Hiatus
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Japan Real Estate Blog
Tags : japan, real estate, property, investment, 不動産
A unique compilation of news, opinions, and analysis on real estate investment trends in Japan, brought to you daily by an industry insider in Tokyo.
Is investing in a mutual fund or hedge fund similar to gambling?
An interesting article in the Nikkei last Friday pointed out a sobering fact: only half of the J-REITs which came to market in fiscal 2005 have opened at above their IPO listing price. REITs listed by much-watched Japanese fund management companies like Creed Corp. , Asset Managers Co. and daVinci Advisors KK, are among the losers.
According to the Nikkei, J-REITs, private domestic funds, and foreign funds each currently have around 3 trillion yen of real estate assets under management. Because of the fierce competition for good buildings, expected yields for prime Tokyo office have declined from 6.3% in 1999 to 4.4% now, and the best assets can command less than 3.5%. At the same time, average leverage has gone up, from around 60% last year to more than 70% now. The search for yields has forced fund managers to diversify their strategies, making huge inroads into more risky plays such as regional retail, leisure/hospitality, and redevelopment. J-REITs are feeling the heat, too: many are also dabbling in development and some have been prompted to sell off less profitable buildings.
The global savings glut is the key factor in the rise of the global financial economy… he abundance of savings globally has made it more and more difficult to achieve high returns from physical investments. It has made financial speculation an attractive alternative for achieving returns. The rising demand for risk assets has made these assets less volatile, which increases their value ... if demand for risk assets is permanently higher, their value should be higher. It is still too early to say whether this higher risk appetite is a cyclical or permanent phenomenon.
The price of the growth is a declining risk premium…As long as the world keeps lowering the risk premium, financial markets can sustain growth by moving money across the world effortlessly, and I believe it would take a shock to trigger the risk reduction trade that could spell the end of the current cycle.
Thirteen condos are to be demolished, and four hotels have stopped operations following revelations of falsified structural reports (see previous post). Meanwhile, Kimura Construction, the builder of many of the projects in question, has gone into bankruptcy. The Japan Times writes:
The builder emphasized lower costs and faster construction to win condo and hotel construction bids in the Tokyo area and posted 12.7 billion yen in sales for the year that ended in June.
... Kimura denied that his firm had ever pressured Aneha, but added that he had nothing but anger toward the architect's office.
Concerning the entry of private companies into the inspection service business, a senior Construction and Transport Ministry official said: "We had hoped that companies that conduct accurate and speedy inspections would be highly evaluated as a result of competition among private companies. But in reality, it was found that agencies that conducted strict inspections were avoided, and those that quickly passed plans were more popular, making big profits. The system didn't work properly."
Last week, it was discovered that an architect had falsified structural analyses for 20 condominiums and a hotel in the Tokyo area – 13 of which have already been completed. At least four of the buildings might collapse in an earthquake with an intensity of upper 5 on the Japanese scale of seven.
In September, Gap opened the first Banana Republic stores in Japan. The four stores are located in Ginza, Roppongi Hills, Nihonbashi and Yokohama. The Ginza outlet is situated in the Printemps Ginza department store and occupies approximately 650 sqm on the street and basement levels, bringing to mind the inauguration in 1994 of the first Gap store on the ground and basement levels of the nearby Sukiyabashi Hankyu. The new store's prices are considerably more expensive than in the United States: approximately 62,000 yen for a dress, more than 30,000 yen for a ladies' jacket and 30,000 yen for a cashmere sweater.I wonder how successful they will be when a lot of Japanese go to Hawaii to pick up Bana-Ripa clothes at US prices? Of course, the quality and size selection is better in their Japan stores, and they do get points for not going head-to-head with Zara - which in my opinion is a much stronger retailer.
Since Barneys New York, affiliated with Isetan, launched a new store last October in Ginza, it has been a runaway success. According to industry sources, it rang up 2.8 billion yen in sales from its 2.900 sqm space in its first five months of operation, 23% more than forecasts. Isetan had counted on a turnover of 5 billion yen for the first year but it has since raised the target to 6 billion.That's almost 200,000 yen per sqm per month in sales, folks! You can probably infer from that how much rent these high-end stores can pay in Ginza. The article goes on to say, however, that the other two Barneys in Shinjuku and Yokohama recorded year-on-year sales declines of 10.5% and 3.8% respectively.
The Fair Trade Commission wagged its finger at real estate firms who give misleading names to their apartment developments. At first I thought there had been complaints from irate buyers who bought a "Mansion" only to find out that it actually an "Apartment", a "Heights", or even a "Co-op" (see below for definitions).
It turns out they wanted to crack down on those naughty developers who call their newest block of rabbit hutches "Grande Maison Ginza" when the property is actually 20 minutes' walk from there, in like, Hakozaki or something. There has been a lot of this going on. So from January, you can only call it "Residence Yoyogi-koen No. 7" if it's within 300 meters of the actual park. You know, while they're at it I wish they'd do something about the "seven minute walk from XXX station" crap ! Seven minutes, my pony.Note: In the past many property names would follow the pattern of [Owner Name + Type] such as "Yamada Manshon", or "Ichiki Haitsu". Nowadays the trend is towards an [Image/Brand Name + Location] approach like "Dynacity Takanawadai", "Core Road Senri" and "Kyodo Residence", or to dispense with the location altogether, like "Casa May Hills".
Full Story : Nikkei, FTC Fair Trade Directive (PDF)
Seibu Railways today announced its reorganization under a new holding company to be formed in March. Yesterday, it rejected a rival takeover bid launched by two brothers of the disgraced founding-family scion Yoshiaki Tsutsumi. As expected, the current management picked Cerberus and Nikko Principal Investments (see my previous post) to be the biggest shareholders in the new entity, Seibu Holdings.
The Japan Times recently had an absorbing interview (full text here, archived here) with Alex Kerr, author of the insightful and sometimes shocking Dogs and Demons :
Things are getting good again economically a little too soon. What that does is lull everyone back into a feeling that everything is going to be OK: "Let's talk about reform, but we don't really have to take the pain of it."Japan Real Estate Blog
A few excellent articles on Japan’s recovery :
The retirement of baby boomers in large numbers, due to take place in 2008 and 2009, will cause a shortage of skilled labor; however, this will prod manufacturers into accelerating factory automation investments through 2007.Japan Real Estate Blog
From 2008 onward, consumer spending will pick up steam again, because the children of the baby boomers will enter their 40s and become able to spend more money on culture and leisure. As the ratio of unmarried people in their 40s will be higher than now, their consumption on activities such as trips, sports and cultural involvement, which they often enjoy with their friends, will increase. The ratio of working women will grow to about 72%, a figure on par with the U.S. level, and will continue to stimulate consumption.
Therefore, the nation's overall consumption expenditure seems likely to continue growing at an annual rate of over 3% through 2013.
The Daily Yomiuri reports (archive here) that Yoyogi Park may be paved over to make way for a new stadium and other sports facilities. The development is part of Tokyo’s bid for the 2016 Olympics, which Gov. Ishihara announced last month - see this post.
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Japan Real Estate Blog
Tags : japan, real estate, property, investment, 不動産
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