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A look ahead: Asterisk Realty & Placement Agency

Overseas private real estate investors are ripe to take advantage of Japan’s tourism boom, especially in the luxury hospitality sector, said Yukihiko Ito, managing director at Asterisk.

As Japan meets its target of attracting 20 million foreign visitors in a year by 2020, foreign investors should look to Japan’s hospitality sector for returns, especially in the luxury market, said one local placement agent.

“Since the interest of the tourism industry in Japanese real estate market has continued to be very strong for the past several years, there has been a surge in interest in the luxury hospitality sector,” according to Yukihiko Ito, managing director at Asterisk Realty & Placement Agency.

Inbound tourism has become one of the few promising areas of business in Japan. Foreign visitors reached 20 million in 2016, which was double that of 2013 levels, according to the Japan National Tourism Organization.

The growth of interest in tourism as a whole can be attributed to many factors, including the flourishing middle class in China and global high-net-worth (HNW) individuals. The Japanese government is keen on tapping into tourism and attracting more overseas HNW visitors. A series of policies, such as eased rules for visas, improved access to airports, the expansion of duty-free shopping and integrated resorts, help the cause.

With the growth of overall demand, the Japanese hospitality industry is seeking potential opportunities in the luxury hotel and branded residence market.

For overseas players, including private equity funds entering the Japanese market, the luxury end of the hospitality real estate sector will provide the best chance of generating strong returns, Ito said. There will be substantial opportunities to invest, especially in the projects related to investment in or development of luxury hotels branded residences.

However, domestic groups may be put off by seeing a controversial bill for integrated resorts making local headlines this month again in Japan. The bill, also known as the Casino Bill, would legalize casinos in Japan and has been met by critics who argue it will result in an increase in organized crime and fuel gambling addiction. By contrast, overseas players, which have more experience compared to Japanese local players at this stage, are likely to take quick action with these investment opportunities.