Mitsubishi Estate Forecasts First Profit Gain in Three Years

Mitsubishi Estate Co., Japan’s biggest developer by market value, expects to post an increase in full-year profit for the first time in three years as rents and apartment sales improve.

Profit will rise 28 percent to 58 billion yen ($585 million) this fiscal year ending March 2014, the Tokyo-based company said in a statement through the stock exchange today. That compares with the 71.8 billion yen mean estimate of 23 analysts surveyed by Bloomberg. Sales for the year will increase 15 percent to 1.07 trillion yen, said Mitsubishi Estate, the owner of about 30 buildings in Marunouchi, Japan’s most expensive business district.

“The office market is picking up,” said Jo Kato, Mitsubishi Estate director and executive vice president, at a news conference in Tokyo. “We expect some corporations to increase office space in the second half of the year.”

Japanese developers are recovering from record-high vacancy rates in Tokyo last year after the supply of office space surged 50 percent from a year earlier. Mitsubishi Estate’s vacancy rate, a measure of unoccupied space, for office buildings, retail facilities and warehouses fell to 3.98 percent in March, the lowest in a year, while rents on average rose for two straight quarters, the company said on its website.

Mitsubishi Estate had two straight years of profit declines after reporting a profit gain of 64.2 billion yen in the year ended March 2011.

Operating profit for the developer’s office building business will increase 8.7 percent to 117 billion yen this fiscal year, while it will surge 12-fold to 27 billion yen at the residential division from a year earlier, it said.

Vacancy Rates

For the year ended March 31, net income declined 20 percent to 45.5 billion yen from a year earlier, the company said today. Sales fell 8.5 percent to 927.2 billion yen.

Profit at the office sales and leasing business fell 26 percent last fiscal year because Mitsubishi Estate had a one-time-gain from the sale of Akasaka Park Building the previous year, which generated 60.8 billion yen of revenue.

Residential profit fell by about half to 2.3 billion yen in the year ended March 31 after the company sold 17 percent fewer apartments from a year earlier, according to the statement.

Tokyo’s office vacancy rate rose to a record high of 9.43 percent in June last year and fell to 8.56 percent in March, according to Tokyo-based Miki Shoji Co. Office supply in the capital will reach about 580,000 square meters (6.2 million square feet) this year, the lowest since 1999, according to a report by Mori Building Co., Japan’s biggest closely held developer. The supply will fall 67 percent this year after gaining 50 percent in 2012, it said.

The shares trimmed earlier gains after the earnings. The stock closed 0.5 percent higher at 3,190 yen in Tokyo after gaining as much as 2.7 percent.