Tokyo real estate faces borrowing cost pressures
The rise in interest rates and inflation are weakening property market returns in Tokyo, as the price of the Tiffany building in the Ginza district has been reduced by one-third due to a long-term fixed lease and declining demand. The Kurasawa Group, which owns the building, is struggling to sell the property at its previous price of 120 billion yen (around 760 million dollars), with current asking prices now starting at 80 billion yen. The building is leased under a fixed 25-year contract, which has led to buyer reluctance in an inflationary environment, amid increasing expectations of further interest rate hikes due to the weak yen and ongoing inflation. The yields on prime real estate have fallen to their lowest levels ever. Nonetheless, Kurasawa Company is not facing urgent liquidity needs and still intends to retain the building, which houses a Tiffany store and luxury amenities in the heart of Ginza.
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