Overseas investors attracted to Japanese real estate. Aug 18 2012

 

Overseas investors attracted to Japanese real estate

High-rise buildings in the Shinonome district of Koto Ward, Tokyo, are pictured in this photo taken from a Mainichi helicopter. (Mainichi)

拡大写真

Overseas institutional investors are paying more attention to Japanese real estate, which they regard as low-risk property amid the prolonged European debt crisis.

European and U.S. real estate companies and investment firms are aggressively buying condominium complexes and buildings in downtown Tokyo, while a U.S. investment bank is getting ready to set up a real estate investment fund in Japan.

Behind these moves are refugee funds from European countries hit hard by the debt crisis that have flown into Japanese real estate, and growing observations that Japan's real estate market has bottomed out.

Market players are hoping that the domestic real estate market, which has been sluggish, may improve, according to an official of a Japanese commercial bank.

Grosvenor Group Ltd., a London-based major real estate company, bought two high-grade condominium complexes in Minato Ward, Tokyo, between October last year and January this year, and intends to buy more property in Japan.

"Following the debt crisis, European investors are expanding their investment in Asia. In particular, they are paying attention to Japan, where real estate prices are believed to have bottomed out," says Koshiro Hiroi, Grosvenor managing director and chief Japan representative.

Angelo, Gordon & Co., a New York-based investment company, and Tokyo-based Orix Real Estate Corp. jointly purchased part of an office building in Chiyoda Ward, Tokyo, in March.

Kenedix, Inc., a Tokyo-based investment company that caters mainly to overseas investors, is aiming to buy the old headquarters building of the Long-Term Credit Bank of Japan, which has been reorganized into Shinsei Bank after going under.

The Goldman Sachs Group, a major U.S. investment bank, is set to establish a real estate investment trust, the first such trust to be founded in Japan by an overseas company, to invest in office buildings mainly in Tokyo. The company intends to launch the trust by collecting some 30 billion yen mainly from Japanese institutional investors, and aims to expand it to 300 billion yen in five years.

Behind the booming real estate investment in Japan are growing observations that domestic real estate prices have already bottomed out.

The rents of office buildings in central Tokyo are at the lowest level in the past decade largely because new office buildings have been built one after another in recent years. However, as the supply of such buildings is expected to decrease from 2013, investors believe the prices will increase.

Moreover, as the European debt crisis is prolonged, European and U.S. investors are withdrawing their funds from Europe to avoid risks of further decline in share prices and buying Japanese property in hopes that their prices will increase in the near future.

"Japanese real estate is regarded as low-risk just like the yen and government bonds, and is attracting funds mainly from Europe and the United States. If real estate transactions increase in Japan, the industry will benefit," says Eriko Kato, a senior researcher of Sumitomo Mitsui Trust Research Institute.

There is also speculation that a Singaporean government-affiliated company intends to shortly set up a real estate investment trust specializing in logistic facilities in Japan and list the trust's shares on the stock market.

"While the European crisis is becoming increasingly serious, overseas investors are appreciating the stability of investment conditions in Japan," says Takashi Ishizawa, chief real estate analyst with Mizuho Securities Co.

August 18, 2012(Mainichi Japan)