Japanese developers are betting bigger on Britain as turbulence in the U.S. markets clouds their investment strategies.
Mitsubishi Estate Company is dialing up its U.K. exposure to take advantage of London’s supply-constrained office market, deemed by executives as a safer place to park capital, Bloomberg reported. The Tokyo-based giant broke ground this week on a $1.07 billion South Bank office project, one of several major plays by Japanese investors in the country.
Mitsubishi traditionally leaned heavily on the U.S., placing more than half its overseas capital there. But a slim majority of that capital is going to the nation these days, while 22 percent goes to Europe, a share that could rise as the American market confuses investors, according to executive Masa Iwase.
Japanese capital has been flowing into Britain at an accelerated clip.
Investors from Japan deployed more than $2.13 billion into U.K. real estate between 2023 and mid-2025, up 50 percent from the five-year pre-pandemic cycle, according to MSCI Real Capital Analytics. It’s still a fraction of the nearly $9.34 billion that U.S. investors put into the country in the first half of this year alone, but marks a notable shift.
London’s fundamentals are part of the draw. Unlike New York, where office construction has continued apace, development in the British capital has largely stalled thanks to political uncertainty, stubbornly high interest rates and inflated construction costs. That’s left strong demand for prime space colliding with tight supply, a recipe for rent growth that has top executives from BlackRock and others publicly complaining about a lack of quality stock.
Mitsubishi isn’t the only Japanese heavyweight planting deeper roots. Mitsui Fudosan is plowing $1.47 billion into a massive British Library extension alongside Stanhope, a project slated for completion by 2032.
For both Japanese firms, London’s global talent pool and institutional-grade real estate market remain compelling, even as the weak yen poses a headwind for overseas investment.
The South Bank project, known as 72 Upper Ground, has had a bumpy path to construction,
delayed for years by planning fights. Mitsubishi is developing the tower with local partner CO-RE. At the groundbreaking, U.K. Investment Minister Jason Stockwood called the project a “massive shot in the arm” for Britain’s appeal.
— Holden Walter-Warner
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AloJapan.com