Singapore developers bet big on Japan’s looming real estate market

[SINGAPORE] Japan is fast becoming the top destination for property developers in Asia, particularly from Singapore, as tourism surges and the yen remains relatively weak against the Singapore dollar.

Following a record-breaking 36.9 million international tourist arrivals in 2024, Japan is setting its sights on welcoming 60 million visitors annually by 2030. This ambitious target, coupled with untapped tourism potential in underdeveloped regions, has prompted Singapore-based developers to ramp up their investments—ploughing hundreds of millions of dollars into the Japanese market in the first quarter of 2025 alone.

A more relaxed visa regime and strategic efforts by the Japanese government to spotlight regional cities have spurred this tourism revival. Under the “Beyond Tokyo” initiative, cities like Kanazawa, Fukuoka, and Sapporo are gaining prominence, offering new frontiers for hospitality and mixed-use real estate developments. The strategy aims to ease overcrowding in traditional tourist hotspots while boosting economic activity in rural areas.

Among the early movers was CapitaLand Ascott Trust, which in January acquired the ibis Styles Tokyo Ginza and Chisun Budget Kanazawa Ekimae for 21 billion yen (S$190 million). With this, its Japan portfolio expanded to include two serviced residences, four hotels, 23 rental housing properties, and one student accommodation asset.

In February, Far East Hospitality Trust (FEHT) REIT followed suit, purchasing the 319-room Four Points by Sheraton Nagoya, located at Chubu International Airport, for six billion yen. FEHT CEO Gerald Lee noted that four-star business hotels are highly “tradeable” and appeal to both corporate travellers and tourists. Despite speculation over future interest rate hikes by the Bank of Japan, FEHT secured a four-year fixed-rate loan for the acquisition. On April 16, the firm also disclosed a $22 million sustainability-linked loan agreement, although the intended use was not detailed.

Sustainability is an increasingly central theme in Japan’s development landscape. The government’s Green Transformation (GX) strategy—which targets carbon neutrality by 2050—is incentivising eco-conscious construction. Developers are responding with energy-efficient designs, renewable power sources, and smart building technologies to meet tightening regulations and attract ESG-oriented investors.

Private equity firm Patience Capital Group (PCG) is among those scaling up sustainability-linked ventures. The firm has raised $370 million for its Japan Tourism Fund, much of which will go toward transforming the ski town of Myoko in Niigata Prefecture. Plans include the development of a resort, township, hotels, and residences, supported by local and national banks, including Mizuho.

PCG CEO Ken Chan said the group is collaborating with local authorities to generate year-round employment, not just during peak winter months. Plans are underway for convention facilities capable of hosting high-profile events, such as the Davos conference. Construction is expected to begin in 2026, with completion targeted before the 2028 winter season.

Chan emphasized community engagement as a core priority. “We hold regular town hall meetings and have a former Myoko city official on staff to strengthen ties with the community,” he said. Concerns such as water flow affecting rice paddies are addressed openly, as the company positions itself as a long-term stakeholder.

In a separate initiative aligned with its lifestyle strategy, PCG is raising funds for a 25 billion yen residential investment vehicle. In February, it teamed up with Gaw Capital to acquire the Tokyu Plaza Ginza in central Tokyo for US$1.6 billion (S$2.1 billion). Gaw Capital owns a 91% stake, with PCG holding the remaining 9%.

PCG is now re-evaluating the tenant mix at the property to better appeal to both domestic and international visitors. “We’re adjusting placements based on foot traffic and visibility,” said Chan. “We understand Asian consumer behaviour and want to create a retail experience that resonates with a diverse customer base.”

Japan’s luxury retail sector is also enjoying a rebound, fueled by affluent tourists from China and Southeast Asia. Duty-free spending by foreign visitors hit a record 1.2 trillion yen (S$11 billion) in 2024, according to the Japan Tourism Agency. This has prompted developers to prioritise flagship stores and experiential retail formats in high-traffic zones such as Ginza and Omotesando.

Keith Ong, co-founder and CEO of RealVantage, underscored Japan’s appeal as an investment destination. “The country offers a rare combination of political stability, strong infrastructure, and transparent legal processes. Compared to other East Asian markets, Japan feels like a much safer bet,” he said.

That said, Ong cautioned against complacency. His firm explored multiple projects in 2024, including a 300-room hotel in Osaka and a resort development in Niseko, but ultimately passed after conducting due diligence. “You have to be thorough. Not every opportunity checks out,” he added.

Beyond hospitality, Japan is also witnessing a boom in data centre investments, driven by the adoption of cloud computing and generative AI technologies.

CapitaLand Investment (CLI) Japan CEO Hideto Yamada described Japan as a Tier 1 data centre market with robust growth potential. The sector is projected to grow at a 10% compound annual rate—from US$23.8 billion in 2023 to US$38.7 billion by 2028. Tokyo and Osaka are leading hubs, but secondary cities like Fukuoka and Sendai are also gaining traction thanks to government incentives and lower land costs.

Yamada said CLI’s vertically integrated model positions it well to capitalise on this trend. The firm aims to increase global assets under management to $200 billion by 2028 through capital deployment and fund expansion in Japan.

According to Pamela Ambler, head of investor intelligence for Asia-Pacific at JLL, Japan’s macroeconomic fundamentals further boost its attractiveness. “The sustained 2% inflation target has supported rental growth across sectors. With a stable demand-supply balance and a weaker yen, Singaporean investors are seeing stronger risk-adjusted returns in Japan than back home,” she said.

As Japan rides the dual waves of tourism and tech-driven infrastructure, the country is emerging as one of the most dynamic real estate markets in Asia—offering compelling opportunities for those with the foresight and patience to navigate its evolving landscape.