Japan’s once-storied real estate sector has gone from bubbly to bad, to even worse in recent years. But an upcoming commercial property sale in Tokyo, which is seen as a litmus test for the market, is drawing a new kind of investor: Asian money.
Japan Tobacco Inc., the world’s third-largest tobacco maker, is in process of selling three mixed-use buildings in Tokyo, which could fetch up to 100 billion yen, according to market observers. The site is called Shinagawa Seaside Forest and was once home to a JT plant. JT is selling three of its office buildings in the site, and the tobacco maker will sell all three as a package or each building separately, depending on demand.
This is the first big commercial real estate deal Tokyo has seen since the collapse of Lehman Brothers. It is being closely watched by industry observers and bankers, to see if the property market is showing a sign of the recovery.
Japanese real estate’s supply-demand balance has eroded since the financial crisis, and the nation’s land prices have plummeted for nearly a decade.
But what makes this deal really different is that Asian investors are showing a keen interest in the sale. In the past, most foreign real estate investment flowing into Japan came from Western private equity funds or investment banks.
“There is a possibility that money from a pension fund or a sovereign fund from Asia, such as Taiwan, Korea, Hong Kong, Singapore or mainland China, will be poured into the Japanese market,” said Takashi Hashimoto, an analyst at Barclays Capital analyst, citing Asian appetite for the JT deal.
A JT spokesman said bidding is scheduled to take place on November 25, and the company expects an agreement will be reached in January