Olympics: Tokyo Games could be 'show window' for Japanese capital's booming real estate

TOKYO (BLOOMBERG) – While the debate still rages over whether it is safe to hold the Tokyo Olympics, investors in the Japanese capital’s real estate sector may be saying the Games must go on.

That is according to one analyst who sees the event as providing a “show window” for Tokyo’s real estate, whether spectators are allowed or not. The approaching Games, as well as the increasing pace of Japan’s Covid vaccination campaign, is helping to fuel expectations for the country’s real estate investment trusts.

“Should the Olympics and Paralympics move forward with the help of vaccines, it’s highly likely that money will flow into J-Reits globally – even if the Games are held without spectators,” Daiwa Securities Co. analyst Eiji Kinouchi wrote in a note.

With the Games starting in less than 50 days, the debate around the merits of the event continues. The country’s vaccine roll-out, which was initially slow and has weighed on Japanese stocks for months, is now picking up momentum, giving hope to those who want to see the publicly unpopular Games go forward.

While foreign spectators will not be attending the Games, the global TV audience for the Olympics is estimated to top three billion – dwarfing the 600,000 foreign visitors who had been expected to attend before the pandemic hit and caused the event to be postponed from 2020.

That audience provides an opportunity for Tokyo’s booming real estate sector to display its wares to the world.

“Historically, countries that host the Olympics and Paralympics see their Reit indexes gain for two years, starting from the year they host the Games,” Kinouchi wrote. He sees the same time window for gains to accrue in Japan.

“It could be due to a ‘show window effect,’ as investors worldwide see the city rebuilt beautifully on screen,” he said.

The Tokyo Stock Exchange Reit Index has been on a winning streak, booking gains every month this year. The index extended that advance on Thursday (June 4), closing the trading session at highest level since the pandemic-led crash last February. That has taken its advance in 2021 up to 18 per cent, well above the 8.5 per cent rise in the benchmark Topix index.

“The Reit market environment isn’t too bad at the moment, with investor sentiment leaning toward risk-on,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.

“With the ongoing vaccine roll-out, demand for offices should gradually come back from the stay-at-home trend we had been seeing.”

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