Investment Insights - Tokyo PM Real Estate Unveiled

FUKUOKA, Japan (Reuters) - Offshore investors and Japanese real estate investment trusts are stepping up investments in properties outside Tokyo. The move is driven by a rebound in Japan’s office market.

Tokyu Group, L Catterton Real Estate (“LCRE”) and Tokyu Department Store unveil plans for a landmark mixed-use project in the heart of Shibuya. The project will include high quality retail, a boutique luxury hotel and rental residences.
1. The Rise of Off-Market Deals

The world’s ultra-wealthy see Japan as their next real estate playground. New luxury developments are popping up in the capital, and buyers—both foreign and domestic—are snapping them up. The price gap is striking. In Tokyo, a million dollars will buy you more than twice as much space as in New York or Hong Kong, according to Knight Frank data.

Amid rising prices and sluggish growth, the Japanese government is doubling down on measures to boost domestic demand. Ahead of a key election in October, Prime Minister Fumio Kishida has set out a blueprint for an economic package that includes policies to protect households from cost-push inflation and back sustainable wage growth.

The plan will also encourage investment by cutting corporate taxes and introducing new tax breaks for firms that invest in strategically important sectors such as semiconductors, the government said. The move is aimed at mitigating the effects of rising inflation on household incomes and spurring private-sector investment, Kishida told cabinet ministers.

Kishida’s plan is designed to help offset sluggish domestic consumer spending and revive investment by businesses, which are grappling with parts shortages amid the COVID-19 pandemic and increasing competition from competitors in China. It calls for steps to promote local production and reduce reliance on overseas suppliers.

At the same time, the plan aims to bolster employment and boost birthrates in a bid to stem an ongoing decline in the nation’s population, which has implications for the economy and national security as Japan tries to maintain its global military presence. The government plans to offer new subsidies for child rearing and education and increase pay for younger workers in an effort to incentivize them to marry and have children. 江東区 不動産売却

The plan also seeks to boost exports by promoting industrial innovation and offering tax breaks for companies that expand operations abroad. It would allow the government to use its sovereign wealth fund to help export-oriented firms. The fund has already invested in companies such as semiconductor manufacturer Intel and automotive supplier Toyota.
2. High-End Luxury Apartments

The world's wealthiest people are relocating to Tokyo, and the city's ultra-luxury apartment market is booming. It is one of the few areas in Asia where a home in the top tiers can rival the price of a mansion in the most expensive neighborhoods of New York or Hong Kong. The city has around 7,000 residents with net worth of $30 million or more, and the demand for high-end real estate is growing.

Luxury apartments in the heart of the city are selling for record prices, and developers are launching a number of projects that will set new standards. The luxury residential market is particularly active in Minato, a central ward that includes some of Tokyo's most upscale neighborhoods, such as Akasaka, Roppongi, Shiba and Omotesando. The area is home to many of Tokyo's Embassies, international schools and high-end shopping and entertainment venues.

Historically, the affluent areas of Minato were low-rise housing communities, but post-bubble Tokyo saw state policy shifts aimed at encouraging high-rise construction for maximum profits. The yakuza, or organized crime groups, played a key role in the change, as they forced elderly residents to sell their homes for redevelopment.

The result is that central Tokyo now has a strong supply of luxury apartments, with demand from overseas investors increasing in the wake of the pandemic and the favorable dollar-to-yen exchange rate. One developer, Mori Building, is constructing a skyscraper with 91 Aman hotel residences that will be the highest-priced condominium tower in Japan.

Another project aims to redefine Tokyo's concept of luxury with the 1.26-million-square-meter Shibuya Upper West Project. Located at the intersection of the affluent neighborhoods of Shoto and Yoyogi, the cultural districts of Kamiyamacho and Tomigaya, and the bustling Shibuya district, this project will include retail, a small luxury hotel, and rental residences.

The project will be completed in 2023, but it already has attracted a number of overseas buyers, including a Chinese family that paid Y=10bn ($88m) for the most expensive apartment in the complex. Other luxury developments in the city are also attracting high-end buyers, including the Marq Omotesando One by BPE Asia and a Y=1bn condo in the former headquarters of Toyota.
3. New Developments with Spectacular Views

Spectacular villas and condominiums are on the rise in Tokyo, many of which offer breathtaking views. These luxury properties have become a popular investment choice for overseas investors who are seeking an attractive way to gain exposure to the Japanese economy and lifestyle.

Located in the affluent residential neighborhood of Shoto, west of central Tokyo, this new development will feature high quality retail and rental residences. The project is a collaboration between Tokyu Corporation, the main conglomerate of the Tokyu Group and L Catterton Real Estate, the real estate investment and management arm of global consumer-focused private equity firm L Catterton.

The new development will be located at the intersection of the affluent residential neighborhoods of Shoto and Yoyogi, cultural areas of Kamiyamacho and Tomigaya, and vibrant Shibuya district. The development will offer a mix of luxury retail and small boutique hotel with high quality apartment rentals, providing an urban retreat for those who want to live in one of the most exciting and livable cities in the world.

Construction of the 63-story skyscraper, called Tokyo Torch, will begin in 2022. Designed by Pelli Clarke Pelli Architects, the tower will surpass all other existing buildings in Japan and will be the country’s tallest skyscraper upon completion.

The tower will be constructed on the largest city block that faces Tokyo Station, the busiest rail hub in the capital, and is intended to serve as a symbol of modern Tokyo. Its location will be a focal point for the future of the capital, which is planning a massive shift from its postwar identity as an industrial metropolis to a global city.

In the midst of the fourth maelstrom of rebuilding that has wreaked havoc on the city over the last few decades, the new high-rises and tony shopping complexes have rendered parts of the formerly distinctive cityscape look like any other city in the world. The intimate exchanges of neighbors that used to take place in these neighborhoods, and the coziness they exuded, have been lost to the impersonal marketplace.
4. High-End Office Space

The Tokyo office market may be in the early stages of a recovery, but developers are looking to make their buildings stand out. A new tower at Azabudai Hills, for example, will be slightly shorter than Tokyo’s famous Nikkei stock indicator building and will include apartments and retail spaces.

This tower is the latest in a series of high-profile projects by Mori Building, which has reshaped the city skyline over the past two decades with multiple tall buildings and complexes that mix offices with retail and cultural attractions. While Mori’s CEO admitted that the COVID-19 pandemic had changed work patterns, he said demand would remain strong for office space that offers amenities such as fitness and wellness facilities.

In a nod to a long tradition of luxury British brands in Japan, the design of No. 001 Minami Aoyama, an ultra-luxurious private home being built in collaboration with luxury automaker Aston Martin, will be led by the creative genius of British designer Jonathan Quinn. The design of this property is influenced by the brand’s iconic sports cars and aims to create an environment that will foster creativity and productivity, according to developer Raimon Land.

As the UK and Japan continue to strengthen their commercial relationship, leading Japanese businesses are investing in British companies and projects across a range of sectors. These include Nissan’s plan to build affordable housing and a life-science laboratory in London, Mitsubishi Estate’s investment in a UK offshore wind project, and Sumitomo’s commitment to expand its existing UK portfolio of offshore wind investments.