Japan’s public pension fund is the largest pool in the world and with huge amounts of capital to work with, it may start buying real estate in a bid to boost returns. This move could pour tens of billions of dollars into international centers like London and Paris, according to property consultant CBRE.
Any plan by Japan’s Government Pension Investment Fund (GPIF) would come in the wake of the government’s request to use public funds to increase returns to help stimulate the economy. This move is part of the economic policies adopted by Prime Minister Shinzo Abe.
Last month, the GPIF stated that it would shift away from bonds and invest in stocks to take on a higher level of risk. This was its most noteworthy shift in asset allocation since 2006.
Property usually offers a higher yield or rental income as a percentage of a property’s value than government-issued bonds. It is viewed as more risky to investors, since it takes longer to buy or sell property. Owners also face the risk of being left with empty premises if their tenants leave and the space cannot be rented to another occupier right away.
Central banks continue to keep their interest rates low, and many government bonds offer little or no return to investors.As a result, they are looking to different sources to generate income. CBRE has noted that if GPIF chooses to enter the international real estate market, “it could become a very significant player.”
For a fund entering the market, a typical real estate allocation would be about five per cent. Over time, the allocation would increase to about 10 per cent, according to Simon Barrowcliff at CBRE. This figure would mean up to £65.69 billion in deals in major markets like New York, London, or Paris.
Overseas buyers from locations such as Brazil and Azerbaijan spent £10.5 billion in London last year. This amount represented approximately one-fifth of all commercial property transactions by value in Europe.
Asian investors have invested billions in commercial property in cities around the world since the financial crash of 2008. In many cases, they have been unable to spend such large amounts in their home markets.
According to CBRE, rule changes in countries like Taiwan, China and Australia will make it easier for investors to spend more on property. The property consultant is expecting investment in commercial property to increase.
Previous Post
Orchid Pub Chain Placed on the Market
