Union Investment had acquired J6 in Shibuya in 2014
As office rents in central Tokyo continue to climb, Germany’s Union Investment has sold a pair of commercial towers in the city’s central Shibuya ward after holding the assets for over nine years.
The Frankfurt-based fund manager in February announced its sale of Shibuya Prime Plaza, with multiple industry sources confirming to Mingtiandi that the tower near Shibuya station was sold to JR East Building, the real estate division of one of Japan’s high speed rail operators, for JPY 25 billion ($165.2 million), confirming a report last week by Nikkei Real Estate.
In the same statement, Union Investment said it has also sold J6 Front, an office and retail building near Harajuku station, with Toyota Fudosan, a real estate unit of the automotive giant having earlier disclosed its purchase of the asset. That 6,869 square metre (73,937 square feet) building changed hands for JPY 20 to 25 billion, according to a separate Nikkei report on Wednesday.
Union Investment attributed the sales to robust fundamentals driving Tokyo’s office market.
“The Japanese real estate market is very liquid and attractive, well-let properties continue to enjoy strong demand, especially from local investors,” said Adam Irányi, global head of investment management at Union Investment. “We have taken advantage of the ideal timing where the assets were mature and market conditions strong in order to optimise performance for our investors.”
Shibuya Sales
The deals come as rents for office space in Shibuya grew 6.9 percent in February compared to year-earlier levels, according to data from office brokerage Miki Shoji, with the commercial hub standing as the only ward in central Tokyo to see year-on-year growth.
As of February, office rents in the ward had climbed for seven months in a row and now stand at a 31-month peak, according to Miki Shoji.
Union Investment purchased Shibuya Prime Plaza for JPY 16 billion in 2008 on behalf of its open-ended real estate strategy UniImmo:Europa, with the fund exiting the 9,339 square metre asset at JPY 2.7 million per square metre.
Adam Irányi global head of investment management at Union Investment
Located within a nine-minute walk of two railway stations, the 2007-vintage property includes 13 above-ground floors along with a retail podium. Among the tenants are IT consultancy NTT Data and financial services firm Paygent.
J6 Front has four floors of retail below four storeys of office, with Union investment having acquired the property for €127 million (then $94 million) in 2014. At the reported compensation, the German fund manager received JPY 2.9 million per square metre for the property.
Shai Greenberg, senior director and co-lead international for Japan capital markets at JLL, highlighted that office assets in Shibuya have among the lowest vacancy among the Japanese capital’s commercial hubs, thanks to a shortage of space as tech companies expand their footprints in the ward.
“Shibuya sub-market finished 2023 as one of the strongest office markets in Tokyo with vacancy rate in the low 2 percent, well below the Tokyo market average mid 4 percent vacancy rate,”said Greenberg. “This is driven by limited supply and dominance of fast growing tech firms in the sub-market.”
Including the debut of major projects such as Dogenzaka Dori and Shibuya Sakura Stage, developers brought to market around 107,000 square metres of office space in Shibuya last year, after 2022 saw little to no deliveries, according to JLL.
Union investment, which was advised by local broker Touchstone Capital Management in its pair of Shibuya disposals, pointed to Japan’s active property sector and strong market fundamentals as enabling the disposal.
“Supported by positive office yields spread and the strength of domestic capital demand, capital values in Tokyo remain strong,” said Eric Cheah, head of investment management for Asia Pacific at Union Investment.
Japan’s real estate market recorded $36.9 billion in transactions of income-earning real estate assets last year, making it the second most liquid market in Asia Pacific, behind mainland China, according to data from MSCI Real Assets.
Office Sales
The pair of Shibuya sales are among a number of office divestments by Union Investment in recent months, with the asset manager in January selling the VisionCrest Commercial building in Singapore to TE Capital Partners and LaSalle Investment Management for S$450 million ($331 million).
Back in Europe, Union Investment sold an office building in Vienna to local real estate company Thalhof Immobilien GmbH in March with that deal coming one month after it sold an eight-storey office building in Stockholm to Swedish real assets manager Niam.
Union Investment had €424 billion in global assets under management as of March last year.
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