TOKYO – Japanese investors are spending the most in two decades to buy up properties overseas, undeterred by the global real estate slump and the yen’s decline to a 50-year low.

A Manhattan skyscraper, data centres in Toronto and office buildings in London are among the assets that Japanese companies and pension funds have scooped up in 2023.

Flush with cash and in the only developed economy with access to rock-bottom financing rates, their purchases are giving some relief to the market as rising office vacancies and interest rates keep other buyers away.

“They see a window of opportunity at the moment in which they can be more competitive,” said Mr Alex Foshay, head of real estate firm Newmark Group’s International Capital Markets Group.

Japan-sourced capital has accounted for US$7.4 billion (S$9.9 billion) of global commercial real estate transactions so far in 2023, more than three times the annual average in the past 15 years, according to MSCI Real Assets.

Spending on that scale from Japan has rarely been seen since the late 1980s, when the nation’s asset bubble fuelled purchases of iconic places such as Rockefeller Center and Pebble Beach Golf Links.

Brokers say their Japanese clients want to continue spending money overseas, particularly in the United States, Australia and India. Most are taking a long-term view to diversify income, given low returns in Japan.

They see attractive prices stemming from the real estate downturn, even as the yen’s weakness reduces purchasing power.

Mr Hiroyuki Takayama, director for cross-border transactions at Cushman & Wakefield in Tokyo, said the investment boom is being partly fuelled by companies that allocated capital for overseas real estate before the Covid-19 pandemic.

While those firms were unable to travel and evaluate targets during the Covid-19 crisis, 2023’s return to normal has unleashed dry powder.

In a deal that helped put Japanese buyers back on the map, Mori Trust bought a 49.9 per cent stake in 245 Park Avenue – a skyscraper behind Grand Central Station in Manhattan – from SL Green Realty for about 100 billion yen (S$911 million) in June.

Mori Trust reached its original goal of investing 200 billion yen in overseas real estate in 2022, five years ahead of schedule.

The company is now targeting 1.2 trillion yen in business investments by 2030, of which about a quarter is for abroad, its chief executive Miwako Date said.

Such sales may help to thaw out a market that has been largely frozen as US workers shun calls to return to the office.

“When the Japanese groups are buying on a direct basis, they tend to go for prominent assets,” said Mr Brandon McMenomy, executive director of capital markets in the US at CBRE Group. “It provides welcomed liquidity to the US commercial real estate market.”

Elsewhere, among the biggest transactions by Japanese buyers in 2023 was a C$1.35 billion (S$1.3 billion) deal for a data centre portfolio in downtown Toronto, purchased by mobile carrier KDDI.

A joint venture of Mitsui Fudosan, Japan’s largest developer by market value, spent £315 million (S$532 million) on a London office building near St Paul’s Cathedral.

In Sydney, a fund led by Mitsubishi Estate bought a commercial tower for A$779 million (S$685 million).

Pension funds such as Japan’s GPIF, which began investing in global real estate only in 2018, also added to the aggregate figure.

Wading into the fragile global market is not without risks. South Korean institutional investors ploughed billions of dollars into offices before the pandemic, only to see valuations tumble in 2023.

Back in the late 1980s and into the 1990s, Japanese companies struggled with real estate deals that went bad.

Mitsubishi Estate gave up its ownership of the bankrupt Rockefeller Center in 1995 after acquiring the New York landmark at the market’s height.

Pebble Beach Golf Links was reportedly sold by a Japanese businessman for about 40 per cent less than what he paid for it two years earlier after he became saddled with debt.

Much of that experience is driving Japanese investors to be cautious, according to Mr Benjamin Chow, head of Asia-Pacific research at MSCI.

“This is the first time that they’ve gone against the grain in a long time,” he said.

Mr Stephen Down, head of central London and international investment at Savills in London, who worked in Japan in the early 1990s, said there are differences with the bubble-era spending.

“It’s certainly not on that scale,” said Mr Down, who advises Japanese clients on transactions in Britain and Europe. “It’s a healthy diversification strategy to complement what is steady business within Japan with some slightly more exciting returns.”

Globally, Japan is the fifth-largest source of outbound capital deployed into real estate in 2023, up from 16th in 2022, according to MSCI.

Of the top five most active countries, Japan is the only one to mark an increase.

Others such as the US and Canada – typically home to investors looking to deploy large amounts of capital – have significantly cut purchases.

The spurt also reflects the cyclical nature of where easy money comes from during downturns. After the global financial crisis, Chinese investors mopped up US assets from luxury hotels to office towers. Now Japanese investors may offer a potential lifeline, Cushman’s Mr Takayama said.

“Many investors are having refinancing problems and are forced to sell,” he said. “Before, they’d probably go to Chinese investors, and I don’t think many Chinese investors are there anymore.” BLOOMBERG