American International Group has reportedly amassed a portfolio of investments in Japanese commercial real estate, which market experts value at between $2.5 and $3.5 billion.
A report from London’s Financial Times indicates that AIG is betting heavily that the severely depressed Japanese property market is poised for a recovery. “Prices have dropped between 60 and 80 per cent since the economic bubble collapsed” in the late 80′ and early 90’s, said the FT, which has created “significant opportunities” for international investors.
Nor is AIG alone in the hunt for bargains. Investment banks Goldman Sachs and Morgan Stanley have also reportedly invested heavily, acquiring property interests valued at $10 billion and $5 billion respectively. The report also noted that new projects, completed last year, addied 1.4 million square meters (app.14 million square feet) of new commercial space. 15 new projects are scheduled to open this year, which will up the total to 2.67 million square meters (app. 26.7 million square feet).
Another indication of renewed interest in the Japanese property sector, according to the report, is the growth seen in real estate investment trusts (REIT’s), the primary vehicle used by AIG and others to securitize investments in real property. The FT noted that there are currently 6 REIT’s trading on the Tokyo Stock Exchange and the number is expected to rise to 16 in the near future.
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