Tokyo tops the list of millionaires, with 461,000; it’s second in multi-millionaires, with 3,525; and No. 14 in billionaires, with 12.YOSHIKAZU TSUNO/AFP / Getty Images
The Canada Pension Plan Investment Board believes that this is the point in Japan's real estate cycle when the getting is good.
CPPIB has created a co-investment program with GE Capital Real Estate through which the team will start putting money into mid-size office buildings in Tokyo. The partnership comes just months after CPPIB announced that it and Global Logistic Properties had decided to more than double the equity they were committing to their venture, which develops industrial properties in Japan. That venture, created less than two years ago, was CPPIB's first foray into Japanese real estate.
"We've been looking at the Japanese market for quite some time," says CPPIB head of real estate investments Graeme Eadie. "Even before the change in government, we felt the office market had bottomed out and was starting to recover."
And, with aging buildings, there is now an opportunity to upgrade many offices – including changes to ensure that they've got the most current earthquake proofing – that will allow landlords to charge higher rents, he said. "Our view is that the rental rates have actually bottomed."
Japan, like London, has a small number of mega-towers but most of the office space is housed in smaller structures in and around the core, he noted. It's the smaller buildings that CPPIB is zeroing in on.
"One of the key things in the Japanese market is acceptance by the locals and that takes time, that's why the local partner is so important," Mr. Eadie says. GE has been active in this space since the late 1990s.
CPPIB and GE Capital will initially invest up to $403-million (U.S.) in the new venture, with 49 per cent of that coming from CPPIB.
CPPIB will manage its part of the co-investment program from its Hong Kong office, but its people are spending more and more time in Japan and are weighing some debt products.
(Tara Perkins is a Globe and Mail Real Estate Reporter.)
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