#tokyo real estate
AXA Real Estate Sees Japan Commercial Property Prices Near Highs
AXA Real Estate. the world’s fifth-largest property fund, is growing concerned that Japanese property prices are nearing their highs.
“I can see the top of the mountain,” said Tetsuya Karasawa, head at AXA Real Estate Investment Managers Japan KK, speaking about commercial real estate prices. “The question is do we have some way to go or we are already at the top?”
A recent increase in commercial real estate values, because of the government’s efforts to end deflation and boost economic growth, has prompted AXA to consider selling some properties in a fund it established in 2012, Karasawa said in an interview in Tokyo. The fund is now fully invested, the company said.
The fund, a joint venture with the property unit of Sumitomo Mitsui Trust Holdings Inc. has acquired 20 billion yen ($170 million) of assets, mainly medium-size office buildings in Tokyo. It can hold the assets to 2019, though it may take advantage of recent price increases to sell some of the properties earlier, he said.
“If you sell now, you can sell at a good price,” Karasawa said.
The capitalization rate, a measure of investment yield, for office buildings in Tokyo fell to the lowest level since August 2009 in November, according to New York-based Real Capital Analytics Inc. The yield declined to 4.75 percent in November from around 5.3 percent two years earlier. When the yield declines, values rise.
Tokyo’s property market has been recovering since Prime Minister Shinzo Abe introduced his policy to revive the economy and end deflation two years ago, and may extend gains.
Prices of prime office buildings in Tokyo advanced more than 20 percent in 2014 and are set to increase at least 10 percent in 2015, helped by rising rents and low borrowing costs, said Takeshi Akagi, Jones Lang LaSalle Inc.’s head of research in Tokyo. The vacancy rate for office space in Tokyo has improved to the level in 2009, according to Miki Shoji Co. a closely held office brokerage company in Tokyo.
“The market is very, very competitive in terms of acquisitions,” Karasawa said. “What we don’t want to do is to launch a new fund, but can’t invest. We try to analyze our strategy very carefully; what is workable in this market or is it better to wait for a while?”
AXA’s caution about further investment in Japanese real estate prompted the recent departure of Hidetoshi Ono, the former head of the Japan Core Fund at AXA Real Estate Investment Managers in Singapore. Ono, who has returned to Japan, said he left the company at the end of December to “seek more challenging opportunities outside of AXA.”
AXA Real Estate is the world’s fifth-largest property fund manager with $65.7 billion of assets under management, according to a 2014 fund manager survey by Anrev and Inrev, associations for real estate investors.
It is part of AXA Investment Managers, a subsidiary of the French insurance and financial services company AXA SA. AXA Real Estate also manages a couple of debt funds, which lend to real estate buyers, and invests in Japanese real estate on behalf of AXA’s insurance division and other investors.