan’s largest commercial real estate markets and property pricing indices are showing signs of recovery, too.

Sawada was asked about the evolution and acceptance of the REIT approach to commercial real estate investment in Japan.

“The J-REIT market is very mature,” he said. “Scale has grown to some extent. The market participants can invest in J-REITs without minding the liquidity. The J-REIT market has experienced various situations, including the global financial crisis, so the market participants can analyze the cycle by utilizing past data and easily invest in the J-REIT market. Some investors think the Japanese REIT market should be expanded because of the liquidity concerns. If the market grows, the more investors can easily invest in the Japanese REIT market.”

Sawada also explained how the Japanese REIT regime compares to other Asian markets.

“Transparency in the J-REIT market is very nice,” he said. “They disclose a variety of data. For example, they disclose each property’s net operating income each accounting period. That’s why we can calculate property indices. The Japanese market is huge and measured, so the performances are expected to be more stabilized than other Asian countries. If investors invest in the J-REIT market, they can expect a relatively stable return compared to other Asian markets.”

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