Mitsubishi Estate Co., Japan's largest developer by value, may buy property managers to more than double assets under management to ¥4 trillion ($40 billion) within six years as Tokyo commercial rents slow.

Mitsubishi Estate, the main landlord in Tokyo's priciest business district, is in talks to buy or form an alliance with a number of fund management companies, Chief Executive Officer Keiji Kimura said in an interview in Tokyo.

"We are looking into M&A opportunities in the U.S., Europe and Asia including Japan," Kimura said March 12, without giving details. "It would be great to create a global network by buying property investment companies."

Mitsubishi Estate, whose leasing business generates 60 percent of its profit, is looking to diversify its revenue after redeveloping six buildings in the Marunouchi business district in Tokyo. Office rent growth is set to slow across Japan this year as the economy falters and the U.S. subprime collapse saps confidence, Kimura said a week ago.

The company Friday completed its ¥13.7 billion acquisition of 60 percent of Sunshine City, which operates a Tokyo skyscraper.

Mitsubishi Estate aims to increase operating profit from overseas business to 20 percent of such earnings in five years, from 13 percent for the year ended last March.

The company plans to expand its property portfolio in Europe and the U.S. as owners, including New York developer Harry Macklowe, sell buildings to repay debt after lenders limited the availability of credit in the wake of rising delinquencies in the subprime mortgage market.

"There are companies that may be forced to sell their properties after the collapse of the subprime market," Kimura said. "It is a buying opportunity."

Mitsubishi Estate plans to increase office rents on average by 15 percent in the next three years, Kimura said.

"Rents may not increase as radically as we have seen in the past," Kimura said. "I see rents increasing gradually due to a tight supply of office buildings."

Office rental growth in Tokyo may slip below 10 percent in 2008 for the first time in four years as Japan's economy slows, cutting corporate spending, real estate brokers, including Jones Lang LaSalle Inc. and CB Richard Ellis Group Inc., said last month.

Japanese developers also face declining growth in residential property.

Mitsui Fudosan Co., Japan's biggest property developer by sales, said this month the housing market will remain "tough" because of the high cost of construction materials and stricter building codes that have delayed projects.

Condominium sales may fall for a third year in 2008 after new rules slowed approvals for projects at a time when the cost of raw materials such as steel and oil is at a record high.

Mitsubishi Estate plans to cut costs at its condominium business by pooling with subsidiary Towa Real Estate Development Co. to buy materials and by focusing on developing residences close to transport and shopping hubs, Kimura said.

Mitsubishi Estate last month forecast the profit margin for its condo business will decline after land and construction costs rose. The margin will drop to as little as 18 percent for the year to March 2011, from 25 percent now, the company said last month.

"One of the benefits of merging our condo business with Towa is we can reduce costs for materials used in kitchens and bathrooms significantly since we order together in volume," Kimura said. "While cutting costs, we also need to provide value-added properties, such as condos that are close to stations or shopping centers."

Condominiums put up for sale in Tokyo and the surrounding area dropped for a sixth month in February, declining 28 percent from a year earlier, the Real Estate Economic Research Institute said on March 13.

"There are still many people who want to buy condos despite the increase in condo prices," Kimura said.