Some of the world’s biggest investors are scouring Japan’s property market for deals, in spite of the earthquake, tsunami and nuclear crisis in March, as they look for stable returns amid global economic uncertainty.
Industry officials say US investment funds managed by large groups including Blackstone and Fortress Investment, European life and pension funds, as well as Asian developers and wealthy individuals are actively searching for investment opportunities in Japan.
“The number of visitors I have had in the past two weeks [from overseas investors] …has increased quite dramatically over a month ago,” says Andy Hurfurt, executive director of CBRE Consulting in Tokyo.
After attracting a surge in interest from overseas investors in 2007 and 2008, Japan’s real estate market was hit by a series of setbacks, beginning with the collapse of Lehman Brothers in 2008. More recently it was hit by the March 11 earthquake and tsunami as well as the accident at the Fukushima nuclear power plant, which triggered an exodus of foreign residents from Tokyo.
Since the global downturn, many of those overseas investors that did not default on their real estate loans have been trying to sell them.
Lone Star, which sold a key property in central Tokyo to Mitsubishi Estate earlier this year, is trying to find a buyer for a commercial complex that houses wedding and banquet halls as well as a museum, for an estimated Y100bn ($1.3bn).
Nevertheless, there are clear signs of a return to buying activity, which was put on hold immediately after the March 11 crisis, industry officials say.
“I’m not going to say it’s a full-scale recovery, but things have been picking up of late,” says Christian Mancini, chief executive of Savills Japan.
Headline-grabbing deals involving massive sums and trophy assets are still few and far between. “There are a number of parties looking for deals and the market is active in smaller [deal] sizes, but there is limited activity in larger size deals,” says Alan Miyasaki, managing director of Blackstone in Tokyo.
Nevertheless, Japan is attracting interest among western investors who see the yen as a haven and Japan’s property market as a laggard. “They have seen recovery in Hong Kong and Singapore but in Japan they think the recovery is yet to happen,” says Mr Hurfurt at CBRE Consulting. In addition to continuing interest in Japan’s office market, which offers stable income, there is strong interest in logistics assets, industry officials and analysts say.
Global Logistic Properties, Asia’s largest provider of modern logistics facilities, which is part of GIC, the Singapore sovereign wealth fund, won exclusive negotiating rights to buy a portfolio of logistics properties owned by La Salle Investment Management and worth as much as Y140bn, according to a person familiar with the situation. GLP also set up a joint venture with the Canada Pension Plan Investment Board to develop and hold logistics facilities in Japan.
Goodman Group, the Australian industrial property group, which has A$1bn ($1.1bn) of assets under management in Japan, is assessing further acquisition and development opportunities valued at more than A$1.2bn, it recently said.
Asian developers and wealthy individuals are also looking to invest in hotels, according to industry officials. New investors, mostly Asian, are investing in logistics, commercial and residential properties because rental income is stable, says Daisuke Fukushima, property analyst at Nomura in Tokyo.
YTL, the Malaysian group which is developing condominiums in the ski resort of Niseko, says it is continuing to look for other opportunities in Japan.
Mr Hurfurt of CBRE Consulting warns that the growing interest from overseas investors will have to compete with domestic groups, particularly from Japanese real estate investment trusts (J-Reits).
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