US pension giant eyes Japan property on growth outlook

[TOKYO] US pension giant TIAA is setting its sights on Japanese real estate, betting Abenomics has the economy well placed to grow in coming years.

The near 100-year-old firm, known for offering retirement products to teachers, plans to invest about US$1 billion in retail and logistic sites in Tokyo and Osaka, Shusaku Watanabe, director of capital transactions for Asia Pacific at its property unit TH Real Estate, said in an interview on Monday.

TIAA, which oversees US$938 billion, joins a growing list of international investors snapping up Japan properties on expectations Prime Minister Shinzo Abe's reforms will boost economic growth. M&G Real Estate, the property investment arm of London-based Prudential Plc last month said it's looking for offices, logistic centers and apartment buildings in Tokyo, while US-based PGIM Real Estate has acquired US$1 billion of assets in Japan in the past year.

"For the global markets that we're looking at, the story in Japan, particularly in Tokyo, looks really interesting," Harry Tan, head of research for Asia Pacific at TH Real Estate, said in the interview. "The economy is in a sweet spot and will continue to remain well supported in the next three to four years." The unit made its first investment in October with the US$82 million acquisition of an office and retail building in the Ginza shopping district.

Total Japanese property transactions jumped 16 per cent in the first quarter from a year earlier to US$11.1 billion, according to Jones Lang LaSalle.

Tokyo offices offer one of the highest returns among major global cities, yielding an average 4.4 per cent in the first quarter; higher than Manhattan, London, Hong Kong and Sydney, according to Real Capital Analytics.

TH Real Estate plans to buy non-discretionary stores such as supermarkets and drugstores, as well as movie theaters, Mr Watanabe said. It's staying away from high street luxury retail locations because of the sector's volatility, he said.

The unit, which holds US$99 billion of property, wants to increase its allocation to Asia, which accounts for just 2 per cent of its global portfolio with about US$1 billion invested in each of Australia and China, Mr Watanabe said.

"Asia overall is still under-allocated," he said. "So we need to increase in Asia overall, especially in Japan."

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