Japan’s Climate Pledge Prompts Companies to Sell Aging Property

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(Bloomberg) — Japan’s ambitious targets on carbon emissions is prompting some firms to offload aging office blocks, resulting in rare investment opportunities for potential buyers, according to the head of the Asian nation’s biggest trust bank.

“Companies are now reviewing their facilities and assets and will either make them fit the carbon neutral policy or sell,” said Toru Takakura, president of Sumitomo Mitsui Trust Holdings Inc., which has about $2 trillion of assets under custody. “We are seeing properties that have been held by companies for years coming to the market and there are opportunities for good properties.”

While firms assess the properties on how essential they are for their core businesses, potential buyers “may see various other uses or purposes in the locations,” Takakura said in an interview.

Japan in October pledged to become carbon neutral by 2050 and has outlined milestones for sectors such as energy, manufacturing and transportation. The country’s major businesses, meanwhile, are making moves to clean up their operations and are under pressure to demonstrate what steps they’re taking to reduce emissions, no matter how big or small.

Strategy Fit

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“Companies are considering how to cut emissions, including by retrofitting or rebuilding,” Takakura said. “But they are also likely to decide to sell them after considering whether holding such a property fits their strategy going forward.”

Separately, Sumitomo Mitsui Trust, which offers real estate brokerage and domestic and international asset management services, is seeing a pick up in property transactions after a sharp drop in early 2020 due to the coronavirus pandemic, Takakura said. Interest from foreign buyers is strong, particularly for distribution facilities and data centers, due to low global interest rates, he said.

Investment in commercial real estate in Japan dropped 4% last year, compared with 28% globally, according to Jones Lang LaSalle Inc. Tokyo ranked third after Paris and London for investments in 2020, up from sixth a year earlier.

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