Japanese tech giants sell offices to balance books

A host of major international corporations in Japan are choosing to sell their office space assets in order to maintain their balance sheets, a report from real estate services company CBRE has found.

The sales are predominantly aspects of various streamlining initiatives within Japan’s larger blue-chip corporations, with tech giants Sony and Panasonic leading the way in transferring expensive assets back onto the property market.

The sudden windfall of vacant office space has initiated a tangible resurgence in market performance across the region, as a slew of businesses move to take advantage of anomalously low rental agreements.

Such a change marks the first time in nearly five years that Tokyo’s commercial property market has returned to growth, with buyers – including significant numbers of real estate agencies - eager to be first in line for the benefits on offer.

Andy Hurfurt, executive director at the Japanese unit of CBRE Group Inc., said: “Market sentiment is more positive now than at any time since the Lehman crisis", "This reflects a widely held view that the market has bottomed and will move to an upside cycle."

Takeshi Akagi , head of research at Jones Lang LaSalle Japan, expresses a similar view, saying: “As a sign of market improvement, property prices typically go up before rent increases because investors try to buy real estate assets in anticipation of higher rents," said Takeshi Akagi, head of research at Jones Lang LaSalle Japan.”

On Thursday, Sony Corp confirmed the sale of its epic 25-storey office block – dubbed Sony City – in the Osaki building, Tokyo. The sale generated a reported ¥111bn ($1.12 billion), in what has become the most extensive property deal on the Japanese market in four years.

The company behind the newly released Playstation 4 have moved all non-key staff and assets away from Japan, towards their New York headquarters. Once a market leader in electronics, Sony has witnessed a dramatic downturn in fortunes, having been challenged on multiple fronts by companies such as Apple, Samsung and Microsoft.

Rival corporation Panasonic is currently in the process of selling its headquarters in Tokyo’s central business district, promising investors a windfall of ¥130bn should the sale succeed in meeting the guide price. Similarly, electronics manufacturer Sharp Corp has sold a nine-storey office block in a prime Japanese location, and is already on the lookout for opportunities to offload further assets.

At their peak over 20 years ago in 1991, office rental prices in Japan rose to a record ¥44,193 per tsubo (a traditional measure equating to the size of two tatami mats, or 3.3 sq m). The property bubble was to burst just months later, and - following steady declines throughout the financial crisis – the market bottomed out last year, with average rents measuring just ¥16,554.

Vacancy rates for top Tokyo offices fell for three consecutive quarters during 2012 according to CBRE. The increased uptake, added to the effect of government initiatives to tackle deflation introduced by new premier Shinzo Abe, have resulted in the Nikkei hitting a four year high this week.

According to Thompson Reuter, Japan’s public real estate trusts have raised in excess of $1.8bn worth of cash since the start of the year – the equivalent of 70% of the total for the entirety of 2012.