Tokyo office tower could be up for grabs for US$2.9 billion

Advertising and public relations giant Dentsu Group is considering selling their head office building in Shimbashi, Tokyo. With an estimated price somewhere around 300 billion Yen (approx. US$2.9 billion), this could end up as Japan’s most expensive single-building sale. Several potential buyers are apparently already lined up.

The group’s headquarters typically has 9,000 staff on-site, but only 20% are commuting into the office due to the pandemic. The abundance of empty floorspace has led the company to reconsider their real estate holdings. After the sale, they would continue to lease space within the building. Dentsu’s advertising revenue has fallen since the start of the coronavirus pandemic, with the company expecting to post a loss for the second year running.

The 210-meter tall, 48-story office tower was built in 2002 as the Caretta Shiodome mixed-use redevelopment on the site of the former Shiodome Freight Terminal. French architect Jean Nouvel designed the office tower, while American architect Jon Jerde designed the retail component.   

The complex includes restaurants, retail, museum, and a theatre. The total floor area is 231,700 sqm (2.49 million sq.ft), which may explain the high estimated price. It had a book value of 181.4 billion Yen as of December 2019.

According to JLL, the largest single-building transaction in Japan’s history was the sale of Pacific Century Place Marunouchi in 2006 for 200 billion Yen to Davinci Holdings.

Up until now, the major office buildings in Tokyo’s prime business districts have been tightly held by Japan’s conglomerates, making this current environment incredibly enticing for foreign funds seeking a once-in-a-lifetime chance to get acquire some rare assets. Bargain sales, however, are still not apparent.

There is the looming risk that office demand may not fully recover should the telework trend become permanent. Major corporations are reconsidering their floorspace requirements both from a cost-cutting perspective and from having fewer employees in the building at any one time. Japanese homes and apartments, however, are notoriously small and cramped, both in the city center and out in the suburbs, so it will be interesting to see how long employees are willing and able to work from home. According to the Cabinet Office, only 21.5% of employers across Japan had implemented some form of telework as of December 2020. In Tokyo, the ratio was 42.8%, down from 48.4% in May.

Location

1-8-1 Higashi Shinbashi, Minato-ku, Tokyo

Sources: 
The Tokyo Shimbun, January 20, 2021.
NHK, January 20, 2021.
The Sankei Shimbun, January 23, 2021.

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