A J-REIT has sold a large office building in Shinagawa at a 12% loss to an unnamed buyer. The sale price of 61 billion Yen (approx. US$403 million) is 12% below book value and 8.5% below an October 2023 appraisal.
Garden City Shinagawa Gotenyama is a 9-story office building located a 10-minute walk from Kita-Shinagawa Station and a 14-minute walk from Shinagawa Station. While Shinagawa Station is heavily used by commuters and is seeing some major redevelopment projects in its immediate vicinity, growing telework trends have made a challenging market outlook for large-scale offices located further away from stations.
The occupancy of the building was 84.3% as at January 2024, but the scheduled departure of a large-scale tenant in July will see the occupancy rate drop to 49.8%. This drop in rental income will result in an after-depreciation NOI rate of just 1.3%. Given the feedback from the leasing activities to date, some time would be required for the asset’s operations and revenues to recover.
Currently, 5,565 tsubo (18,400 sqm) of office space in the building is advertised for lease, representing approximately 47% of the building’s NLA of 38,577 sqm.
The sale price works out to be approximately 1.58 million Yen per square meter (approx. US$975/sq.ft) based on the NLA.
