Electronics giant Sony Corporation has this week announced plans to move into the real estate sector, brokering property sales and offering consultancy services. While this is far removed from the company’s traditional electronics market it does highlight how big businesses are now looking towards real estate investment as a long-term income stream.
Many people will question what Sony Corporation knows about the real estate market and its management experience in this particular area but missing skills can be bought in and experience built upon. The new company, Sony Real Estate Corp, will be set up with initial capital of $2.4 million with an annual target of sales in excess of ¥50 billion within five years.
Why has Sony chosen this particular route?
Over the years we have seen many major industrial companies looking towards different areas of income and Sony is no different. In what many believe is a sign of the times, the company regularly holds meetings with management and staff where everyone is free to put forward new business proposals. Some of these ideas will be taken further, some will be dropped and some, such as the real estate venture, will eventually come to fruition.
Quote from PropertyForum.com: “How much money do I need to start a property portfolio?”
What does the company expect in the future?
It is interesting to learn that while Sony has long-term plans for its real estate division it is also looking to list the company as a separate entity on worldwide stock markets. The idea is that within three years Sony, the parent company, will be able to cash in a significant percentage of its shareholding in the real estate venture to raise funds going forward. If the company’s plans for annual sales in excess of ¥50 billion within five years come to fruition this could be an interesting and potentially lucrative opportunity.
Has diversification worked in the past?
While the idea of investing in real estate has certainly caught the attention of many investors around the world and put significant focus upon Sony Corporation, what kind of track record does the company have? Many experts are already talking about the relatively unsuccessful medical equipment division with accusations that there is a lack of direction for this particular venture. This is one of the problems when you stray from your traditional marketplace and hopefully the company has learned from past mistakes and can reflect this within the real estate venture?
Why is real estate so attractive to large corporations?
There are two main reasons why real estate seems to attract the attention of relatively large corporations who have no particular experience or skills in this arena. The fact is that many large companies will have real estate investments in which their worldwide operations are housed and there may be opportunities to reorganise these real estate assets to the benefit of the company.
It is also worth noting that the real estate market is an area which impacts upon everybody and every business around the world. It is volatile, it can be difficult to predict but there are certainly investment opportunities to be considered on a long-term basis. Perhaps some of the larger corporations also have a head start on small operations and individuals because of their access to significant capital going forward?