Mori says Tokyo real estate is best bet

Bloomberg

Billionaire Akira Mori said developing energy-saving buildings in central Tokyo is the best way to benefit from Prime Minister Shinzo Abe’s policies, such as boosting the capital’s competitiveness.

Mori Trust Co. may seek to acquire more land after it accumulated about 10,000 tsubo, or 33,000 sq. meters, of space in the area, depending on how well Abe’s growth plan is implemented, said Mori, who owns the nation’s most profitable and closely held developer.

Property prices in central Tokyo will probably increase as demand remains strong for buildings that are energy efficient and have strong disaster-prevention systems, Mori said.

Mori, 76, revealed plans in November to invest in Tokyo property for the first time since he declared the end of the real estate boom in 2008. The population of the capital, where 1 in 10 Japanese live, is growing as unprecedented monetary easing by the Bank of Japan and increased government spending under “Abenomics” bolster consumer confidence.

“With Japan’s aging population, we will find more demand returning to central Tokyo,” Mori said in an interview in Tokyo on Monday. “Whether ‘Abenomics’ will succeed will depend on the growth strategy. If Abe’s growth strategy is going well, we may consider buying more.”

Mori Trust manages 89 buildings in Japan, including the Tokyo Shiodome Building in a commercial district near Tokyo Bay, and was operating about 30 hotels as of March 31.

The developer turned a ¥19.2 billion profit for the year through March 31, with more than ¥14.4 billion of its net income generated by Mori Building Co., run by Mori’s older brother, Minoru, who died last year.

Abe has promised to loosen business regulations and increase government support as part of the “third arrow” of his three-pronged strategy to end deflation, following fiscal and monetary stimulus.

His plan includes creating incentives to attract foreign investments and boosting the competitiveness of major cities, according to the website of the prime minister’s office. The government said it may also consider relaxing development rules for floor ratio in certain zones to match the needs for office buildings and residential space in metropolitan areas.

“Tokyo’s attraction as an international city is very high,” said Mori.

The Topix Real Estate Index, which tracks 43 property companies, has posted a 41 percent return in the past six months.

The economy grew at an annualized 4.1 percent in the January-March quarter, the fastest expansion in a year, a government report showed June 10. The report came two months after the BOJ unveiled a plan to target a 2 percent inflation rate in two years.

“The inflation target will naturally benefit real estate,” said Mori. “As the economy improves, Tokyo, with clean water and air, will gradually stand out as an attractive place to invest, luring foreign capital.”