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Property

Goldman to double Japan property investments to over $2bn a year

Ultralow rates and steady demand draw more international players to Asian market

Goldman Sachs is refocusing on Japan's property market after a lull following the 2008 financial crisis.   © Reuters

TOKYO -- Goldman Sachs will increase its property investments in Japan to about 250 billion yen ($2.28 billion) a year from the current range of 100 billion to 150 billion yen, with a focus on logistics hubs, data centers and other facilities that enjoy growing demand.

Utilization and occupancy rates for Japanese logistics hubs and rental condominiums have held steady even in the pandemic. This, coupled with its relatively low interest rates, makes the country an appealing destination for international investors.

Overseas investors poured about 1.5 trillion yen into the Japanese property market in 2020, according to Jones Lang LaSalle. They accounted for more than 30% of all real estate deals by value in the country, the highest percentage since the record marked in 2007.

Goldman would join the ranks of top international property investors in Japan like Blackstone Group with its planned increase -- a potential boon to property prices in the country. It is especially interested in logistics hubs and data centers, for which demand is growing amid the rise of e-commerce and data communications. Goldman purchased a roughly 52,000-sq.-meter plot in Osaka Prefecture with a partner at the end of April, with plans to complete construction on a large-scale logistics facility there in 2024.

Goldman will also invest in properties offloaded by struggling companies. It acquired in 2020 the headquarters of Faurecia Clarion Electronics, a major player in car navigation systems. Such companies tend to remain on-site even after the sale, generating stable rental income for the buyer.

Goldman has been revamping property investment operations worldwide, including through the merger of Goldman Sachs Japan's principal investment division and Goldman Sachs Asset Management's property division. It is believed to be preparing a large-scale fund in order to expand property investments in Japan and the rest of the world.

Goldman entered the Japanese property market in the late 1990s after the asset price bubble burst. Originally focused on property collateral behind bad debt, it quickly branched out, even acquiring the Tiffany Building in Tokyo's ritzy Ginza district in the mid-2000s. But Goldman downsized its property investments in Japan after suffering major losses from the 2008 financial crisis, and in response to new restrictions on large-scale financial institutions.

Meanwhile, dedicated fund operators like Blackstone emerged as key players in the 2010s. Goldman is once again accelerating its push into the Japanese property market in pursuit of greater returns amid ultralow interest rates.

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