Man Without Qualities

Sunday, March 31, 2002

Decline and Fall

According to an article in the current Wall Street Journal Online [link requires paid subscription] “the average value of urban commercial property [in Japan] has fallen 84% from its high and is still declining, worsening bad debt problems everywhere.”

That sounds like a big fall off in commercial real estate prices. Have such prices now become realistic? Consider that in the late 1980’s one read routinely in American papers that the grounds of the Japanese Imperial Palace (a little more than 200 acres) were "worth" – simply as raw land and without attributing any historical or artistic value to the palace buildings - more than all of the real estate in California. If the “value” of the land around the Imperial Palace real estate has fallen only 84%, then the current value of a parcel of less than 2000 acres in central Tokyo is still “worth” more than the all of the real estate in California was worth in the late 1980’s.


Sounds like those Japanese bad debt problems are going to get a whole lot worse.

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