Giant investment funds are poised to start buying Japanese property in the first half of next year when prices are expected to be at rock bottom, it is claimed.
Global investors including Carlyle Group, Blackstone Group and Lone Star Funds are still waiting for prices to drop a bit further, according to Ben Duncan, managing director of CB Richard Ellis Japan.
‘The market is steering toward big, opportunistic funds. They’re waiting for prices to fall further. At the moment they are not seeing as much distress as they hope for. But as the market starts to bottom out they’ll probably start to buy,’ he explained.
Commercial land prices in Japan fell 4.7% to a three-year low in 2008, with the decline increasing to 5.4% in the three largest metropolitan areas of Tokyo, Osaka and Nagoya, official government figures show. Office vacancies in Tokyo’s main business districts increased for the 17 month in a row in June to 7.25%.
Blackstone has already said publicly that is plans to invest in Japanese property companies that need financing.
One factor that is hampering a move forward is that Japan’s banks have been lenient in allowing companies to refinance borrowing rather than forcing them to liquidate assets, Duncan said.
‘That’s held back recovery in that the market hasn’t corrected. If there had been more pressure we’d see more transactions and investment from all sectors,’ he added.
Firms like Barclays Capital are indicating a turnaround is not far off. ‘Pessimism has been retreating recently with the re-emergence of office contract and condominium sales transactions,’ it said in a statement.
Other factors are being taken into account. Tokyo, for example, recently overtook Shanghai as Asia’s most attractive city for real estate investment, according to the Urban Land Institute and PricewaterhouseCoopers LLP.
‘What we’ve seen in the last three quarters is a lot of upgrading. Companies in good shape are taking advantage of the market to move into more attractive quarters at no increase in cost,’ Duncan said.
