Singapore's GIC puts $1.7bn into Tokyo commercial real estate

GIC, Singapore's sovereign wealth fund, has paid $1.7bn for a landmark office block in one of the most desirable locations of Tokyo, highlighting foreign interest in the potential of commercial property in the Japanese capital.

The purchase by GIC from Secured Capital, a private equity fund, is of the office component of Pacific Century Place Marunouchi, a 32-storey tower that includes the Four Seasons hotel, next to Tokyo's main railway station.

Total rentable office space is 38,840 square metres, the Singapore fund said.

Japan's property market has been recovering on the back of prime minister Shinzo Abe's policies to revive the economy. Companies are also expanding their office space as the weaker yen buoys earnings.

Although still relatively moderate, office rents in central Tokyo have risen for nine consecutive months. The office vacancy rate also fell to 5 per cent in September for the first time in nearly six years, according to real estate broker Miki Shoji.

Hiroshi Okubo, head of research for Japan at CBRE, said the pricing of the GIC deal reflected the potential for a further rise in office rents.

"Overseas investments into the Japanese property market are rising and they will continue to increase," Mr Okubo said.

With competition in the Tokyo area intense, investors are looking at major locations outside of the capital as well as different asset classes including retail and residential properties, he added.

Lee Kok Sun, co-head of Asia at GIC Real Estate, the Singapore wealth fund's property arm, said the investment demonstrated "our confidence in Japan and specifically, the Tokyo office market over the long run".

GIC, which managed a portfolio valued at more than S$100bn ($79bn) as of March 31, already has significant property exposure to Japan.

Its most recent project - which involved a bigger investment than the Pacific Century acquisition - was Shiodome City Centre, a 42-storey office block near the Ginza district that GIC built in a joint venture with other partners in 2003.

The Singapore fund also owns the Westin Tokyo hotel near Roppongi, which it bought in 2008.

The previous year GIC formed a joint venture with Sumitomo Corp to invest $1.3bn in what they said would be "large-scale retail properties" across Japan over the next two years.

This was billed by the pair as "one of the largest private retail property investment platforms in Japan" and targeted the metropolitan areas of Tokyo, Osaka, Nagoya and other major cities.

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