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Investors Big on Japan Real Estate

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With the bottoming out of real estate prices and a recovery in the debt market, foreign investors are increasingly favoring Japanese real estate over others. Over $2 billion worth of investment deals were inked since late last year with more in the pipeline.
Mapletree Investments, the real estate arm of Singapore's state investor Temasek Holdings, is one of the leading foreign investors who have shown interest in the Japanese real estate sector with nearly $1 billion earmarked for acquisition of office buildings, data centers, and research and development facilities in the country. The growing list also includes The Blackstone Group (BX - Free Report) , an asset management and financial advisory services provider; Fortress Investment Group LLC , a publicly owned investment manager; Deutsche Bank (DB - Free Report) , a leading financial firm; and LaSalle Investment Management, the investment management business of Jones Lang LaSalle Inc. (JLL - Free Report) .
According to industry experts, major foreign private equity groups, real estate trusts and realtors have apportioned an estimated $6.6 billion for investments in Asia, primarily focusing on Japan. Furthermore, the cap rates of Japanese real estate are expected to decline in the second half of 2010. Investors are also keen to acquire distressed or marked-down properties, such as debt backed by commercial real estate, with rental rate of office space in Asia-Pacific expected to rise between 10% and 30% in 2010.
Jones Lang had earlier stated in its report that office rentals in Asia have increased strongly, with net absorption or change in occupied office space in Tier I cities rising 13% sequentially from the previous quarter to 4.3 million square feet. Jones Lang has a dedicated research team that provides in-depth analyses on the region’s property markets to assist and inform developers and investors, fund managers, and lenders. It also offers clients insights into the emerging shape of the regional real estate markets and places them in the perspective of global trends.
Jones Lang operates as a single-source provider of real estate solutions with a broad range of real estate products and services, and an extensive knowledge of domestic and international real estate markets. The company faces stiff competition from international, regional and local players in the market due to which it has to continually invest in value drivers that act as key differentiators. Consequently, the company is under severe stress to maintain its profitability. We maintain our Neutral rating on Jones Lang, which currently has a Zacks #3 Rank that translates into a short-term Hold recommendation.

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