Daiwa real estate unit aims to raise rents to fight higher rates

Japanese real estate investment is being hurt by rising borrowing costs that is denting its appeal

Published Tue, Jun 9, 2026 · 12:15 PM

Daiwa uses the consumer price index as a benchmark for raising rents. PHOTO: BLOOMBERG

[TOKYO] Daiwa Securities Group’s real estate asset management business is increasing rents for office space and apartments to offset higher interest rates that have made it more expensive to fund property acquisitions.

The company has also started expanding its team of rent negotiators to help improve the terms of lease agreements for properties in Daiwa’s real estate portfolio, Yoshiki Nishigaki, president of Daiwa Real Estate Asset Management, said.

Japanese real estate investment is being hurt by rising borrowing costs that is denting its appeal. Concerns over inflation and fiscal policy stoked by the US-Iran war have driven Japanese government debt yields to multi-year highs.

“With inflationary pressures continuing, we are focused on how to achieve rental growth,” Nishigaki noted. The leasing market is “extremely strong”, making boosting rents a good way to improve profits on properties and then distributed them to investors, he added.

Changing rental terms requires additional staff to negotiate with tenants. In April, the company added 10 people, most of whom primarily handle rent negotiations. That was the first major increase in front-office staffing since the company started operations in 2004. Nishigaki declined to disclose the total size of the current team.

The unit manages rentals of office and residential properties in central Tokyo and other areas for two listed real estate investment trusts, Daiwa Office Investment and Daiwa Securities Living Investments, as well as three private Reits. Its assets under management stood at around 1.6 trillion yen (S$12.9 billion) at the end of March.

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Daiwa Securities said in November 2024 that it plans to expand its asset base through new property acquisitions, setting a target to increase group-wide real estate-related assets under management (AUM) to 1.8 trillion-2 trillion yen by 2030, from 1.5 trillion yen as of end-September 2024, according to a company presentation.

“Market conditions are tight and favourable for landlords,” said Shota Otani, chief senior researcher at Sumitomo Mitsui Trust Research Institute. Otani expects office rents to rise by around 5 per cent annually over the next five years, outpacing current inflation.

Daiwa uses the consumer price index as a benchmark for raising rents, according to Nishigaki. Japanese inflation has been surging with prices excluding fresh food rising 3.1 per cent in 2025, the fourth straight year above 2 per cent.