ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Economy

Japan's cities basking in commercial property investment

TOKYO -- Urban commercial land values are making a comeback in Japan as cheap credit and a weak yen embolden foreign and domestic players alike to buy in.

     Meguro Gajoen, a multiuse complex featuring wedding and office space here in the capital, recently sold for an eyebrow-raising markup of more than 10 billion yen ($84.7 million). Real estate developer Mori Trust flipped the property to U.S.-based LaSalle Investment Management for more than 140 billion yen in January after buying it for about 130 billion yen last August.

     A person familiar with LaSalle described the purchase as a good bet, given the ample potential for rent appreciation.

     Commercial land values in Japan have stopped falling for the first time in seven years. Property bulls are wagering that a resurgent Japanese economy will drive up office rents. The office vacancy rate in central Tokyo has retreated to a roughly six-year low of 5.31%, according to real estate broker Miki Shoji, which expects a landlord's market to continue.

     The Bank of Japan's ultraloose monetary policy has depressed long-term interest rates, lowering the financing hurdle for property buyers. New domestic bank lending to the real estate industry grew by a fifth on the year in the October-December quarter, reaching 2.5 trillion yen, BOJ figures show.

     Kanazawa, a midsize city west of Tokyo, boasted the biggest jump in commercial land value nationwide in the land ministry's latest official survey. Its appeal has grown thanks to a new bullet train connection to Tokyo. The third-largest gain was seen in Nagoya, which sits at the other end of a magnetic-levitation train line to Tokyo slated for completion in 2027.

     "Investors looking for resale profits are buying small and midsize buildings and empty lots," a local real estate appraiser says.

     Meanwhile, foreign property hunters are taking advantage of the increased buying power that comes with a weak yen. GreenOak Real Estate, a U.S. investment firm, shelled out around 50 billion yen for the Aoyama Building, a vintage property occupying a prime piece of the Tokyo neighborhood of the same name. That was more than a fifth more than what a domestic real estate investment trust considered paying, an official at the REIT says.

    Japanese real estate purchases by foreign companies and foreign investment funds surged 170% to 981.7 billion yen last year, according to the Urban Research Institute, an affiliate of Mizuho Trust & Banking. Property investment by foreign individuals is also on the rise. Real estate broker Tokyu Livable reports a notable turnout of mainland Chinese and Taiwanese for its property tours. Some recent deals have been worth around 3 billion yen, according to the company.

(Nikkei)

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media