Advertising agency Dentsu Group will consider selling its headquarters in central Tokyo in a deal possibly worth around 300 billion yen ($2.9 billion), which would mark one of the largest property sales ever in Japan.
The group joins a string of Japanese companies that are reevaluating what to do with their Tokyo headquarters, as the coronavirus outbreak forces them to embrace a new approach to the workplace. Dentsu in particular is looking to shift to a more decentralized corporate structure that relies heavily on teleworking.
Completed in 2002 in the waterfront district of Shiodome, Dentsu Group’s headquarters stands roughly 210 meters tall with 48 floors above ground. The lower levels house a commercial complex called Caretta Shiodome.
Dentsu could extend preferential negotiation rights to a potential buyer and enter full-fledged negotiations as early as this month. Proceeds from the sale will go toward structural reforms and investments in future growth.
The biggest property deal in Japanese history was BlackStone’s 2020 purchase of about 220 condominium buildings for 300 billion yen, according to U.S. real estate services company Jones Lang LaSalle. The Dentsu sale could rival this in scale.
The group has accelerated its push for more diverse workstyles since the coronavirus spread across Japan last February. No more than 20% or so of employees at its headquarters still come into the office, with over 9,000 working remotely instead.
The agency is looking to streamline its excess office capacity, with plans to lease most of the building from the buyer so it can keep its headquarters there.
Potential buyers include financial institutions, property developers and investment funds. In addition to a steady stream of rental income from Dentsu, the building is located in an extremely popular area of Tokyo and could attract new tenants as well.
Other Japanese companies are also selling off property. Record label Avex, whose earnings have suffered due to event cancellations and other pandemic-related issues, announced at the end of 2020 that it will sell its Tokyo headquarters. Canadian property investment company BentallGreenOak has reportedly agreed to buy the building for about 72 billion yen.
Institutional investors like BentallGreenOak have purchased many of these properties that are for sale. Low interest rates are only expected to boost their interest in real estate, which has relatively high returns.