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Tokyo office market overtakes London and NYC

Emerging markets accounted for a quarter of all property sales during the first half of 2008, compared to just 10 percent a year ago. More than 9,000 properties valued at $306bn were sold in the first six months of this year.

Tokyo has overtaken London and New York as the most active office sales market in the world after property sales in Japan more than doubled during the past 12 months, a report from Real Capital Analytics has revealed.

The Japanese capital was the seventh most active office market last year, according to RCA’s global capital trends report, however increasing focus on real estate in emerging markets has helped catapult the city into the top spot. London comes in second, with New York third and Paris fourth.

Japan saw office property sales rise 103 percent between the first half of 2007 and 2008, with $12.6 billion (€8.5 billion) in sales as of the end of June 2008. Overall, emerging markets have accounted for 25 percent of all property sales during the first half of 2008, compared to just 10 percent one year ago.

The report comes as MGPA revealed in June it was planning a $1 billion Japan fund, straight after closing its latest Asia property fund, the MGPA Asia Fund III, the largest dedicated Asia real estate vehicle ever at $3.9 billion. MGPA Asia chief executive Simon Treacy told a Reuters Global Real Estate Summit audience in Singapore, the firm was eyeing the office sector in Osaka and Tokyo, as well as the industrial sector.

According to the RCA report, the US was still the most active country in terms of the office market with $28.6 billion in sales during the first half of this year, however, that figure has fallen 69 percent compared to the same period in 2007. Hong Kong, Singapore, Spain and the Netherlands were the only other countries beside Japan to see increases in sales activity over the course of the year, with Hong Kong office sales increasing 86 percent, Singapore rising 58 percent, Spain rising 77 percent and the Netherlands increasing 14 percent. 

London was still the most active city in terms of the industrial, retail and hotel real estate markets, while the US was the most active country in relation to those markets. However sales fell across the board for the US and UK in the first half of 2008 compared to one year ago, with industrial sales declining by 52 percent and 32 percent for the US and UK respectively. Retail sales fell by 65 percent and 50 percent in both countries, while hotel assets sales volume fell by 75 percent in the US and 78 percent in the UK.

Land was the only real estate sector not to witness falling sales, with development site sales worldwide increasing 11 percent between 2007 and 2008. Last month, Starwood Land Ventures, an affiliate of Starwood Capital Group, partnered with The Penrose Group in a joint venture to acquire, hold and develop residential real estate in the Mid-Atlantic US. The deal follows on the firm’s $150 million joint venture in June with Houston-based Riverway Properties to capitalize on the current market dislocation by targeting residential land deals in Houston.

Los Angeles-based LandCap Partners – a joint venture between Goldman Sachs’ Whitehall Street Real Estate Funds and REIT Northstar Realty Finance – closed its first deal after raising $350 million for a land fund last year in a bid to target troubled homebuilders in the US. The deal comprised more than 250 single-family lots in Aurora, Colorado acquired from the Quadrant Investment Group. LandCap said at the time it planned to resell the land assets back to homebuilders when the real estate market improved.