Real-Estate Investors Flee the U.S. for a Land of Fuller Offices | Kanebridge News
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Real-Estate Investors Flee the U.S. for a Land of Fuller Offices

International investors feel bullish on Japan’s economy, with the stock market trading near a 33-year high, as a weak yen sweetens the pot

Wed, Jul 26, 2023 8:24amGrey Clock 3 min

TOKYO—Office building investors are in full retreat from most U.S. cities. Some are finding a haven in Japan, where most workers have returned to the office and banks are eager to lend.

Foreign investors including LaSalle Investment Management, London-based M&G, and Singaporean conglomerate Keppel are buying Japanese office buildings, attracted by the market’s stability.

Investment in Japanese office real estate hit over $4 billion in the first quarter of this year, more than double the figure a year earlier, according to JLL.

In the U.S., pension funds and property developers are selling off their office holdings at a discount. Office vacancy rates are surging in major cities, hitting 16% in Manhattan and 32% in San Francisco in the second quarter, according to CBRE. Vacancy rates in Tokyo’s central business districts have stabilised around 6%.

LaSalle bought a medium-sized office building in Tokyo’s Shinjuku district last year. PHOTO: SYLVAN LEBRUN/THE WALL STREET JOURNAL

“Almost every other office market in the world would trade places in a heartbeat with Tokyo,” said Calvin Chou, head of Asia-Pacific for Invesco Real Estate.

The office sector often acts as a proxy for a country’s economy, and international investors like Invesco are feeling bullish on Japan, Chou said. The stock market has been trading near a 33-year high, and property buyers’ dollars go farther thanks to the weak yen.

An additional incentive, according to investors, is the generous spread between the rent yield on office buildings and the cost of borrowing to acquire the buildings, which is low thanks to the Bank of Japan’s near-zero interest rates.

Smaller apartments and a cultural emphasis on in-person communication with colleagues spelled the swift decline of remote work in Japan. As of the end of April, office attendance rates in Tokyo were above 75%, according to NLI Research Institute. In the U.S., the average return rate is stalled at about 50%, according to data firms and industry participants.

Millions of square feet of new office space will hit the market in Tokyo and Osaka over the next few years, but analysts said they didn’t expect many empty cubicles to result.

Kunihiko Okumura, chief executive of LaSalle’s Japan branch, said his firm has continued actively buying offices in Japan over the last several years. He projected that LaSalle’s new $2.2 billion Asia Pacific real estate fund would invest 60% of its Japan allocation in office property.

In September 2022, LaSalle purchased a vacant medium-sized office building in Tokyo’s Shinjuku district, near the Park Hyatt hotel made famous in the 2003 movie “Lost in Translation.” LaSalle completed renovations in March and has already made more leasing progress than expected, Okumura said.

By contrast, LaSalle in February unloaded an office building in Santa Ana, Calif., at a loss of more than 50%.

Many foreign investors have gravitated towards Japan’s Class B or medium-size office buildings instead of top-tier properties.

“We continue to seek the assets which have been very poorly managed by property owners,” Okumura said. “That kind of inefficiency provides us with a very good opportunity to be able to push up the value of the asset and sell it to a very strong core market.”

British investor M&G paid more than $700 million last October for an office building in Yokohama, just south of Tokyo. Its head of Asia real estate, JD Lai, said the building would provide long-term stable income.

This winter, BlackRock purchased the 17-story Harumi Front office building in Tokyo, tapping a loan from Japan’s Mizuho Bank. According to the seller’s disclosure, the price was more than $250 million.

Investors across Asia are also joining the game. From Singapore, Keppel picked up a boutique office building in the Ginza neighbourhood last November, while SilkRoad acquired an office in central Tokyo as part of a six-asset portfolio buy in April.

Last year, Hong Kong private equity firm Gaw Capital helped Invesco complete a $3 billion effort to privatize the U.S. company’s office real estate investment trust in Japan, which owned 18 buildings.

“We renovated two of the assets and created common areas, and then we actually managed to raise rents quite a bit,” said Isabella Lo, a Gaw Capital managing director.

Satoru Aoyama, a senior director at Fitch Ratings in Japan, said Japanese banks have a strong lending appetite for office real-estate investments, even while U.S. financial institutions are having second thoughts.

Analysts said Japan likely isn’t a place to make large gains, given the country’s shrinking population and generally slow-growing economy. Some big players remain on the sidelines, unsure whether the work-from-home trend may come back to Japan after all.

“It’s not an exceptionally attractive market, but it’s a very solid market,” said Aoyama. In discussions with investors, he said, “we try to list concerns, but for each concern, we find a mitigant.”


Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual

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Tonino Lamborghini recently revealed a new luxury project comprising 241 units in Ras Al Khaimah, developed in partnership with Arista Developments.

Tue, May 21, 2024 2 min

Named the Tonino Lamborghini Residences, this project promises a fresh take on luxury living with its iconic design, cutting-edge amenities, and stunning sea views.

Set on Al Marjan Island, the development is adding 241 high-end units to the area’s real estate offerings, all reflecting the sleek, Italian elegance associated with the Lamborghini name.

These residences are designed to impress, featuring modern architecture that harmonizes with the scenic surroundings and interiors marked by meticulous craftsmanship and top-quality finishes.

Living in this one of the project’s units means access to a range of upscale amenities: a state-of-the-art fitness center, multiple swimming pools, beautifully landscaped gardens, and dedicated areas for children’s play. The complex also offers a business center with a conference room, an outdoor BBQ area, and a chic café, catering to all aspects of high-end living.

Arch. Abdulla Al Abdouli, Chief Executive Officer, Marjan, expressed excitement about the introduction of Tonino Lamborghini Residences to Al Marjan Island, noting the project’s blend of sustainable construction and smart home technologies. This integration, he mentioned, guarantees a luxurious lifestyle equipped with the finest modern amenities, reflecting the exquisite Italian craftsmanship. He is confident that this new venture with Arista Developments will significantly boost the allure of Al Marjan Island as a top lifestyle destination in Ras Al Khaimah for both investors and residents.

Tonino Lamborghini, President of the Tonino Lamborghini brand, said: “We are delighted to be among the pioneers in this remarkable new destination in one of the seven emirates of the UAE. Our heartfelt gratitude and recognition go to H.H. Sheikh Saud bin Saqr Al Qasimi, Supreme Council Member and Ruler of Ras Al Khaimah, for his visionary leadership and foresight, and for embracing innovative strategies to revitalize a region full of potential.”

Mr. Arthur Chu, Chairman of Arista Developments, highlighted the project’s ambition to capture the essence of the Tonino Lamborghini brand in every aspect of its design. He described the development of a prestigious residential tower on Al Marjan Island that will reflect the lifestyle and beauty synonymous with Lamborghini. From the sharp, well-defined lines of the exterior to the elegantly designed interior common areas, every detail is crafted to showcase the brand’s distinctive elegance and sophistication. Chu emphasized that the interior designs, personally crafted by Tonino Lamborghini, aim to fully immerse residents in the Italian brand’s luxurious identity.

The variety in housing options is vast, ranging from one and two-bedroom apartments to duplexes, sea view villas, signature villas, and exclusive penthouses.

The collaboration between Tonino Lamborghini and Arista Developments blends iconic Italian style with expert real estate craftsmanship. This venture marks Lamborghini’s first introduction to Ras Al Khaimah and represents a commitment to setting new standards in luxury and modern living.



Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual

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