Grosvenor Ltd., the real estate firm owned by the family trust of the Duke of Westminster, plans to spend as much as 50 billion yen ($490 million) to buy and refurbish in apartments in Tokyo as demand for existing luxury homes increases.
Grosvenor will buy residential buildings, renovate and sell the units because it sees more demand from Asian and domestic high-net-worth individuals for top-end, refurbished apartments, said Koshiro Hiroi, managing director at Grosvenor. The sales volume of new apartments in Tokyo that cost more than 100 million yen surged as much as 20 percent last year, while sales of existing apartments rose 5 percent, said Hiroi, citing the company’s research.
Grosvenor is betting on changing tastes among Japanese homebuyers. The number of people who prefer to buy and live in newly built apartments has remained above 96 percent over the last decade, according to a report by Recruit Sumai Co., a Tokyo-based housing information provider. About 44 percent of homebuyers surveyed said they prefer existing units, an increase from 33 percent in 2003, the report showed.
“It used to be that new houses would cost more,” said Hiroi in an interview on May 12. “However, Japan’s housing market has matured. Like Europe or the U.S., the value of good quality housing should be sustainable after renovation.”
Transactions of previously owned homes account for 14 percent of the total in Japan, according to Japan’s land ministry. That compares with 90 percent in the U.S., 86 percent in the U.K. and 64 percent in France, it said.
The market for renovated residential apartments in Japan is estimated to be about 6.5 trillion yen and accounts for 28 percent of total residential investment, according to the land ministry. The ratio of investment in refurbished apartments in the country compares to 57 percent in the U.K. and 77 percent in Germany, the same report showed.
Grosvenor entered Japan’s market in 2001 and opened its Tokyo office the following year. One of Grosvenor’s first projects was an apartment building nearby Yoyogi Park in central Tokyo. The company in 2008 turned the property into a 45-unit luxury residential complex that it rents out.
The highest monthly rent at Grosvenor Place Kamizonocho is about 3 million yen, or as much as 28,000 yen per tsubo, which is among the most expensive residential rent in Japan, he said. A tsubo, a standard measure of property area in Japan, is 3.3 square meters or 35.5 square feet.
Grosvenor invests in luxury residential sector by buying existing apartment buildings and sell or rent them out after refurbishment depending on market condition, Hiroi said. The company also buys land and develop projects on its own.
Since 2011, Grosvenor has acquired more than 40 billion yen of residential buildings in Tokyo, Hiroi said.
Grosvenor is turning a 14-story building, built in 2003, in Roppongi into luxury units that cost as much as 500 million yen. Grosvenor sold 20 of the 99 units last year and plans to release 20 more this year, including a penthouse which may cost even more, Hiroi said, without giving details.
Turning units into luxury apartments offers a return of about 10 percent to 15 percent, he said.
Grosvenor has invested more than $2 billion in residential, office and commercial buildings. About 70 percent is in residential.
The Duke of Westminster, whose name is Gerald Grosvenor, is the world’s 79th-richest man with a net worth of $13.7 billion, according to the Bloomberg Billionaires Index.
The Grosvenor family’s ancestral London land holdings are in Mayfair and Belgravia, districts that are consistently among the world’s most expensive for leasing an office or buying a home.
(An earlier version of this story was corrected to reflect the rent cited for Kamizonocho is the highest, not average.)