Student Residence Japan’s Thriving Alternative Asset Class

Japan Real Estate

Japan Properties

03 Nov, 2020 –

Residence for college students in Japan have certainly evolved. Once cramped and shabby, the newer residences have quality global standards with secure entrances, co-working space, living space, shared kitchens, common entertainment areas and perhaps even a rooftop balcony. While such residences appeal to foreign students, they often face the battle of securing a dwelling as the country can be unwelcoming and resistant to opening their doors to foreigners. Some landlords are concerned about the language barrier, following rules such as property disposing garbage, and making too much noise.

This reluctance to accept non-Japanese nationals is in fact the catalyst for change in the Japanese property market, attracting more foreign business operators. Koji Naito, who heads the capital market research arm in Japan at Jones Lang LaSalle KK (JLL) believes the trend of this mainstream office class and share-houses can be a solid investment as investors seek a wider variety of alternative asset classes such as data centers, nursing homes and student accommodations. He adds that, rent is covered by parents in many cases, so owners can expect a stable cash flow, too. In Tokyo, student residence prices can range from ¥70,000 to ¥140,000 (USD $660 to $1,321) per month.

Currently Star Asia KK, a joint venture between U.K. and Tokyo-based GSA, which specializes in providing student accommodations, operates 47 student accommodations globally, aims to provide 5,000 to 7,000 beds in Japan in the next several years. Similarly, Tokyu Land Corp., a group firm of railway operator Tokyu Corp. and Itochu Property Development Ltd., a real estate and developer unit of trading house giant Itochu Corp., have started building student accommodations in the past several years.

With the investment boom and growing number of foreign students, the outlook for the student accommodation market had appeared quite promising. Foreign residences are not restricted to just foreigners. It also attracts Japanese students from various colleges including the University of Tokyo, Waseda University, Temple University, and those attending Japanese language schools. The diversity is key to cultural development and a community experience. Students also gain the opportunity to practice their Japanese language skills, beneficial to entering the workforce.

It is undeniable that the coronavirus outbreak drastically changed the educational landscape. In early April 2020, the Japanese government implemented tighter controls that effectively froze cross-border movement. Many foreign students had to cancel their scheduled accommodations. Although it’s still not known when people can freely start traveling again, industry players and experts believe that the health crisis is just a short-term setback. Global real estate firm, JLL believes the economic fallout this time has not severely damaged financial institutions like it did when during the 2008 global financial crisis. It’s likely to take some time before international traveling returns to normal, but will not affect investments in student housing.

Housing operators believe that the field of education is “resilient” to economic downturns and Japan will still be a popular destination for foreign students with its prestigious colleges and universities. The last decade has shown phenomenal growth. In 2011, Japan saw just 163,697 foreign students. But that number had nearly doubled just eight years later, reaching 312,214 by May of 2019. With this level of growth the Japan Student Services Organization, an independent agency supporting students studying in higher education institutions expects the trend of increasing foreign students wanting to study in Japan will return once the COVID-19 pandemic calms down. It is only a matter of time.

With the current buyers’ market and soft pricing brought on by the pandemic, investors are positioning themselves accordingly, buying premium residential assets in strategic locations around major universities, which could easily be converted into student housing once entry bans are relaxed. And, of course, at reduced prices!

 

(Source – Priti Donnelly, “Foreign Students”, Pic – Japan Student Services Organization)

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