Asia Pacific
Japan’s corporates are sitting on a potential $2 trillion real estate treasure trove
5 min read 8 Sep 25
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Japanese companies hold vast real estate assets, which are typically misvalued on their balance sheets. Carl Vine, Co-Head of Asia Pacific Equities, and William Montgomery, Senior Asia Pacific Equities Analyst, explore the often overlooked property treasure – potentially worth US$2 trillion – on Japan’s corporate balance sheets and ask who stands to benefit when it is unlocked.
Cash piles and cross-shareholdings are well-known and readily-measured sources of latent value in the Japanese equity asset class. There is, however, a less appreciated and certainly less frequently measured pool of value sitting on corporate balance sheets: real estate.
The bubble-era excesses may be long gone, but the legacy remains. Japanese companies still hold vast property portfolios, typically carried at book values established decades ago. The question is not whether value exists, but how much – and how quickly it can be unlocked.
“Japanese companies still hold vast property portfolios, typically carried at book values established decades ago.”
Is there $2 trillion of real estate sitting on listed balance sheets?
The Topix Index represents the overwhelming majority of listed Japanese companies. It has a market value of US$7 trillion1. The book value of real estate holdings for these companies (land and buildings (L&B)) adds up to some $1.1tn. At 16% of total market cap, this is not insignificant. However, this is the recorded book value. What about market values and unrealised gains?
Since 2010, Japanese companies have been required to disclose estimated market values for real estate leased out for investment or non-core purposes. Of the $1.1tn of L&B on the books of Topix companies, some $280bn is classified in this way2.
According to the latest Nikkei and Toyo Keizai survey, the market assessed value of these assets is $480bn, some $200bn or 70% higher3. If one were to assume that the remaining real estate was mis-marked by the same extent, the total market value of L&B on the balance sheets of Topix-listed companies would be close to $1.9tn, not the $1.1tn reported.
On top of this, it is widely known that fair value estimates themselves tend to be conservative. With this in mind, the true figure for the market value of L&B could easily be $2tn or more – equivalent to around 30% of the total market cap of listed Japan.
This is not to say, of course, that all of the real estate owned by listed Japanese companies is excessive. What it does highlight is the numbers involved are very significant. Anecdotal evidence reinforces the point. To take just one example, Hino Motors has sold three properties over the last 18 months with a combined book value of ¥24bn. The realised proceeds were ¥148bn, representing ¥124bn of gains.
In this case then, the market value was 5x the book value. This is not unusual. The market-cap-weighted average age of Topix companies is 71 years. There is plenty of long-held real estate on the books.
Activists know the playbook
This treasure trove has drawn the attention of activist investors, both domestic and foreign. In recent years, a growing list of shareholder interventions has targeted the unlocking of trapped real estate value.
“In recent years, a growing list of shareholder interventions has targeted the unlocking of trapped real estate value.”
Oasis successfully forced the sale of Tokyo Dome to Mitsui Fudosan. 3D Investment Partners pushed Sapporo Breweries to divest Yebisu Garden Place. Elliott Management has been pressing Tokyo Gas and Sumitomo Realty over undervalued property holdings.
The persistent mispricing of land on corporate balance sheets has also fuelled a wave of friendly and unsolicited takeovers. Starting in 2019 with NTT Urban’s buy-in from parent NTT, real estate-focused takeover bids have steadily gained pace. Indeed, Bain’s buyouts of Showa Aircraft and Nissin Corp – where land and warehouses were central to the investment case – cemented what has since become a recurring activist theme.
Importantly, these bids have carried premiums anywhere between 25% to 200% above undisturbed prices; equating to price-to-NAV (net asset value) multiples between 1.0x and 1.8x.
Unlocking real estate value is no longer a theoretical exercise. A shift in corporate priorities, amplified by activist pressure, is driving more disposals. Dormant sites are being monetised, creating options for reinvestment, deleveraging, and shareholder returns.
From legacy to prosperity - who else benefits?
Developers such as Mitsui Fudosan, Mitsubishi Estate, and their peers are well-positioned beneficiaries of what is unfolding as a once-in-a-generation development cycle as long-locked-up sites finally come to market.
In far tougher conditions, having compounded book value per share at just over 8% annually during the past fifteen years, a company like Mitsui Fudosan now faces an even richer runway. Its acquisition of Tokyo Dome is already shaping up to be fantastically profitable, and the pipeline ahead suggests more landmark opportunities. Against this backdrop, the fact that these firms still trade at 40–50% discounts to post-tax NAVs looks less like a valuation quirk and more like a structural mispricing.
Railways, warehousing, and logistics operators could also be winners, as transport nodes and last-mile networks gain value through land rationalisation. J-REITs (listed real estate investment trusts), meanwhile, long considered vulnerable to higher rates, are emerging as stable landlords in a market that may finally be seeing improved liquidity. And then, of course, we have hundreds of random companies sat on meaningful unrealised gains.
Policy catalyst?
So far, the release of value has been driven mainly by changing corporate attitudes, with occasional nudges from activist investors. But the Ministry of Finance has the potential to loom large in this developing story.
Any hint of tax relief on long-held land assets – whether through capital gains treatment, incentives for disposals, or adjustments to fixed-asset taxation – would act as an accelerant. For companies sitting on vast unrealised gains, the prospect of crystallising value without punitive taxation could flip the decision-making calculus overnight. In that context, latent balance sheet assets start to look less like ballast and more like dry tinder waiting for a spark.
The investment angle
Thirty-five years after Japan’s asset bubble burst, corporate balance sheets are still stuffed with underutilised real estate. However, rather than shielding huge unrealised losses, balance sheets of listed Japanese companies are now hiding huge unrealised gains.
Governance reform, rising capital discipline and the return of inflation are converging to liquefy this source of value. The pending real estate capital release relative to market cap is yet another tailwind for the Japanese equity asset class.
1 Calculated at an exchange rate of 148 yen to 1 US dollar.
2 Bloomberg, September 2025.
3 Nikkei, ‘Real estate unrealized profit, up to 29 trillion yen at the end of March, up 7% from the previous fiscal year’, (Nikkei.com), August 2025.
The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested. Past performance is not a guide to future performance. The views expressed in this document should not be taken as a recommendation, advice or forecast.
