| TOKYO, March 1
TOKYO, March 1 Japanese blue-chip firms, from
electronics giants to brewers, are selling prime real estate to
shore up battered balance sheets, stoking a resurgent property
market. Some are moving into new offices to take advantage of
relatively low rents.
Big downtown office buildings are coming up for sale as
Tokyo's property market regains growth momentum for the first
time in almost five years, with plenty of interest among buyers,
particularly Japan's public real estate trusts, experts said.
"Market sentiment is more positive now than at any time
since the Lehman crisis," said Andy Hurfurt, executive director
at the Japanese unit of CBRE Group Inc, a global real
estate services company. "This reflects a widely held view that
the market has bottomed and will move to an upside cycle."
Looking to cash in on that market recovery, Sony Corp
said on Thursday it sold its 25-floor Sony City Osaki
building near its central Tokyo headquarters for 111 billion yen
($1.12 billion) - the biggest deal of its kind in four years.
The company that gave the world the Trinitron TV
and Walkman music player is shedding non-core assets - it has
also offloaded its New York headquarters - as it
seeks to halt a slump in its TV fortunes from competition from
Samsung Electronics Co and others.
Osaka-based rival Panasonic Corp is also selling a
central Tokyo office it uses as its headquarters in the capital,
sources said, and has promised investors it will generate 130
billion yen from asset sales to underpin cash flow.
Sharp Corp has sold a 9-storey building
in Tokyo and is looking to sell more in the city, a spokeswoman
Japan's real estate market crashed in the wake of the global
financial crisis, and rents in Tokyo have fallen ever since. But
last year, vacancy rates in the city's quality buildings slipped
for three straight quarters, according to CBRE. Monthly rents,
which have dropped since early 2008, were almost flat in 2012.
Central Tokyo office rents - measured in tsubo, equivalent
to 3.3 square meters or the size of two traditional tatami mats
- peaked in late 1991 at 44,193 yen ($480) as Japan's bubble
economy burst. Rents in January were 16,554 yen, according to
Miki Shoji, a local real estate services firm.
Market sentiment - from real estate to shares - has been
buoyed by economic policies touted by the new administration of
Prime Minister Shinzo Abe, who came to power in December. The
benchmark Nikkei average this week hit a 4-year high and
has been rising since mid-November on hopes of aggressive moves
to tackle deflation in Asia's second-largest economy.
The Tokyo Stock Exchange REIT index has risen by a
fifth in three months on expectations that real estate trusts
will push up profits from rent increases. The higher REIT share
prices rise, the easier it is for them to raise money from
selling new shares - money to plough into more properties.
"As a sign of market improvement, property prices typically
go up before rent increases because investors try to buy real
estate assets in anticipation of higher rents," said Takeshi
Akagi, head of research at Jones Lang LaSalle Japan.
Japan's public real estate trusts have raised over $1.8
billion in cash so far this year, almost 70 percent of the total
they raised in the whole of last year, according to Thomson
Reuters data. That aggressive fund raising is a sign that REITs
will be strong potential buyers, experts said.
Nippon Building Fund, Japan's largest REIT by
assets and the buyer of a 60 percent interest in the Sony
building, raised about 70 billion yen in January from selling
new shares. Kenichi Tanaka, CEO at Nippon Building Fund
Management, which manages the REIT, said then the trust could
afford to buy assets worth 100 billion yen, and was keen to
invest quickly as now is a good time to buy properties in Tokyo.
"Tokyo rents have fallen to a very low level and I don't
expect rents will stay at this level," he said at the time.
"That will give us upside potential if we buy properties now."
MORE THAN JUST A 'GARAGE' SALE
That potential in Tokyo's office and commercial property
market is also attracting foreign investors, said Ken Negishi,
representative director at Deka Real Estate Lending, the local
unit of a German bank. "Investors expect rental income will
rise, backed by economic growth. When companies see stronger
earnings, they can afford to pay higher rents and fulfill their
needs to use bigger space. We're getting into that cycle now."
CBRE's Hurfurt expects more Japanese manufacturers to sell
real estate assets. "I know of other firms that are reviewing
their real estate holdings and examining more effective ways of
using capital," he said.
Kirin Holdings Co, under pressure to expand abroad
as Japanese consume less alcohol, is looking to sell two
buildings in Tokyo, while moving into one of the city's newest
offices where it can house group companies currently dotted
around the capital at several locations.
"Companies are offloading assets, and we see this trend as a
good opportunity for us to invest in new properties," said
Tatekazu Nakamura, executive manager at Mitsui Fudosan Co Ltd
, one of Japan's top real estate developers. "We have
been trying to source potential deals."