has won two mandates worth a combined $600m (鈧�567m) to invest in Japanese real estate.
鈥淥ne of the mandates came from an existing investor, the other is a new institution,鈥� chief executive Justin O鈥機onnor told IPE Real Estate.
鈥淢andates have been a trend in the last three to four years 鈥� and we are benefitting from that.鈥�
O鈥機onnor, who is visiting the firm鈥檚 Asian and Australian offices, said there is growing interest in Japan, as shown in a on emerging trends in real estate.
鈥淛apan has been major recipient of inbound capital,鈥� said O鈥機onnor. 鈥淚t is the second-largest market in the world after the US (and) it has an enormous amount of stock. If you have the ability to execute on the ground then it is a great market.鈥�
鈥檚 first Japan fund, known as Greater Tokyo Office Fund, raised $82m in the first round, and has received commitments of $150m in subsequent closes.
The fund remains open, and O鈥機onnor expects to soon reach the target of $200m.
The fund could begin selling assets this year and Savills IM is planning to follow it up with a second vehicle.
Savills IM manages assets in Japan valued at more than US$1bn. ln 2013,it acquired Merchant Capital in Japan, giving it a presence in the country, and in 2015 it bought SEB Asset Management, which began investing in Japanese real estate 10 years ago.
鈥淲e source 99% of our transactions in Japan off-market,鈥� O鈥機onnor said, stressing that Japan is a market 鈥渨here you need local people on the ground, who speak the language鈥�.
鈥淲e like offices and residential, where there is a strong and deep rental market,鈥� he said. 鈥淒epending on where you buy, you can get cash on cash yields of between 4% and 6.5%.
鈥淭he cost of debt is cheap. So if you buy central Tokyo, you may be able to get a 4-4.5% yield, and if you buy on the outskirts of Tokyo, the yield may be around 6-6.5%. If you are borrowing at an all-in cost of 1%, that is fantastic.鈥�
By comparison, he said, debt is relatively expensive in Australia. 鈥淚t doesn鈥檛 make sense buying assets at 4% yield when the cost of debt is 3%.鈥�
Like Australia, Japan is seen as a core market offering stable income returns to investors, based on both rental incomes and capital appreciation.
O鈥機onnor sees opportunity in Japan鈥檚 logistics sector due to changing retail trends. 鈥淲e are seeing different types of demand for logistics from e-tailers, ranging from mega-distribution centres to last-mile logistics to service consumers.鈥�
He intends to emulate Savills IM鈥檚 activities in Japan and Europe in the wider Asia-Pacific region.
Having opened an office in Australia last year, the firm is now increasing its capacity through recruitment. It plans to open an office in Shanghai in the first half of this year, and will then look at Seoul.
O鈥機onnor said Savills IM is on track to launch a pan-Asia core plus fund which will seek to raise between $300m and $500m to acquire assets with a gross value of around $1bn.
