Japan: A Capital Markets: Domestic: J-REITs Overview
Current Trends in the J-REIT Market
After an extended downturn that started in mid-2021, the Japan Real Estate Investment Trust (J-REIT) market seems to have been shifting towards recovery in 2025.
As a result of the continued decline in J-REIT market prices over the past several years, the average expected dividend yield reached 4.67% as of the end of September 2025, exceeding the yields of most high-dividend stocks. Furthermore, the underlying real estate market continues to boom despite several negative factors, such as the expected massive oversupply of logistics properties.
Despite rising interest rates and general inflation, which increase the maintenance costs of portfolio assets, investors are now re-evaluating J-REITs. The Tokyo Stock Exchange REIT Index rebounded significantly in 2025, rising by 16.22% as of the end of September. In August 2025, a new J-REIT was listed for the first time in about four years.
The Japanese economy has been experiencing inflation for the first time in many years, and in March 2024 the Bank of Japan moved away from the negative interest policies it introduced in February 2016. The Bank of Japan further increased its policy rate in July 2024. While increases in the policy rate would result in increasing interest payment for REITs, these factors may positively affect the J-REIT market.
In addition, due to an increase in inbound tourism, hotel assets have been performing well and are relatively active in trade in REIT markets. The new J-REIT listed this year is a hotel REIT.
Another trend is overseas investment. For example, in 2024, Sekisui House REIT, Inc acquired two overseas real estate properties located in the United States of America. It was the first time in six years that a listed J-REIT acquired overseas real estate properties. Going forward, we may see more cases of overseas real estate acquisitions following this trend.
Environmental, social and governance (ESG) movement (especially the environmental element) is still a trend for portfolio assets and equity/debt financings. More and more portfolio assets have various environmental certificates, and some J-REITs have introduced renewable energy into their portfolios of assets. Green and sustainability financings (both equity and debt) are becoming common as well.
Current Trends of Private REITs
Private REITs are also present, and are often compared with listed REITs (ie, J-REITs). Sponsors currently appear to prefer private REITs over listed J-REITs in general. From 2020 to 2025, two J-REITs were listed, while nearly 30 private REITs commenced operations (as of the end of September 2025). In 2024 and 2025, seven private REITs commenced operations, while only one J-REIT was newly listed as of the end of September 2025.
The industries of private REIT sponsors have diversified to include railways, electricity, gas, construction and regional banking. As a result of the increase in private REITs, reorganisation and consolidation may occur. Unlike J-REITs, private REITs have not yet undergone any full-scale business integration or restructuring.
Recent Noteworthy Capital Market Transactions
For the first time in a while, an IPO of a REIT occurred in 2025: the investment units of Kasumigaseki Hotel REIT Investment Corporation, a hotel REIT, were listed on the Real Estate Investment Trust Securities Market of the Tokyo Stock Exchange on 13 August 2025. This marks the first new REIT listing in approximately four years, since the listing of Tokaido REIT, Inc on 22 June 2021.
In recent J-REIT offerings, even when the J-REIT makes placements of investment units to foreign investors, it has become less common for issuers to conduct Rule 144A offerings or prepare an English offering memorandum, mainly due to cost considerations. However, in large-scale offerings, Rule 144A transactions are still being conducted. Amidst the strong performance of hotels due to inbound tourism, J-REITs mainly investing in hotels completed relatively large offerings, including Rule 144A offerings.
With the recovery of the office leasing market, some J-REITs mainly investing in offices completed follow-on offerings. J-REITs meeting certain requirements can rely on the guidelines of the Financial Services Agency (FSA) to shorten the period between the announcement date and the pricing date of their offerings. A number of J-REITs that conducted follow-on offerings relied on this rule. Shortening the period reduces the risk of fluctuations in the price of the investment units after the announcement date.
Furthermore, an increasing number of J-REITs are delivering their prospectus electronically rather than on paper, which benefits the environment.
Amidst recent undervalued investment unit price levels and other factors, there has been an increase in the number of cases of REITs (or their sponsors) acquiring their (own) investment units. Investment unit acquisitions by sponsors are expected to align the interests of unitholders with those of the sponsor.
Recent Noteworthy Corporate Actions
The Japanese REIT sector witnessed an unsolicited unitholder proposal for merger and an unsolicited takeover attempt made against listed J-REITs (in 2019 and 2021), which were previously unseen in this market. Regarding the latter, Starwood commenced a tender offer for the units of Invesco Office REIT, Inc (IOJ), without the prior consent of IOJ. Starwood’s tender offer failed, but Invesco, the sponsor of IOJ, launched and succeeded in making a counter tender offer as a “white knight”. Consequently, IOJ completed a squeeze-out and delisted in November 2021 – the first delisting in J-REIT history.
In 2023, a unitholder proposal was made to one J-REIT (Ichigo Office) requiring, among other things, the modification of asset management fees and appointment of additional directors. The proposal was opposed by the board and was not approved in the extraordinary unitholders’ meeting held in June 2023.
These cases sparked discussion over the corporate governance of REITs. In particular, the deemed consent scheme in unitholders’ general meetings and consolidation of REIT units to squeeze out unitholders became hot topics.
Following this, on 28 January 2025, 3D Investment Partners announced that it would launch a tender offer for NTT Urban Development REIT Investment Corporation; on February 13th, it also announced that it would launch a tender offer for Hanshin Hankyu REIT Investment Corporation. Neither of these two tender offers was successful. Unlike the previous case involving an unsolicited tender offer, these transactions were characterised by its limited target ownership stake held for pure investment purposes, rather than the intention to fully acquire the REIT through mergers of subsidiary REITs or squeeze-outs of minority investors.
Also noteworthy are recent changes in the ownership of asset management companies and mergers of J-REITs. For example, in 2022, Mitsubishi Corporation and UBS sold their entire interest in their joint venture asset management company managing J-REITs to the KKR Group.
As for mergers of J-REITs, Mitsui Fudosan Logistics Park Inc (MFLP) and Advance Logistics Investment Corporation (ADL) announced a merger that was completed as planned in November 2024. Concurrently with the merger, an absorption-type company split occurred between the asset management companies of these REITs, where the asset management company of MFLP took over the asset management business related to logistics facilities (among others) from the asset management company of ADL.
Moreover, in 2024, a transaction took place where the acquisition of a private REIT and its asset management company occurred at the same time. Ichigo Inc acquired all of the units of Tosho Tokai REIT Inc from its investors and all of the shares of Toshō Asset Management Co, Ltd from Tosho Co, Ltd, the sponsor of Tosho Tokai REIT Inc.