A Study of Strategic Themes in the Internationalisation of Japanese Industry
New Horizons in International Business series
Chapter 24: Global Real Estate Investment
INTRODUCTION Japanese direct investment in overseas real estate was a minor part of total outﬂows of FDI until the second half of the 1980s. According to the Ministry of Finance, real estate FDI by all Japanese industries in the period from 1951 to 1972 totalled only $US100 million, partly due to severe regulatory controls. This scenario changed dramatically from the mid-1980s, when deregulation of outward investment, appreciation of the yen and a booming domestic real estate market provided Japanese investors with increased equity and borrowing capacity for overseas real estate investment at a time when the domestic market was both illiquid and remarkably expensive (Farrell, 2000a). During the 1980s, total outﬂows of Japanese direct investment expanded at an unprecedented pace, peaking at over 20 per cent of total outﬂows in 1991, as investors in many industries sought to acquire or develop foreign landmark oﬃce buildings, hotels and apartments – at a time when many overseas real estate markets were entering a period of price decline and many key buildings became available to Japanese investors. In this decade, overseas real estate investment became popular for many ﬁrms across a range of Japanese industries, as well as for individual Japanese investors. Partly in response to high land prices in Japan, investors considered foreign oﬃce buildings, hotels and other real estate comparatively inexpensive, especially in the United States and the United Kingdom, while tourism-oriented investment was also popular in Australia. This phenomenon was short-lived, as many investments were overly...
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