Real-Estate Investors Flee the U.S. for a Land of Fuller Offices
International investors feel bullish on Japan’s economy, with the stock market trading near a 33-year high, as a weak yen sweetens the pot
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TOKYO—Office building investors are in full retreat from most U.S. cities. Some are finding a haven in Japan, where most workers have returned to the office and banks are eager to lend.
Foreign investors including LaSalle Investment Management, London-based M&G, and Singaporean conglomerate Keppel are buying Japanese office buildings, attracted by the market’s stability.
Investment in Japanese office real estate hit over $4 billion in the first quarter of this year, more than double the figure a year earlier, according to JLL.
In the U.S., pension funds and property developers are selling off their office holdings at a discount. Office vacancy rates are surging in major cities, hitting 16% in Manhattan and 32% in San Francisco in the second quarter, according to CBRE. Vacancy rates in Tokyo’s central business districts have stabilised around 6%.
“Almost every other office market in the world would trade places in a heartbeat with Tokyo,” said Calvin Chou, head of Asia-Pacific for Invesco Real Estate.
The office sector often acts as a proxy for a country’s economy, and international investors like Invesco are feeling bullish on Japan, Chou said. The stock market has been trading near a 33-year high, and property buyers’ dollars go farther thanks to the weak yen.
An additional incentive, according to investors, is the generous spread between the rent yield on office buildings and the cost of borrowing to acquire the buildings, which is low thanks to the Bank of Japan’s near-zero interest rates.
Smaller apartments and a cultural emphasis on in-person communication with colleagues spelled the swift decline of remote work in Japan. As of the end of April, office attendance rates in Tokyo were above 75%, according to NLI Research Institute. In the U.S., the average return rate is stalled at about 50%, according to data firms and industry participants.
Millions of square feet of new office space will hit the market in Tokyo and Osaka over the next few years, but analysts said they didn’t expect many empty cubicles to result.
Kunihiko Okumura, chief executive of LaSalle’s Japan branch, said his firm has continued actively buying offices in Japan over the last several years. He projected that LaSalle’s new $2.2 billion Asia Pacific real estate fund would invest 60% of its Japan allocation in office property.
In September 2022, LaSalle purchased a vacant medium-sized office building in Tokyo’s Shinjuku district, near the Park Hyatt hotel made famous in the 2003 movie “Lost in Translation.” LaSalle completed renovations in March and has already made more leasing progress than expected, Okumura said.
By contrast, LaSalle in February unloaded an office building in Santa Ana, Calif., at a loss of more than 50%.
Many foreign investors have gravitated towards Japan’s Class B or medium-size office buildings instead of top-tier properties.
“We continue to seek the assets which have been very poorly managed by property owners,” Okumura said. “That kind of inefficiency provides us with a very good opportunity to be able to push up the value of the asset and sell it to a very strong core market.”
British investor M&G paid more than $700 million last October for an office building in Yokohama, just south of Tokyo. Its head of Asia real estate, JD Lai, said the building would provide long-term stable income.
This winter, BlackRock purchased the 17-story Harumi Front office building in Tokyo, tapping a loan from Japan’s Mizuho Bank. According to the seller’s disclosure, the price was more than $250 million.
Investors across Asia are also joining the game. From Singapore, Keppel picked up a boutique office building in the Ginza neighbourhood last November, while SilkRoad acquired an office in central Tokyo as part of a six-asset portfolio buy in April.
Last year, Hong Kong private equity firm Gaw Capital helped Invesco complete a $3 billion effort to privatize the U.S. company’s office real estate investment trust in Japan, which owned 18 buildings.
“We renovated two of the assets and created common areas, and then we actually managed to raise rents quite a bit,” said Isabella Lo, a Gaw Capital managing director.
Satoru Aoyama, a senior director at Fitch Ratings in Japan, said Japanese banks have a strong lending appetite for office real-estate investments, even while U.S. financial institutions are having second thoughts.
Analysts said Japan likely isn’t a place to make large gains, given the country’s shrinking population and generally slow-growing economy. Some big players remain on the sidelines, unsure whether the work-from-home trend may come back to Japan after all.
“It’s not an exceptionally attractive market, but it’s a very solid market,” said Aoyama. In discussions with investors, he said, “we try to list concerns, but for each concern, we find a mitigant.”
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Ophora Tallawong has launched its final release of quality apartments priced under $700,000.
From bushland greens to valley reds, the country’s most awarded designers are proving that the best colour palette was never on a swatch card; it was outside the window all along.
Ophora Tallawong has launched its final release of quality apartments priced under $700,000.
3 min
Ophora Tallawong has launched its final release of apartments, positioning itself as one of the last opportunities for buyers to secure a new Sydney home below $700,000.
The project, located in one of the city’s fastest-growing corridors, is offering rare buyer protections at a time when affordability is tightening and competition for quality stock is intensifying.
According to JLL’s Q2 2025 Apartment Market Overview, Sydney’s median apartment price has already climbed to $795,000, setting a record.
With interest rates now on a downward trend and supply still heavily constrained, experts warn that today’s price brackets may not exist next year.
Ronnie Rahme, Development Manager at KDMC, said buyers were responding to the combination of quality and value.
“You simply don’t see this level of finish at these price points anymore,” Rahme said. “That’s why demand has been so strong for this final release.”
Dr Andrew Wilson, Chief Economist at My Housing Market, says the economic drivers are clear. “High rents and higher prices continue to provide clear incentives for first-home buyers and investors chasing solid investment returns,” he told Kanebridge News.
“New government initiatives to support first-home buyers will also act to place upward pressure on prices.”
The bigger picture
JLL’s research reinforces that point. While over 15,700 apartments are expected to be delivered nationally this year, a 40% uplift on 2024, Sydney remains undersupplied, with demand continuing to outpace completions.
The report also notes that reductions in the RBA cash rate are expected to further fuel buyer activity, with constrained supply continuing to push prices higher into 2026.
With construction costs soaring, Government contributions climbing, and interest rates remaining high, projects are harder than ever to bring to market, putting upward pressure on newly completed apartments.
The pipeline of new supply is shrinking as developers delay or abandon projects that no longer stack up financially.
According to JLL’s overview, only 2,554 completions are forecast for Sydney this year – against annual demand exceeding 30,000 dwellings.
At the same time, population growth, rental demand, and first-home buyer incentives are intensifying competition for limited stock. The imbalance between constrained supply and resilient demand is leaving new apartments scarcer and more expensive across Sydney.
Ophora: Last Chance In Sydney’s northwest
Developed by KDMC and designed by Architex, the $50 million project has launched its final release, with limited availability of 81 brand-new residences from just $545,000 for a one-bedroom, or $695,000 for a two-bedroom, which is far below Sydney’s median and significantly cheaper than nearby competition.
The five-storey development at 37 Reis St, Tallawong, combines affordability with premium inclusions more often seen in luxury builds: ducted air-conditioning, timber floors, premium finishes, fridge cavities with water plumbing, video intercom systems, fibre internet, EV charging, landscaped gardens and a rooftop terrace with sweeping views.
It also comes with something almost unheard of at this price point, a 10-year Latent Defects Insurance (LDI) policy. Typically reserved for multimillion-dollar projects, LDI guarantees structural integrity for a decade and is only awarded to developers with a strong building track record.
SHC Insurance Brokers founder Stefan Hicks acknowledged the rarity of obtaining LDI, particularly for entry-level residential apartment complexes like Ophora.
“Gaining LDI is no mean feat. It’s offered selectively to developers and builders with a quality building history, and it requires both parties to employ an independent inspection service throughout construction,” he said.
“While this insurance is well-established around the world in about 40 countries, in Australia, we’re typically seeing high-end buildings covet LDI. The fact that Ophora has joined this exclusive list of quality-assured builds is a coup for entry-level home buyers.”
Raising the standard for affordable luxury
Rahme says the KDMC team wanted to set a new benchmark.
“Our mission with Ophora has always been clear: to raise the standard of what buyers should expect, regardless of budget,” he said.
“We’ve delivered a collection of apartments with finishes and features you’d usually only find in luxury projects, and we’ve backed it with one of the most stringent insurances available in the market. That gives buyers peace of mind that their investment is protected for the long term.
“People are walking through and realising you simply don’t see this level of quality at these price points anymore, as it’s effectively replacement cost in 2025.
“With rates coming down and limited competition, buyers and investors are moving quickly because they know the window won’t stay open. Investors, who have recently purchased at Ophora, have reported a strong rental demand, with minimum rental yields exceeding five per cent.”
Developments like Ophora, move-in ready, competitively priced and backed by rare structural protections (LDI), may represent the last chance for buyers to secure a sub-$700,000 apartment in Sydney.
View Ophora on cpmrealty.com.au
To arrange a private viewing or request more information, contact Sam Elbanna from CPM Realty: 0411 222 260
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