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Flows of Overseas Funds in the Real Estate Market

September 5, 2022
HOGEN Yoshihiko*, KOIDE Yoshiyasu
Financial System and Bank Examination Department

*Currently at the Research and Statistics Department.

The global real estate fund market is expanding against the backdrop of inflows from investment funds. Japan's real estate fund market has also experienced inflows from foreign investment funds, which now hold a share equivalent to almost 20 percent of the total market value of J-REITs. These investment funds have actively invested via cross-border transactions and may adjust their fund flows in response to manifestations of global risk factors such as those reflected in adjustments in global financial markets. This review first gauges cross-border investment flows of these investment funds to real estate funds using fund-level data, where funds are sorted depending on their location of the registration and investment destination. It then investigates how changes in the economic and financial environment affects investment flows and the real estate prices in each region. The results show that real estate funds in many regions experience a decline in inflows from investment funds and price drops of the local real estate funds as a result of deterioration in global financial conditions or rises in the U.S. interest rate, with the effects particularly pronounced in Japan. These results also indicate that when considering developments in the commercial real estate (CRE) market in Japan, it is essential to look into changes not only in domestic factors but also in global financial conditions, which may have an important impact on investment funds' portfolio allocation decisions.


Bank of Japan Review is published by the Bank of Japan to explain recent economic and financial topics for a wide range of readers. This report, 2022-E-7, is a translation of the original Japanese version, 2022-J-14, published in September 2022. The views expressed in the Review are those of the authors and do not necessarily represent those of the Bank of Japan.

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