Japanese investment into London is not a flash in the pan

Yes, the start of 2025 showed that institutions are looking to London to generate returns, such as the landmark British Library Extension scheme by Mitsui Fudosan (pictured above), which will see an investment of £1.1 billion to create new commercial spaces and extensive public access land, for which Savills is advising. But these conversations have been going on for months and even years; it is only now that the deals are completing.

Investment drivers

The recent investments can be attributed to some key factors. Unlike the Chinese investors that spent a lot of money in 2016, the foreign exchange benefits aren’t available to the Japanese as a result of a weak yen. Instead, the interest in London stems broadly from the slower pace of the domestic investment scene, which has been suffering from stagnant growth and deflation. After all, it’s only eighteen months since the Bank of Japan raised interest rates for the first time in 17 years.

There is a lot of history between Japan and the UK, with a trading relationship going back more than a century. It’s a unique country that requires significant experience to work with. The value of an advisor is found in its ability to understand the nuances of the client, and the ability to offer Japanese-speaking services from London, as well as on the ground in Tokyo, which few can, and to build deep relationships with senior stakeholders in Japanese organisations, not just over years but over decades.

Historical lessons

I remember working in Japan in the early 1990s, but the current investment environment differs from the bubble-era spending of that time, where prominent buildings were often bought at the height of the market and then sold at a loss. Recent deals are on a more proportional scale, and are viewed as complementary to the existing investments in Japan. Buyers are motivated largely by healthy diversification, with the added benefit of more exciting returns than are available domestically.

The weak yen naturally limits the size of the group that will be able to make investments into the UK, so it’s important not to overstate the return of Japanese investment into London. The data shows an increase in volumes, but it’s building from a very low base and is likely to be a steady stream of deals rather than a wave. As the next deals complete, I’d expect to see more institutions following the lead of the likes of Mitsubishi, Mitsui Fudosan and Takenaka, but progress will remain incremental.

Of course, there are always external political and economic factors to consider which may impact future interest from Japan, but for now it’s clear that the momentum is building albeit steadily.

Further information

Contact Stephen Down