Global excess liquidity and business opportunities
Currently, there is an unprecedented level of global excess liquidity, driven by the monetary easing policies of central banks in many countries. Even in Japan, there has been a tendency for many companies to use their surplus funds for stock buy-back, which puts money back into the financial market. Whether this is because companies are storing funds for upcoming investments, or because they are simply skipping out on investment opportunities, is unclear. Individual financial assets in Japan have also risen to a high of 1.8 quadrillion yen, with the majority of these assets lying dormant in the form of cash. There is simply not very much money going into investment.
Neither companies nor individuals have been able to discern promising areas of investment. In the long run, however, this may mean that these companies and people will eventually invest their extra money in new business areas. In other words, from a more positive perspective, the money currently lying dormant may come back into circulation if a new, attractive investment opportunity shows up. Our prediction is that this kind of opportunity will come out of a field invigorated with new value from the digital revolution. The integration of IoT and AI into our everyday lives and the subsequent linkage between “things” and “experiences” is creating new value. This kind of opportunity is where investors will pool their money—and this is not something companies should overlook.
Real estate crowdfunding, in this context
Revolutionary technologies have given rise to various kinds of innovation in a short period of time—VR (virtual reality), AR (augmented reality), blockchain, drones, cognitive computing, connected cars, smart homes, etc. This kind of technological innovation leads to reform in social systems like FinTech (financial technology), HR technology, and real estate technology as well. Changes in technology are causing dramatic changes in the mechanisms of society.
Crowdfunding, in which companies and individuals gather funds for a product or project by raising small amounts of money from a large number of people, is also gaining traction. Crowdfunding is a form of social system reform, and one that has recently come to influence the Japanese real estate industry as well.
In August 2017, Kenedix and NRI announced their collaboration for a real estate crowdfunding business. Until now, real estate investment had been the realm of institutional investors and a small number of professional-level individual investors. The digital divide between general consumers and real estate agents had prevented an increase in the range of investors. The advancement of technology, however, has broken this situation down, and now the way is clear for many more consumers to enter the fray.
There are many individual investors looking for meaningful ways to spend their money—as can be evidenced by the large amount of donations collected through crowdfunding for recovery efforts after the Great East Japan Earthquake. Real estate crowdfunding is likely to produce a certain level of return, it has a clear object (property), and can be considered a way to invest in and give back to a certain region. As such, the market for real estate crowdfunding is expected to grow in the future.
Joint development and the future
There is a great chance that innovative services will be integrated into our everyday lives not gradually, but all at once. This is often the case especially in the digital world. In order for companies to ride this wave, it is not enough for them to simply use their own resources. It is important that they be willing to work with other companies in an open innovation type environment.
In our efforts in the real estate crowdfunding business as well, we have to be able to look beyond crowdfunding to things like big data analytics, blockchain technology, AI robot advisors, etc., and be able to utilize these technologies to further develop our real estate-related businesses. NRI plans to work together with these companies that are planning innovation in this industry, to create new value.
We hope that NRI will be able to lead the digital revolution and find success in it, so that we may use this experience as a touchstone for the next chapter of the company.
Nomura Research Institute, Ltd.
Corporate Communications Department