The financialization of real estate in Japan: the formation of a core–periphery structure

ABSTRACT

The term ‘financialization of real estate’ (FoRE) refers to the method of connecting financial markets with the geographical location of real estate assets. Therefore, the unevenness of regional development is closely tied to FoRE. In Japan, FoRE’s initial focus was Tokyo; however, the interest has recently spread to the periphery. This shift occurred owing to changes in investment actors and their strategies, which also changed the impact of the penetration of FoRE on regional economies. This article will elucidate the factors that constitute the FoRE core–periphery structure, focusing on regional real estate market characteristics and investment actors’ attributes.

KEYWORDS:

• real estate investment trust (REIT)
• investment actors
• international financial centre
• local real estate market
• global financial market

JEL:

• G12
• O53
• P33
• R32

ACKNOWLEDGEMENTS

The authors thank the editor and two anonymous referees for very constructive comments on an earlier version of this paper. They also thank Editage (www.editage.com) for assistance with English language editing.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.

Notes

1. Japanese REITs, known as J-REITs, are listed on the nation’s stock exchanges. In 2014, a mechanism for infrastructure funds was established. Infrastructure funds are invested in order to establish renewable-power facilities and other public facilities, in a method similar to other REITs. This article refers to both types of funds as ‘REITs’. In J-REITs, 70% or more of the assets under management must be real estate, and 90% or more of the profit must be paid to equity investors (Association for Real Estate Securitization (ARES), 2020).

2. According to the Japan Exchange Group (n.d.), foreign investors accounted for 4.6 trillion yen of the total 10.2 trillion yen in J-REIT unit acquisitions in 2017.

3. According to ARES (2020), the total market capitalization of REITs worldwide has grown from about US$870 billion in 2007, before the financial crisis, to about US$1920 billion in 2019.

4. According to the Sumitomo Mitsui Trust Research Institute (n.d.), the number of assets under management was 1.5 trillion yen in 2003 and 25 trillion yen in 2008.

Additional information

Funding

This work was supported by the Japan Securities Scholarship Foundation and Japan Society for the Promotion of Science (JSPS) [grant number 19K01169].