CBRE Research today released their “Is Multifamily Asia Pacific’s Next Big Investment Opportunity?” report highlighting Japan as the most robust market for this property segment in the APAC region. 

According to the report, “Although multifamily has been regarded as an institutional grade asset class in the U.S. and Europe for some time, Asia Pacific’s strong culture of home ownership has resulted in a relatively small investable universe.  Japan, which is home to the bulk of regional multifamily stock, has been the lone exception, with the country’s large, liquid, and resilient multifamily market attracting robust interest from both foreign and domestic investors over the past decade.”

The report remarked that Japan is the region’s most developed multifamily market registering US$6.8 billion worth of transactions in 2020 which came to 19% of overall real estate volume that year. 

The report also notes that Japan will remain the focus for institutional purchases for this property segment moving forward.

On page 6 of the report, CBRE Research outlines why Japan’s multifamily segment has become attractive over the last decade.  “Since 2007, condominium rents in the Tokyo 23 Wards have comfortably outperformed those for Grade A offices in the same district.  Condominium rents exceeded the previous peak in 2008 and have maintained steady performance in H1 2021. In contrast, Grade A office rents fell by around 3% over the same period.”

The report continues.  “In addition to its resilience and defensive qualities, Japan multifamily offers attractive yields compared to assets in other markets.  Multifamily cap rates are around 3% in Tokyo, a relatively lower level than those in other major global markets.  However, the availability of high LTV ratios and the low cost of debt in Japan has ensured the outperformance of multifamily cash on cash yield including leveraged returns.”

CBRE Research in the report advises investors to always look at Tokyo but also not to ignore the regional cities.  Kawasaki, Saitama City, and Fukuoka were specifically highlighted due to the increased population estimates until 2025.  Nagoya, Yokohama and Osaka were mentioned as areas of multifamily investment interest despite their estimated mild population declines.  The report explained these three cities are expected to experience a net migration in the coming years making them still attractive depending on the asset. 

Further Reading:

Is Multifamily Asia Pacific’s Next Big Investment Opportunity? (CBRE Research; September 2021)