Investment pool grows

After a first wave of Japanese commercial real estate investors such as Mitsubishi Estate, Mitsui Fudosan, Sekisui House and Sumitomo Forestry, the latest of HSF’s seven annual reports shows interest from a widening group of investors in tapping Australia’s population-driven growth and stable business environment through commercial property.

Odakyu, along with Hankyu Hanshin Properties, JR West Real Estate & Development and Kintetsu Real Estate – as well as Mitsubishi UFJ Financial Group and Nishimatsu Construction – invested in the Mitsubishi Estate-led acquisition of Sydney’s 60 Margaret Street complex from Mirvac and Blackstone last year for $777 million.

Japanese investment in 2023 strengthened as capital from other Asian destinations such as Singapore, Malaysia and Hong Kong eased, HSF partner Michael Back said.

“It was the activity from the Japanese that really kept the commercial market going,” Mr Back said.

“Particularly in the last six months, on any bidder list for a major CBD office property, or for a good industrial site, you’d have two or three Japanese bidders there. And after those three, there’d be one or two names that you’d never seen before.”

Understanding Australia’s market

Odakyu, which operates shopping centres, office towers and has developed more than 25,000 homes along railway lines in and around Tokyo, has since 2018 partnered Daiwa House in developing the 1500-lot Hills of Carmel housing estate in northwestern Sydney’s Box Hill.

The company would, however, only look at housing developments around transport hubs in Australia when it understood local markets, Mr Ochiai said.

“We would like to invest in one or two projects every year like 60 Margaret Street,” he said. “That’s our current strategy and to gradually increase our exposure in real estate investment.”

He declined to say how much Odakyu invested in the 60 Margaret Street transaction.

Japan’s ageing population and shrinking workforce was also creating a need for stable revenue sources offshore to replace declining domestic demand, HSF partner Damien Roberts said.

“It’s not just looking at leveraging their skill sets and reimagining their Australia as an investment destination,” Mr Roberts said.

“It’s actually this is part of their own growth story, because it can no longer be domestic.”

Mr Ochiai said one experience Odakyu had to offer was developing a traditional Japanese-style ryokan hotel in a residential area of Tokyo’s Setagaya ward.

“There was no amenity nearby,” he said.

“We were able to bring in the relatively mid- to high-class accommodation with a hot spring, which offered the super experience for neighbourhood residents.

“A deep understanding of the local community or train passengers is needed.”