Billionaire Mori Says Tokyo Real Estate Best Abenomics Bet

Japanese billionaire Akira Mori said developing energy-saving buildings in central Tokyo is the best way to benefit from Prime Minister Shinzo Abe’s policies such as boosting the city’s competitiveness.

Mori Trust Co. may seek to acquire more land after it accumulated about 10,000 tsubo (33,000 square meters or 355,210 square feet) of space in the area, depending on how well Abe’s growth plan is implemented, said Mori, the owner of the nation’s most profitable closely held developer. Property prices in central Tokyo will probably increase as demand for buildings that are energy efficient and have disaster-prevention systems remain strong, he said.

The billionaire revealed plans in November to invest in Tokyo property for the first time since he declared the end of the real estate boom in 2008. Population in the capital, where one in 10 Japanese live, is growing as an unprecedented monetary easing by the Bank of Japan and increased government spending under Abe’s leadership bolster consumer confidence.

“With Japan’s aging population, we will find more demand returning to central Tokyo,” said Mori, 76, in an interview in the city on June 17. “Whether Abenomics will succeed will depend on the growth strategy. If Abe’s growth strategy is going well, we may consider buying more.”

Luring Capital

Mori Trust manages 89 buildings in Japan, including the Tokyo Shiodome Building in a commercial district near Tokyo Bay, and operated about 30 hotels as of March 31, according to the company’s website. The developer made 19.2 billion yen ($200 million) of profit for the year ended March 31, more than 14.4 billion yen of net income generated by Mori Building Co., which was run by Mori’s older brother, Minoru Mori, who died last year.

Abe has promised to loosen business regulations and increase government support as part of the “third arrow” of his three-pronged strategy to end deflation, following fiscal and monetary stimulus.

His plan includes creating incentives to attract foreign investments and boosting the competitiveness of major cities in Japan, according to the website of the prime minister’s office. The government may also consider relaxing development rules for floor ratio in certain zones to match the needs for office buildings and residential space in metropolitan areas, it said.

“Tokyo’s attraction as an international city is very high,” said Mori.

The Topix Real Estate Index, which tracks 43 property companies, has returned 39 percent in the past six months. Abe took power in December, pledging to revive the world’s third-largest economy. The index gained 0.9 percent today.

‘Naturally Benefit’

Japan’s economy grew at an annualized 4.1 percent in the first three months of this year, the fastest expansion in a year, a government report showed on June 10. The report came two months after the BOJ unveiled a plan to target a 2 percent inflation rate in two years.

“The inflation target will naturally benefit real estate,” said Mori. “As the economy improves, Tokyo, with clean water and air, will gradually stand out as an attractive place to invest, luring foreign capital.”

Still, a recovery in prices in the suburbs will be unlikely because of the shift in population to Tokyo, Mori said.

“Real estate is no longer about holding it and hoping for the value to go up,” Mori said. “It’s about how to seek value by developing a property that is best suitable for that space. Prices can’t be rising in places where there are no people.”

Tokyo’s population has increased 6 percent to 13.1 million in the past decade, while the number of households has risen 17 percent to about 6.6 million, according to the Tokyo Metropolitan Government.

Recent data on the country’s property market is already showing signs of a recovery. The number of sites where values increased rose to 80 out of 150 locations as of April 1, from 51 sites three months earlier, according to government data that tracks highly utilized sites on May 29. It was the first time since 2007, before the global financial crisis, when more than half of the places recorded increases.

“For real estate, you can get as big as you want by borrowing more,” said Mori. “But we have to choose the timing as to when we want to expand and when we want to stay put.”

Before it's here, it's on the Bloomberg Terminal.