California Still Popular With Japan Investors

Japanese investors’ enthusiasm for U.S. real estate has fallen, but their interest in California property has remained relatively high, according to a survey released Monday.

Of 90 Japanese companies responding, 42% said they expect to conduct fewer real estate transactions in 1991, according to a survey conducted in December by Mead Ventures, a business data research and publishing firm based in Phoenix. When questioned at the same time a year earlier, only 6% of the respondents anticipated any decrease in such investment.

“This represents a big shift,” said Christopher Mead, president of Mead Ventures. “The Japanese had been more optimistic than Americans. The new survey shows that the (Japanese investor) mood is more reflective of American attitudes about the economy.”

The economic slowdown in the United States was just one of many factors Japanese investors considered, Mead said. For example, the Japanese stock market fell 40% in 1990, leaving banks and companies with less to invest, Mead noted. Japanese investors were also discouraged because property values declined throughout much of the United States in 1990, Mead said.

However, property values have not declined as steeply in California, and the Golden State remains the preferred location for Japanese investors, the Mead survey indicates. The state also received the top ranking in the 1989 survey. Also, respondents consider Los Angeles the most attractive metropolitan area, the survey said.

Real estate analysts at Kenneth Leventhal & Co., a Los Angeles-based accounting firm, also expect interest in California to remain relatively high among Japanese investors. The value of Japanese investment in California will remain “roughly in the same range” as the $3 billion to $5 billion estimated for 1990, said Jack Barthell, a managing partner at Leventhal.

However, Japanese investment in the nation overall will decline to between $7 billion and $10 billion in 1991, from between $10 billion and $13 billion in 1990, according to Leventhal projections.

JAPANESE CHOICES U.S. metropolitan areas most preferred by Japanese firms for real estate investments:

1990 1989 rank Metro area rank 1 Los Angeles 1 2 New York 2 3 Seattle 9 4 San Francisco 3 5 Honolulu 4 6 San Diego 5 7 Atlanta 8 8 Chicago 7 9 D.C. 6 10 Orlando 17 11 Portland, Ore. 13 12 Sacramento 22 13 Miami 15 14 Boston 10 15 Houston 12

1990 1989 rank Metro area rank 16 Columbus, Ohio unranked (tie) Las Vegas 14 Philadelphia 21 19 Denver 22 (tie) Phoenix 20 21 Cleveland 29 (tie) St. Louis 29 23 Baltimore 34 (tie) Charlotte unranked Dallas 11 Minneapolis 19 27 Detroit 26 (tie) Fresno unranked Palm Springs 39

Source: Mead Ventures