Dec 9, 2025
Dear Foreland Investors,
In the first half of 2025, Foreign Direct Investment (FDI) in Japanese real estate exceeded 1 trillion yen—nearly double the level recorded during the same period last year. This strong inflow contributed to a 2.7% year-on-year increase in nationwide real estate investment activity. As a result, Tokyo has risen to the top position globally for city-level real estate investment, surpassing markets such as New York and Dallas–Fort Worth.
The Tokyo metropolitan area continues to demonstrate exceptional resilience. Prices for existing condominiums have maintained an upward trajectory, reflecting the high degree of international confidence in Tokyo’s asset values and long-term fundamentals.
In the fourth quarter of 2025, foreign exchange dynamics have created a highly favorable investment environment. With the yen trading between 150 and 154 per U.S. dollar, overseas investors currently benefit from an approximate 27% cost advantage compared to periods when the yen was at 110 per dollar. This exchange-rate environment is supporting increased foreign participation across asset classes.
This quarter also marks the inauguration of Sanae Takaichi as Prime Minister. Market sentiment has strengthened moderately on expectations of continued real estate price growth, robust capital inflows, and the persistence of low interest rates. The new administration’s pro-growth agenda—including a proposal to reduce the consumption tax—is expected to lift domestic demand. Furthermore, although the Bank of Japan has exited negative interest rates, monetary conditions remain highly accommodative, keeping borrowing costs at historically attractive levels.
Key Market Drivers and Opportunities
• Urban Migration: Despite Japan’s demographic decline, major cities continue to attract population inflows, sustaining long-term demand for both residential and office assets.
• Foreign Capital Inflows: A structurally weak yen has made Japanese real estate significantly more accessible to global investors, accelerating investment into prime urban locations.
• Attractive Financing Environment: Interest rates remain low by international standards, supporting favorable financing conditions for both domestic and foreign buyers.
• Stable Rental Markets: Core metropolitan areas maintain high occupancy levels and rising rents, providing stable, predictable income streams.
• Legal and Regulatory Stability: Japan offers one of the world’s most transparent real estate markets, with clear freehold rights and no restrictions on foreign ownership.
• Growth in New Asset Classes: Demand is strengthening in logistics facilities, data centers, and senior/healthcare housing—sectors benefiting from structural economic and demographic trends.
Fourth Quarter 2025 Market Performance
• Office: Tokyo’s central five wards continue to lead the market. Vacancy rates have fallen below 4%, and Grade A office rents are rising steadily.
• Residential: Tokyo and Osaka remain robust markets, supported by inward migration and improving wage conditions. Multifamily investments continue to attract strong domestic and international interest.
• Logistics and Industrial: Leasing activity is firming. While construction costs remain elevated, limited new supply is expected to support future rent stability and potential growth.
As we look ahead, we remain committed to capturing the opportunities emerging from these market conditions and delivering sustainable value to our shareholders.
Thank you for your continued trust and support and hope to see you in Q1 2026.
Best Regards,
Foreland RE Network Team