As the next step towards revitalizing the Japanese economy, Japan’s Prime Minister Shinzo Abe has embarked on a slew of corporate sector reforms that could lead to some real estate assets being put up for sale in the market.
The corporate governance reforms are targeting to improve profit margins and long-term competitiveness of Japanese corporations. As the companies are pressured to improve capital efficiency, offloading some real estate properties could be a way forward.
“Some large Japanese corporates with offices in different locations are selling assets and consolidating operations into one headquarter building,” said Toshiro Sato, regional director, head of occupier services for JLL. “They are reducing the number of offices they own to make sure invested capital is utilized efficiently.”
He further added that the reforms could also prompt life insurance companies to sell some of their wholly-owned properties and move to rented spaces.
“Earlier, companies were forced to sell real estate in the bad times and that created opportunities. Now as they start to focus on ROEs [returns on equity] and offload their real estate, that would provide a long needed supply for the institutional market,” Hidetoshi Ono, managing director for Manulife Life Insurance’s Japan real estate department, said in a panel on Abenomics at the Japan conference held in September in Tokyo.
Sato, however, disagrees: “I don’t see a lot of vacant space or new supply coming out of Abenomics. The real estate that will be divested by corporations will not greatly impact vacancy levels or occupancy rates.”
Many Japanese corporations are understood to be preparing for their annual corporate meetings to be held by March next year, and announcements made during these meetings are expected to provide greater clarity on potential property divestments.