Japan: From ‘lost decades’ to growing momentum
Freelance writer Greg Langley examines the current state of play in Japan’s residential market, comparing it to past decades and framing its more positive investment environment against PATRIZIA’s recent investment in the country.
After years of stagnation, Japan’s residential market is showing renewed momentum, led by demand in Tokyo and other major cities. PATRIZIA’s landmark Tokyo acquisition highlights rising confidence in the country’s prime urban housing sector.
International investors treated the Japanese residential market with extreme caution during the ‘lost decades’ from the mid-1990s through the 2010s. As Japan moved in and out of deflation and experienced weak economic growth, the sector offered little prospect of price appreciation or reliable returns, leaving it on the margins of global real estate capital flows.
However, over the past decade, conditions have shifted. Prolonged low interest rates worldwide made Japan’s steady, if modest, yields comparatively attractive, while a weaker yen lowered acquisition costs for foreign buyers.
Now, investors are taking a keener interest as indicators point towards Japan entering a strong wage growth cycle. This year, Shuntō - the annual wage renegotiation between unions and large companies - resulted in the most significant base pay increase seen in decades, with the overall negotiated wage hike reaching around 5.52%. Together with last year’s settlement of just over 5%, it marks the second consecutive year that wages have risen above 5% − a level not seen in more than three decades.
Masami Takizawa,
Representative Director and Head of Japan at PATRIZIA.
Masami Takizawa, Representative Director and Head of Japan at PATRIZIA, says:
“Rising household incomes are underpinning increased demand, supporting affordability and providing a more stable foundation for long-term investment. Add rising urban rents into the mix and you can see why the outlook for prime residential is improving with renewed conviction.”
Landmark portfolio acquisition in Tokyo
That conviction is reflected in PATRIZIA’s latest move in the country: the acquisition of a 14-asset residential portfolio in Tokyo and Yokohama on behalf of a global institutional investor. The deal, comprising around 800 apartments and five retail units with an average building age of just over three years, marks one of the company’s most significant single investments in Japan to date.
With occupancy above 97% and current leases roughly 10% below prevailing market rents, the portfolio offers immediate income stability as well as clear potential for rental reversion and value enhancement over time.
Building scale and local capabilities
For PATRIZIA, the acquisition is more than a single transaction. It represents the latest step in a deliberate build-up of its Japan platform, reflecting a long-term view that the country’s urban centres are undergoing a structural transition. “This acquisition is a significant step forward for our Japan business and a clear reflection of our confidence in Tokyo’s residential market,” Masami says.
Operating from its Tokyo office, PATRIZIA has been steadily expanding its on-the-ground capabilities across transactions, capital markets and asset management. The recent appointment of Yutaka Yukizawa as Head of Transactions Japan, along with other senior hires such as Jun Akase as Director, demonstrate the firm’s commitment to reinforcing its sourcing network and enhancing execution capacity in a highly competitive environment.
Aligned with structural megatrends
The Tokyo portfolio also illustrates how PATRIZIA is positioning itself to benefit from long-term megatrends shaping the sector globally: urbanisation, demographic change and shifting lifestyle preferences.
“In Japan, these forces are particularly acute. An ageing society is driving demand for senior housing and serviced apartments, while younger generations increasingly seek high-quality, well-managed rental accommodation in central locations,” Masami explains. “By targeting modern, well-located properties, PATRIZIA is aligning capital with these evolving patterns of demand.”
The core-plus/value-add strategy underpinning this acquisition is designed to capture both near-term rental upside and longer-term resilience.
Tokyo’s central 23 wards, in particular, remain highly attractive thanks to consistent population inflows, supply constraints and rising rental demand – conditions that align with PATRIZIA’s core-plus and value-add strategies.
Global scale, local execution
Overall, PATRIZIA manages around EUR 19 billion in living sector assets worldwide – the largest sector in the company’s portfolio and unsurprising given the residential heritage central to the firm’s journey for more than 40 years. Its global track record allows it to apply best practices from Europe and other Asian markets to Japan, while tailoring investment and asset management approaches to local dynamics.
At the same time, PATRIZIA continues to diversify across infrastructure and commercial real estate, providing investors with broad exposure to structural growth themes. In Japan, this flexibility allows the company to respond to opportunities as the economy strengthens and property markets evolve beyond residential.
AUM in the living sector worldwide
Doubling down on growth in Japan
The recent transaction represents a significant step for PATRIZIA in its ambition to double assets under management in Japan within the next two years, while also expanding into value-add opportunities beyond the living sector.
The latest Tokyo acquisition signals not only growing confidence in Japan’s residential fundamentals, but also the company’s commitment to capitalising on the structural shifts now reshaping one of the world’s largest housing markets.
The firm is already exploring additional opportunities in both residential and value-add commercial assets, leveraging its local expertise and international platform to deliver stable returns for investors.
Masami says:
“Our strategy is to be a long-term partner in Japan’s urban transition. By combining our global expertise with local execution, we can deliver consistent value while contributing to the ongoing transformation of Japan’s real estate landscape.”
