CodeCode ofof ConductConduct TheThe RealReal EstateEstate CompaniesCompanies AssociationAssociation ofof JapanJapan

-Creating New Value for the Economy and Society-

Japan’s declining population, falling birthrate and aging society are all having major impacts on our economy and society. New issues such as increasing internationalization and global environmental problems also need to be addressed. In this context, Japan’s real estate industry has a social responsibility to create new value to contribute to the economy and society. It is expected to supply high-quality buildings and housing, and help make people’s daily lives-whether at home, work, or play-more comfortable and affluent. As a cornerstone of domestic demand, the industry should also help drive national economic growth. Based on this mission, members of the Real Estate Companies Association of Japan pursue their activities in accordance with the principles below.

1. Creating Attractive Cities Members will help create safe, stable, comfortable and appealing cities; renew urban areas through forming quality housing stock and advanced business infrastructure; create dynamic environments rich in amenities; and work to maintain and enhance their value from both a hard and soft perspective so that they may be passed down to the future generations as high-quality assets.

2. Customer-Focused Activities and Management The provision of “Customer First” management is best served by supporting the lifestyle pursuits of customers in meeting their ever diversifying and increasingly unique needs with an enhanced selection of products and services, and also in providing accurate information while maintaining high ethical standards and acquiring greater expertise.

3. Environmental Harmony Members will work sustainably in order to integrate economic and environmental goals and create harmony through the realization of low-carbon cities. Members will also implement business in a manner that considers global and local environments through energy conservation, waste reduction and increased recycling.

4. International Perspective In addition to opening the Japanese real-estate market internationally, members will strive to make Japanese cities globally appealing through developing first-class cities and regions that will attract international talent, capital and information.

5. Rigorous Compliance Members shall conduct fair business activities based on corporate social responsibility, ensure rigorous compliance by respecting consumer protection laws, eliminate anti-social forces and strive to act in an enlightened manner with respect to human rights issues.

Please refer to list of Member Companies: http://www.fdk.or.jp/en/member.html

100 Real Estate in Japan 2014 Real Estate in Japan 2014 CONTENTS

7 26 30 42 44 45 53 55 15 ) Urban Renewal ( 46 CONTENTS 4 INTRODUCTION THE REAL ESTATE INDUSTRY TODAY 6 Development For-Sale Property 8 Leasing 9 Transactions OVERVIEW OF MAJOR REAL ESTATE SECTORS 10 Housing Urban Redevelopment 23 Leasing Real Estate Transactions Real Estate Securitization Internationalization 36 Resorts 40 The Role of the Real Estate Industry Environmental Measures Roles the Real Estate Industry Should Take against Major Disasters Initiatives to Eliminate Organized Crime Groups, Other Anti-Social Forces from Real Estate Transaction and Money Laundering Political, Social and Economic Events; Real Estate- related Policy Overview of Present Land and Housing Taxation REAL ESTATE RELATED DATA The real estate industry plays a large role in the creation and maintenance of living and urban environments comprised of residences, offices and other properties that are the foundation INTRODUCTION of people’s lives and corporate activities. The real estate industry has supported the growth of the Japanese economy through the supply of quality stand-alone housing and condominiums, the revitalization of cities and regions, the development, management and operation of office and commercial facilities, as well as RealReal through real estate securitization and other businesses. According to the Annual Report on National Accounts, the real estate industry comprises more than 10% of the gross domestic product EstateEstate (GDP). Additionally, the added value created per employee according to the fiscal 2012 Financial Statements Statistics of Corporations by Industry was 17.58 million yen (6.66 million yen for all industries). Thus, compared with other industries inin JapanJapan the real estate industry enjoys a higher perch and holds a vital position within the Japanese economy. The Japanese economy is gradually recovering and it is necessary to realize domestic demand- led growth strategies that will lead to sustainable growth, such as strengthening the global 20142014 competitiveness of major cities and developing quality housing stock. In order to strengthen the global com- petitiveness of major cities, it is necessary to create international business hubs via urban renewal that will bring together talent, capital, and information from around the world. The

4 Real Estate in Japan 2014 hosting of the 2020 Olympics in Tokyo has while also repairing and rebuilding aged With globalization advancing and the speed of also provided the industry with a chance to condominiums. social and economic change becoming ever build attractive cities. Environmental efforts are another important faster, the real estate industry is expected to play Residences play an important role as a theme. It is necessary to continue with an increased role in society. cornerstone of domestic demand and environmentally friendly, low-carbon city-building in order to adjust to diversifying housing – for example, by adapting to the new energy- needs resulting from changes in household saving standards enacted in 2013. Enhancing composition and lifestyles, there is a need to the disaster-prevention capacity of cities is also establish a high-quality stock of residences important and it is necessary to build safe, stable that are excellent in terms of earthquake cities from both a hard and soft perspective. resistance and environmental performance,

5 Real Estate in Japan 2014 THE REAL ESTATE INDUSTRY TODAY

Development Work The flow of the development process begins with studying and understanding the size and form of the candidate development site, confirming related city planning, the status of infrastructure preparation and the concentration of various facilities. A business plan containing the development concept, construction plan and business income and expenditures is then proposed based on these findings. After the land is acquired, more specific construction design is carried out and following the obtaining of development and construction permits the actual construction will begin and continue until completion. Promoting Urban Regeneration Business Urban development of real estate is closely related to the Urban DEVELOPMENT Planning Law, Urban Redevelopment Law, Land Rezoning Law, Building Standard Law and other laws related to the development, construction and design of cities. Furthermore, among the movements promoting urban regeneration in recent years, special exceptions for urban 開planning and new frameworks concerning 発 financial support and other areas have emerged. One example of this is the Special Measures Act for Urban Renaissance that came into effect in 2002. In 2011, “specific urban redevelopment emergency development areas” were designated and “international strategy comprehensive zones” selected to strengthen the international competitiveness of cities and to regenerate cities. Upgrading of Fund Procurement in Development Traditionally, securitization tended to focus on already operating real estate. However, securitization is now also being used in development projects (development-type securitization) to meet the need to diversify capital sources and such as a means to spread risk in fund procurement. The use of development-type securitization enables the developer to procure funds based on a valuation primarily of the development project’s return and limits the debt-burden risk by utilizing non-recourse loan without being impacted by the developer’s own financial condition and limitations on fund raising. Recently, there have been cases of development-type securitization being utilized at urban redevelopment projects in regional cities.

What is development? Real estate development is the creation and adding of real estate value by developing and preparing the infrastructure on obtained land or constructing housing or business facilities on land. Earnings are realized by selling, subdividing or leasing developed real estate.

6 Real Estate in Japan 2014 FOR-SALE PROPERTY

What is for-sale property? For-sale property requires work involving the development and sale of land, stand-alone housing, condominiums and other housing. 分譲 For-Sale Property Business The housing subdivision (for-sale property business) consists of many steps including procurement of the lot, marketing to customer needs and market conditions, product planning, construction designing, advertising and sales. In recent years, diverse unique products have been planned and sold to meet the diversification of needs concerning lifestyles and housing among purchasers. Condominium Supply Trends Since 1981, the number of for-sale condominiums supplied to the market has exceeded the number of stand-alone houses with a proactive supply continuing in recent years centering on large metropolitan areas. Meanwhile, though the actual supply of stand- alone houses is decreasing due to the slowdown of large-scale new town developments and such, the emergence of properties such as smart town properties with distinctive features can be seen. Establishment of Laws for Consumer Protection The following are some of the laws regarding the for-sale housing business. The purpose of these laws is to improve consumer protection and the quality of buildings. [Building Lots and Buildings Transaction Business Law] A broker’s license under the Building Lots and Buildings Transaction Business Law is essential to be able to conduct for-sale housing business. In order to protect the purchaser and secure fair transactions, the law establishes regulations regarding the practices of the for-sale business that include restrictions on the timing for starting advertisements and concluding contracts, the requirement to explain material matters, the handling of deposits, etc. [Housing Quality Assurance Act] This law created a system for indicating housing performance and enhanced the defect liability system concerning new houses. [Law to Secure Execution of Defect Warranty for Specific Housing] This law made measures to secure resources utilizing insurance and deposits mandatory in order to make sure that parties such as the sellers of residences can effectively implement defect warranty.

7 Real Estate in Japan 2014 LEASING

What is leasing? Real estate leasing is the business of obtaining rents by leasing real estate. Leasing applies to diverse properties ranging from housing to office buildings,賃貸 retail properties, hotels and sports facilities.

Leasing Work As for the real estate leasing business, the management and operation is at times conducted by the owner or in other cases partially or entirely entrusted to a third party. The advancement and spread of real estate securitization has furthered the separation of ownership and management. In addition, the complexity of leasing management has increased due to sophistication of building functions. Consequently, the need is growing among owners who do not have their own dedicated management and operation organization to outsource these services to a third party. Changes in Supply of Buildings and the Sophistication of Needs Floor space for launched office construction has been trending downwards since the bursting of the bubble. However, the needs of tenants are becoming more sophisticated. In addition to the focus on the latest IT equipment and energy-saving capabilities, emphasis has been placed on the earthquake resistance of buildings and Business Continuity Plan measures since the Great East Japan Earthquake. Legal Leasing System The relationship between the party leasing the property and the renter is basically governed by the lease contract which stipulates individual items and is positioned under the Land and House Lease Law and the Civil Code. The former version of the Land and House Lease Law prohibited the leasing party from rejecting the renewal of lease contracts unless they had a valid reason. However, in 2000 the fixed tenancy leasehold system was formed based on the Special Measures Law for Promoting the Supply of Good Quality Rental Housing and it is now possible to enter into a contract that ends without renewal at the time of expiration.

8 Real Estate in Japan 2014 Transaction Work Real estate transactions involve providing customers desiring to sell real estate with appraisals that indicate the proper sales price for the concerned property and related sales activities as well as providing customers desiring to buy a property with property information that meets their requirements. Real estate transaction brokers work to ensure that the sale and purchase, etc. of real estate – such as concluding contracts and delivering properties – proceeds smoothly and appropriately. Safe Transactions The brokering of real estate sales, purchasing, transfer or leasing requires a license designated by the Building Lots and Buildings Transaction Business Law. This Law stipulates various matters concerning brokering to secure consumer protection and fair trade and these include the system for TRANSACTIONS licensed real estate brokers, items to include in a brokering contract, compensation restrictions, and matters regarding advertisements and explanation of material matters. On the other hand, because of increasing information technology, 流通 there have been many problems involving the leaking of customer information and the buying/selling of personal information. In order to protect the privacy of Japanese citizens, the Personal Information Protection Law was implemented in April 2005. It is necessary to comply with these laws and carry out business in accordance with these guidelines when it comes to real estate transactions. Vitalizing the Transaction Market The total number of existing homes is higher than the total number of households and conditions are improving for further vitalization of the transaction market for existing homes. When the Basic Act for Housing was enacted in 2006, it was decided that the focus of the Japanese housing policy would transition from quantity to quality. As a doubling of the market for existing homes and the renovation market was included in the New Growth Strategy of 2010, the Ministry of Land, Infrastructure, Transport and Tourism has announced its “total plan for renovation of existing homes” which summarizes initiatives going forward, as well as its recommendations for specific measures through the Real Estate Transaction Market Vitalization Forum.

What are transactions? Real estate transactions are primarily the selling and purchasing, transfer of land and buildings, intermediation on leases and sales brokering of for-sale homes.

9 Real Estate in Japan 2014 Danchi to Condominiums The era of large supply that started in the 1950s lasted until the oil shock of 1973. OVERVIEW OF MAJOR REAL While the Japan Housing Corporation initially dominated the market an increasing number ESTATE SECTORS of private enterprises such as railroad companies began to supply condominium complexes dubbed “luxury mansions,” a distinct departure from danchi properties targeting a certain clientele. The majority of these were located in downtown areas and featured elevators as well as parking lots, HOUSING administrative offices, lobbies and restaurants on the first floor. In order to create a luxurious Following the war, there was a severe lack of housing due impression, fancy titles were given to the to the mass burning of cities. As a result, housing supply properties such as “mansion,” “residence,” was deficient by 4.2 million units at the end of the war. “villa,” “heights” and “heim.” In the mid-1950s, an explosive growth in the population Beginning in the mid-1960s, major real concentrated in major cities began to occur alongside estate companies, trading companies and others entered the field and expanded the Japan’s rapid economic growth. The ensuing increase condominium market from a luxury product in land demand sent land prices soaring, making the to a product targeting the general public. situation for housing even more severe. The Japan Housing This developed a broad demand segment Corporation (presently, the Urban Renaissance Agency) for condominiums. The Government Housing was launched in 1955 as the trump card for eliminating Loan Corporation (presently, the Japan this housing problem and it began to supply “danchi” or Housing Finance Agency) began financing apartment complexes en masse. These danchi spawned condominiums in 1970 and as they became residential districts and led to the construction of so-called easier to purchase, condominiums very quickly became widely accepted. “new towns” and the development of new city areas. However, as the supply of for-sale Today, the most prominent condominium complex is the condominiums increased, the problem of “mansion” and many varieties-such as those targeting how to manage and operate the common families, single persons, DINKs and seniors-have become areas of condominiums emerged. In 1962, available in response to Japan’s changing society. The the Sectional Ownership Law was established. earthquake resistance and energy-saving capabilities of The Law was revised in 1983 as rights and stand-alone houses have also been improved as security management-related problems had emerged that were not initially anticipated.The sudden and disaster prevention measures play a greater role in massive increase in condominiums also saw urban development. “Excellent communities” and “smart disputes over the right to sunlight surface cities” that are environmentally friendly and contribute to a among community residents. The Building low-carbon society are also being advanced. Standards Law was revised in 1976 with new regulations concerning sunshine added in line with consumer demand for further protection.

Development of Housing Areas Slow since Oil Shock In terms of the development of housing areas, the launch of the so-called demarcation system in 1969 led many areas suitable for development to be incorporated into city coordination zones and the policy of suppressing development also became more conspicuous among local governments. In the early 1970s, many administrative regulations such as guidelines on housing lot development were issued. The increase in requirements for bearing expenses for public developments and the prolonging of projects generated a rise in the cost of development. The simultaneous boom to

10 Real Estate in Japan 2014 Real Estate in Japan 2014

Number of For-sale Condominiums in Stock Nationwide (10,000 units) 600 579.6 562.1 571.3 545.1 550 528.4 505.7 485.0 500

465.7 447.1 450 427.2 406.3 386.0 400 368.7 Number of new units supplied (annual, left scale) 351.9 333.6 350 Cumulative units (year-end, right scale) 315.5

295.7 300 277.2 263.6 252.0 234.7 250 216.1 199.7 20 (10,000 units) 184.9 200 172.7 162.0 151.2 HOUSING 15 140.0 150 128.7 106.1 118.5 10 94.3 100

5 50

0 11.1 11.8 12.4 10.2 11.3 11.2 10.8 10.7 12.3 14.8 16.4 18.6 17.3 11.7 13.6 19.0 20.0 18.2 18.4 16.9 17.3 20.3 20.9 19.9 18.6 19.3 20.5 22.7 16.7 17.0 9.2 8.2 0 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 (year) Source: “Zenkoku no Bunjo Manshon Sutokku Kosu (Number of For-sale Condominiums in Stock Nationwide)” by the Ministry of Land, Infrastructure, Transport and Tourism. Notes: 1. Number of new units supplied are derived from construction start statistics, etc. and based on completion. 2. The cumulative units are estimated based on the cumulative figures for new units supplied, etc. 3. Condominiums as described here are buildings at least three stories in height, sold after subdivision, jointly built, steel reinforced concrete, steel-framed reinforced concrete and steel structured housing.

“remodel” Japan also caused land prices to Investment and Development, Kintetsu Real (70,000 to 80,000 unit level) in the Tokyo soar and a condition developed in which land Estate and Obayashi Corporation) in 1992. metropolitan area from 1994 to 2006 due to for developing housing was consistently priced Condominiums exceeding 50 stories also the post-bubble decline in prices, locational high. emerged in 1998 with the Lions Square Elza return to central Tokyo, and preferential tax breaks for purchasers of residential houses As a result of these developments, it became Tower 55 (55 floors; Kawaguchi City, Saitama; etc. However, due to factors such as the very difficult for developers to secure Daikyo) and the Century Park Tower (54 floors; subsequent increase in prices and the impact profitability. After peaking in 1972, the supply Chuo Ward, Tokyo; Mitsui Fudosan) in March of the financial crisis stemming from the area of housing development continued to 1999. Even in Kansai the trend is to build subprime loan problem, supply fell to 44,000 slide given the economic downturn resulting ultra-skyscraper condominiums such as City units in 2008 and 36,000 units in 2009. In from the 1973 oil shock and other factors. In Tower Osaka, a 50-floor condominium that 2010 through 2012 the supply was 45,000 recent years supply from private developers opened in December 2003 in Chuo Ward, units. Meanwhile, the nationwide stock is has dropped to about 20% of the peak level, Osaka City developed by Sumitomo Realty already approximately 5.8 million units (end centering on small-scale developments and & Development. There has been substantial of 2012) and of this approximately 1 million redevelopments in city areas rather than large- supply ever since. units are more than 30 years old. A major scale development of housing areas. Lately there has been a conspicuous trend of issue for the real estate industry is how to moving back to the center of Tokyo reflected maintain or update these appropriately so Condominiums Grow Taller in the recent boom of ultra-skyscraper that they can be kept or improved as high- condominiums that has emerged from The history of condominiums also correlates quality housing stock. With regard to these companies selling off factories and corporate with the history of building higher. Following older condominiums, not only do they have housing as a means to restructure their the completion of Mita Tsunamachi Park inferior earthquake resistance, but in many businesses, the redevelopment of areas in Mansion (19 floors; Minato Ward, Tokyo; cases earthquake-resistance upgrading is front of stations and other factors. However, Mitsui Fudosan) in 1971, a string of high- difficult because the buildings also have many of Tokyo’s 23 wards have in recent years rise condominiums have been released infrastructure problems (e.g., they have no established restrictions on absolute height. including Yono House (21 floors; Saitama elevators or renovating the piping system City, Saitama Prefecture; Sumitomo Realty is difficult). There is no solution other & Development) in 1977; Bell Park City (36 Old Condominiums being Rebuilt as Stock Increases than to rebuild them. However, not much floors; Miyakojima Ward, Osaka City; Mitsui progress is being made rebuilding aging Fudosan and Kanebo Real Estate) in 1987; An analysis of the supply of new con- condominiums. Reasons include difficulties and Sakuranomiya River City (41 floors; dominiums in recent years (based on sales) in forming a consensus and who will bear Miyakojima Ward, Osaka City; Matsushita reveals that massive supply continued the rebuilding costs. With regard to the

11 Real Estate in Japan 2014 Real Estate in Japan 2014

former, the Ministry of Land, Infrastructure, Number of Condominiums over 30, 40 or 50 Years Old Transport, and Tourism formulated the (10 thousand units) Act on Facilitation of Reconstruction of 500 Condominiums, which has made it possible 450 Over 30 years old and less than 40 years old to proceed with condominium rebuilding with Over 40 years old and less than 50 years old a majority vote, provided that at least four- 400 Over 50 years old fifths of those voting on the resolution are 350 183

in favor. Based on changes in the law since 300 they were constructed, however, many aging 250 condominiums have become “existing non- Over 30 years old 200 = built in or conforming buildings” that do not conform to before 1983 135 135 1,290 thousand Over 40 years old 150 current size requirements, which makes it even units = built in or more difficult to form a consensus to rebuild 112 before 1993 100 Over 40 years old 2,640 thousand Over 40 years old units them. With regard to the latter, condominium = built in or 97 97 = built in or 50 before 1973 before 1983 129 320 thousand 68 1,290 thousand unit owners cannot usually afford the costs units units 31 32 involved tearing down existing buildings 0 1 5 Present 5 years later 10 years later 20 years later and constructing new condominiums. Most (2013) (2018) (2023) (2033)

condominiums that have been rebuilt to date Source: “Concerning Promotion of Reconstruction and Other Measures for Aged Condominiums” announced by Ministry of Land, HOUSING have adopted the method of constructing a Infrastructure, Transport and Tourism (MLIT) on November 28, 2013. larger condominium than the existing one by making use of unused areas and bearing the Diversifying Household Supply such as party rooms and guest rooms, costs by selling the additional portion, but this tower condominiums with excellent views, The segment of the population buying approach cannot be used for condominiums green condominiums that focus on energy condominiums has expanded from the with no extra area, which of course includes conservation and environmental harmony, traditional family segment to include DINKs, the “existing non-conforming buildings” and condominiums developed in collaboration singles and retired individuals seeking to mentioned above. Therefore, as an alternative with famous designers or other industries. change their residences from standalone to rebuilding, the government is considering Efforts regarding disaster prevention measures houses in the suburbs to locations downtown. a new system whereby unit owners dissolve such as the deployment of long-period ground These trends and changes in lifestyles their relationship via a majority vote and sell motion countermeasures and seismically and tastes are diversifying the needs for off their land. At the same time, consideration isolated structures for super-skyscraper condominiums. Because of the advent of is also being given in special cases to easing condominiums, elevator countermeasures, Japan’s super-aging society, the need for the restrictions on areas that can be used in securing of emergency power supply, setting various kinds of seniors’ accommodation, rebuilding. With a view to disaster prevention up warehouses with stockpiles in the event such as serviced housing for elderly people, in the event of an earthquake (i.e., saving of a disaster, etc, have also become of is also becoming apparent. In response to lives), these methods would be applied to greater concern since the Great East Japan this diversifying of needs, various options the most urgent cases of condominiums with Earthquake of 2011. “structure resistance deficiency,” and it is are offered such as condominiums with expected that rebuilding will be encouraged commercial facilities being developed for aging condominiums with outdated on large-scale sites, large condominium earthquake resistance. complexes equipped with communal facilities

Flow Chart of Condominium Business

Property Land Construction information sales Construction start Sales start completion Delivery

Information acquisition Property research Acquisition Land & assessment contract Delivery

Business income & expenditures Finalization of product content

Planning Product planning (1) Product planning (2) Design Planning design Basic design Basic design Implementation design

Hanging of signage

Neighborhood Explanation and negotiations Confirmation Confirmation Government Advance study & application acquisition inspection Conferring of inspection certificate Permits (OK) consultation Advance discussions

Construction Construction launch Construction Owner inspection completion Delivery (owner)

Construction Construction Model room launch completion opens 2-year inspection (1) Sales center model room 6-month inspection after Sales Land selection for sales center and model room completion of construction Confirmation meeting Sales 1-year inspection (Selection of management company) start Contract Inside viewing Delivery (2) Sales (management) Sales method and price discussion

12 Real Estate in Japan 2014 CASE STUDY DEUX TOURS CANAL & SPA

PROPERTY OVERVIEW

Name Sumitomo Realty & Development has developed The waterfront scenery and verdant green DEUX TOURS CANAL & SPA what is considered its flagship project “DEUX surrounding DEUX TOURS CANAL & SPA TOURS CANAL & SPA”, a large-scale seismic creates an eye-catching landscape. The Location isolated twin tower 52-floor condominium, in building’s facade is primarily made from glass Harumi 3-chome, Harumi, Chuo-ku, Tokyo. and its architectural design stands out from Chuo-ku, Tokyo surrounding buildings. The property boasts The Harumi area, where DEUX TOURS CANAL Use district a 24-hour supermarket and various common Light industrial district & SPA is located, lies approximately 2.2 km use areas such as a spa, viewing lounge and from Ginza and is also close to Tokyo Bay, bar, all of which to offer users memorable offering proximity to city centers and a Site area experiences. 2 waterfront resort-like atmosphere. The area 15,222m has been designated as a “priority urban DEUX TOURS CANAL & SPA is the first sole renewal area” by the Ministry of Land, project by Sumitomo Realty & Development Structure Infrastructure, Transport and Tourism, and as to have obtained Long-term Excellent House reinforced concrete ”Special Zone for Asian Headquarters” by Certification. Long-term Excellent House (Steel construction in part) the Tokyo Metropolitan Government. Urban Certification is awarded based on the redevelopment of the Harumi area is likely to assessment of deterioration countermeasures, Total units enhance Tokyo’s international competitiveness, quake resistance, manageability/modifiability, Residence – 1,450 units (1LDK~4LDK) and Tokyo’s successful bid to host the 2020 changeability, barrier-free availability, SOHO – 216 plots Olympic Games will see further development energysaving performance, living environment, Others – 2 plots such as construction of the Olympic Village and residential floor area, and maintenance/ Exclusive floor area transport infrastructure. preservation plans. Residence (44.67m2~123.77m2) SOHO (32.34m2~57.05m2) Smooth access to major city centers is available The condominium also offers a custom-order from Kachidoki Station on the Tokyo Metro condominium service, an original system that Oedo line. The opening of Loop Road 2 and enables buyers to choose from a wide range of the Metropolitan Expressway Route No.10 layouts and interior colors free of charge. Harumi Line, a new transportation artery DEUX TOURS CANAL & SPA is not just a connecting central Tokyo and bay areas, is highly competitive condominium with superior scheduled for 2015, providing further access location. It also reflects detailed planning driven to central Tokyo, and Haneda and Narita by a commitment to housing performance and Airports. customer lifestyles to better enhance customer satisfaction.

12 13 Real Estate in Japan 2014 Real Estate in Japan 2014 CASE STUDY BRILLIA TAMA NEW TOWN

PROPERTY OVERVIEW

Name Brillia Tama New Town In October 2013 Tokyo Tatemono Co., Ltd. ideas. New concepts such as “coexistence” completed reconstruction and development (whereby the new residents live harmoniously work on the housing complex project Brillia with nature), “perpetuity” (to inherit a valuable Location Tama New Town, the largest of its kind in asset for future generations) and “environment” 2-2 and 2-4, Suwa, Japan. Tokyo Tatemono was selected as a (to minimize the running costs of common-use Tama City, Tokyo partner company by Suwa 2-chome Jutaku areas through energy-saving measures) were Site area kanri kumiai (management association) to also incorporated into the project. All of these 64,399.93m2 demolish Suwa 2-chome Jutaku, a residential fall under the project’s basic philosophy of complex with 23 five-story buildings with creating a community in which members can 640 units in total completed in 1971 by the live “worry free.” Structure former Japan Housing Corp. (now Urban Four separate rounds of unit sales saw a same- reinforced concrete structure, Renaissance Agency). In its place, the company day sellout following a PR strategy which (partial steel construction) built 11-story to 14-story buildings housing a highlighted Brillia Tama New Town as being Total unit total of 1,249 units (including 684 for-sale Japan’s largest ever reconstruction project. The condominiums), under a commercialization 1,249 units project also likely garnered favorable attention (684 available for sale) plan utilizing the Act on Facilitation of due to being located on an inland area hill in Reconstruction of Condominiums. Unit layout the wake of the Great East Japan Earthquake, 2DK~4LDK Tama New Town is the largest residential as well as its emphasis on bonds among development in Japan and spans hills across people (kizuna) and the creation of community. Inagi, Tama, Hachioji and Machida Cities A seven-minute walk to the nearest station, Exclusive floor area in Tokyo. Discussions on rebuilding Suwa a wide range of layout plans and detailed 43.14m2~101.44m2 2-Chome Jutaku began around 20 years specifications were also appreciated by those (for-sale units: 57.15m2~95.33m2) ago due to problems modifying the original that purchased units. The majority of residents Developer complex’s facilities and specifications. In a were in their 30s and 40s, but about 30% Suwa 2-Chome Jutaku Condominium competition to solicit collaborators for the were aged in their 50s, also showing support, Reconstruction Union project, Tokyo Tatemono proposed the “Tama and helped Brillia Tama New Town realize its New Town Renaissance Concept.” A new aim to become a multi-generational town. mindset was to be adopted: The project would Momentum for reconstruction is gathering for not only value the 40+ year-old history of suburban area condominiums similar to Suwa Suwa 2-Chome Jutaku and rejuvenate culture 2-Chome Jutaku that were developed during and create a new history, but also Tama New Japan’s period of rapid economic growth. Town in its entirety. This idea was highly Existing regulations limit the participation of evaluated and Tokyo Tatemono was selected to developers to work on such projects, and collaborate on Brillia Tama New Town. future issues facing the industry include how to During the reconstruction process, through establish systems that will allow reconstruction hearings and consultation, residents’ under more relaxed regulations. Tokyo opinions were acknowledged and taken into Tatemono Co., Ltd. recognizes the development consideration. Some of these were adopted of Brillia Tama New Town not only as a mere through trial-and-error, and kleingartens (20 reconstruction project, but also as a trigger to vegetable garden plots made available on revitalize New Towns across the nation. the premises) and a dog run (where dogs can play without a leash) are among such realized

14 Real Estate in Japan 2014 Real Estate in Japan 2014

From Post War Recovery to Building Boom OVERVIEW OF MAJOR After the war, major cities readjusted their zonings to promote recovery from the REAL ESTATE SECTORS disasters of the war. This led to a certain degree of order on downtown city streets. However, the construction of buildings by private companies in the late 1940s and early 1950s was still infantile due to a conspicuous URBAN REDEVELOPMENT lack of funds and materials. (URBAN RENEWAL) Upon entering the late 1950s, the first building boom occurred with the Jinmu The objective of urban redevelopment projects is to renew Economy that followed the end of the Korean urban functions, promote advanced use of land, improve War. Although banks still assessed the real estate industry poorly and made the disaster prevention properties and the urban environment, procurement of funds difficult, the system create public space and activate the local economy.

of Construction Cooperation Funds spread. URBAN REDEVELOPMENT It is the integrated and comprehensive arrangement of This system provided funds to facilitate buildings, retail properties and other urban facilities along construction of buildings that companies with streets, plazas and other urban infrastructure by expected to enter as tenants and the building rationally using land and rebuilding aged buildings. business took off. Spurred by the creation of the special urban block system In the early 1950s some of the buildings in 1961, the easing of absolute fixed height limits between whose construction had begun during the 1965 and 1975, and so forth, private companies also War but had been suspended or that had began undertaking ambitious redevelopment projects. been started after the war were completed. Throughout the late 1950s and early 1960s, In recent years, Urban Regeneration measures have been Mitsubishi Estate completed a number of hammered out by the government to heighten the appeal buildings and company buildings of financial of cities and their international competitiveness, and the institutions and newspapers on national land urban development projects of the private sector are they had been granted (land grant) one after receiving proactive support. the other. As a result, the Tokyo business district from Yurakucho to Otemachi was

basically completed. ( URBAN RENEWAL In the late 1960s and early 1970s, there was a dramatic relaxing of regulations limiting building heights as a result of the System of Special Urban Block Area1 of 1961 and the FAR Regulations2 of 1963. In 1964, the Tokiwabashi Redevelopment (Nippon Building, etc.) and Kasumigaseki Building of Tokyo were simultaneously designated as the first special urban block. Both of these were completed in 1968. At the time, both

of these properties enjoyed prestige as the ) largest buildings and the first skyscrapers in the East. Also in 1968 the preparation of an infrastructure on the former site of the Yodobashi Water Purification Plant of Tokyo was completed and the land was sold to the private sector. This was the start of building the new Shinjuku Shintoshin (new downtown) area of skyscrapers.

Private Companies Take Active Role in Redevelopment The history of redevelopment in Japan is primarily the history of local governments

15 Real Estate in Japan 2014 Primary Systems for Promoting Urban Redevelopment

Grant and Subsidy System improvement project Special Tax Measures • FAR appropriate distribution district • City lot redevelopment project • Town creation grant system • Urban district redevelopment project plans • Superior building improvement project • Specific private redevelopment project • FAR district plans by usage • Residential district improvement Public Financing • Special model refinancing • Promoted FAR district plans Urban district redevelopment project, project • • Approved city regeneration projects • Town environment promotion district • Public facility improvement promotion etc. financing system plans Urban district redevelopment, etc. Urban Planning and Building project related to city redevelopment • • Comprehensive development design Regulation Promotion Measures • City regeneration lot adjustment financing (Development Bank of system Japan) • Specific blocks project • Consecutive building design system Loaning of public funds (Organization • Sophisticated use districts • General town creation support project • • Comprehensive development design of • Redevelopment, etc. promotion • City energization regeneration base for Promoting Urban Development) apartment areas districts

History of Building Vacancy and Floor Area (Stock)

90,000（ha） Office floor area (national, left scale) 10（%） 86,023 86,144 86,730 Office floor area (Tokyo area, left scale) 85,227 85,233 81,442 82,557 9.1 80,000 80,277 78,150 79,158 76,434 77,303 74,815 Office vacancy (national, right scale) 73,363 8.0 71,614 8.0 70,000 69,509 Office vacancy (Tokyo area, right scale) 7.4 7.2 64,341 8.0 62,375 7.4 6.6 6.6 60,000 59,670 6.3 56,637 6.2 53,770 50,000 51,076 5.6 5.3 5.9 48,456 5,7 5.1 5.0 5 4.6 40,000 4.0 4.4 4.9 37,037 4.7 4.1 4.6 4.7 3.7 3.5 4.2 30,000 29,130 3.7 3.7 3.4 3.6 2.8 3.2 2.1 2.8 20,000 21,12323 2.9 1.8 2.3 1.7 2.2 1.3 1.9 10,000 14,189 15,041 0.9 13,444 0.7 1.8 10,118 0.6 0.4 0.2 0.2 0.2 0 5,895 7,900 0.5 15,961 17,051 17,985 18,632 19,711 20,236 20,640 20,962 21,389 21,578 21,893 22,296 22,649 22,994 23,385 23,922 24,201 24,443 24,619 24,799 0 1975 80 85 90 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 (year) Source: Prepared using Building Fact-Finding Study Results issued by the Tokyo Building Owners and Managers Association, Building Fact-Finding Study Results issued by the Building Owners and Managers Association, Summary of Investigation on Fixed Asset Price, etc. Issued by the Ministry of Internal Affairs and Communications. Notes: 1. Vacancy rates are studies on April 1 of each year. The 1998-2000 data of the Tokyo Building Owners and Managers Association differs from the study of the Japan Building Owners and Managers Association; therefore, Tokyo Building Owners and Managers Association's data are not included in the national average. They became the same study from 2001 again. 2. (1) Stock is the total floor area of wooden house offices and banks and non-wooden house offices, stores, department stores and banks. However, stores are also included in wooden houses from 1997. (2) The stock is as of January 1 of each year. (3) Tokyo area as pertains to stock: Tokyo, Kanagawa Prefecture, Chiba Prefecture and Saitama Prefecture. aiming to renew low quality city streets formed coordination of multiple landholders’ rights owners and completed the new town after with little or no order, and to recover from the and the preparation of a public infrastructure. a period of 17 years. In addition, Hibiya City destruction of earthquakes, wars and fires. was completed in 1981 on two special urban Although private companies played a role in Era of Planar Redevelopment blocks that were the former site of NHK. This building and supplying buildings and stores Upon entering the mid-1970s, the oil shocks project comprised of four buildings is well 3 in the mid-1950s, they were rarely proactively had ended and led to a slowdown in the known as a project in which air rights were involved in broader redevelopment projects. concentration of industries and people in sold within the special urban blocks. Between the early and mid-1960s, various major cities along with the building boom From Development Boom to Sudden systems were established for securing a calming down. On the other hand, high Building Slump good city environment and attracting superior quality developments worthy of being architecture and developments. These called “town creation” projects began to Between the late 1980s and the early 1990s included creating the system of special be conducted utilizing a new business there was an unprecedented development urban blocks, transferring regulations with system. One representative project of this is boom backed by the spread of information absolute fixed height limits to regulations the Ark Hills project in Minato Ward, Tokyo technology and the emergence of Tokyo based on FARs, and the establishment that was completed in 1986. This was the as an international finance center. The of the New City Planning Law and City first city redevelopment project primarily announcements of very strong demand Redevelopment Law. Private companies took conducted by a private developer based on forecasts made into the mid-1980s by the advantage of the opportunities presented the City Redevelopment Law established National Land Agency (today’s Ministry of by these developments to embark on in 1969. The developer diligently obtained Land, Infrastructure, Transport and Tourism) large redevelopment projects requiring the the understanding of multiple land rights and by multiple think tanks led to a building

16 Real Estate in Japan 2014 Real Estate in Japan 2014

Flow of an Urban District Redevelopment Project

Individual Association Redevelopment [Local public body] Urban Renaissance Agency, implementation implementation company Housing Supply Corporation, etc.

Selection of sophisticated use district, etc.

Decide city plan for urban district redevelopment promotion district

Decide city plan for project

Governor approval for Governor approval for Governor approval for Minister of Land, Infrastructure, Minister of Land, Infrastructure, project implementation association launch project implementation Transport and Tourism or governor Transport and Tourism or governor approval of approval of business plan implementation regulations and business plan

(Category 1 Urban District Redevelopment Project) (Category 2 Urban District Redevelopment Project)

Registration of start to right conversion procedure Application for transfer request and lease request including application indicating no desire for right conversion Preparation of managed disposal plan

Preparation of right conversion plan URBAN REDEVELOPMENT Approval by Minister or governor of managed disposal plan Approval of right conversion plan by Minister or governor Acquisition, etc. of land (1) Payment of compensation or Payment of compensation (2) Acquisition of right to be transferred building facility portion

Conversion of rights on right conversion date Execution of construction

Registration of right conversion Public announcement of building Public announcement of public facility construction completion construction completion Execution of construction

Public announcement of construction completion Registration of building facility portion, etc. Settlement

Settlement Registration of facility structure construction rush that was so great that ten Legal Redevelopment and Voluntary projects include the simple rebuilding of years worth of estimated floor space demand Redevelopment buildings. It is the general term used for was built in only three years. Companies projects that use methods other than urban (

There are two types of city redevelopment URBAN RENEWAL not traditionally involved in development redevelopment projects. These projects projects: legal redevelopment and voluntary entered the building business and triggered comprehensively apply city planning redevelopment. the soaring land prices that became known systems such as special urban blocks and as the bubble. On the other hand, during Legal redevelopment projects are urban special building regulations including the this ten-year period many mega projects that redevelopment projects based on the City comprehensive design system5, tax measures had been conducted over a prolonged period Redevelopment Law4 and these projects are and subsidy measures. executed as city planning projects. Urban such as the development of waterfront areas Since there is no legal force behind the redevelopment projects are implemented in major cities began to appear. Examples of execution of the project, it requires the with the enforcement of laws and seek to these include Makuhari in Chiba Prefecture, approval of all the land right owners, but at improve the disaster prevention capabilities Minato Mirai 21 in Yokohama, Osaka Business the same time there are no strict requirements Park (OBP) and Yokohama Business Park of buildings in cities, renew city functions

such as the need for there to be at least a ) and achieve sophisticated land use. Due (YBP). All of these projects drew attention certain percentage of old buildings within to the enforcement of laws, there are strict as unprecedented multiuse developments the district. Furthermore, the need for requirements for this type of redevelopment in Japan. However, with the headlong rush redevelopment from the perspective of disaster including maintaining a certain ratio of old into the Heisei recession (starting in the late prevention grew as a result of the occurrence or wooden buildings within the set district. 1980s) emerged unprecedented high vacancy of the Great Hanshin Awaji Earthquake. The Since this type of project has a strong public rates, remarkable decreases in rents and other resulting measures included enforcement (government) characteristic, various tax 180-degree transformations in the building of the law concerning the promotion of incentives and support systems are in place for market. This forced some projects such as disaster prevention district infrastructures these projects. the Tokyo waterfront subcenter to undergo within heavily concentrated city areas in significant revisions. Voluntary redevelopment is generally the 1997. These measures sought to effectively unification of divided lots, conversion of land promote redevelopment in city areas that were use (former factory sites, etc.) to redevelop recognized as risky with regard to disaster areas including the construction of public prevention. facilities. At its broadest meaning, these

17 Real Estate in Japan 2014 Major Private City Redevelopment Projects

Development Construction Name Address Area (ha) Completed Main Developer, Participating Companies, etc. Primary Facilities Previous Use Remarks Kasumigaseki Building Chiyoda Ward 1.6 Apr. 1968 Mitsui Fudosan Office, retail Auditorium Specified district Sunshine City Toshima Ward 6.1 May 1978 New City Development Center Office, hotel, exhibit hall Jail Specified district Akasaka and Roppongi Ark Minato Ward 5.6 Mar. 1986 Partnership, Mori Building Office, hotel, TV studio, housing Housing, retail, church, etc. Category 1 urban district redevelopment project Hills Osaka City, (former) Housing and Urban Development, Matsushita Investment Osaka Business Park Osaka City 26.0 Mar. 1990* Office, hotel, retail, multi-purpose hall Warehouse (former army depot) Land zoning adjustment project and Development, Tokio Marine & Fire Insurance, etc. Shinjuku Fuku-toshin Construction Corporation, Sumitomo Realty & Shinjuku Fukutoshin Shinjuku Ward 56.0 Jun. 1990* Development, Tokyo Tatemono, Nomura Real Estate Development, Mitsui Office, retail, hotel Water purification center Specified district Fudosan, Keio Teito Electric Railway, etc. Yokohama Business Park Yokohama City 13.2 Mar. 1991 Nomura Real Estate Development Office, R&D facility, retail Glass factory Emergency city base development promotion project

Tennozu Isle Shinagawa Ward 20.0 Jun. 1992* Voluntary Council of Landowners, Mitsubishi Corporation, Ube Industries, etc. Office, hotel, retail, housing Warehouse, housing District plan

Shin Umeda City Osaka City 4.2 Mar. 1993 Sekisui House, AOKI Construction, Toshiba, etc. Office, hotel, retail, aerial park Automobile plant, warehouse Comprehensive development design system Okawabata River City 21 Chuo Ward 17.0 May 1993* Tokyo, (former) Housing and Urban Development, Mitsui Fudosan Housing, retail Shipyard Specified housing land improvement project Setagaya Business Square Setagaya Ward 2.1 Nov. 1993 Tokyu Land and Tokyu Corporation Office, retail Train depot District plan St. Luke’s International Hospital, Seiwa Real Estate, Tokyu Land, Towa Real St. Luke’s International Chuo Ward 3.9 May 1994* Estate Development, Nippon Life Insurance, Matsushita Investment and Hospital, housing, office Hospital Specified district Hospital Redevelopment Development, Mitsui Fudosan Shibuya and Meguro Yebisu Garden Place 8.3 Oct. 1994 Sapporo Breweries Office, retail, hotel, housing, hall, museum Brewery Specified housing land improvement project Wards Canal City Hakata Fukuoka City 4.2 Apr. 1996 Fukuoka Jisho, Organization for Promoting Urban Development Retail, hotel, cultural facility, amusement facility Plant Category 1 urban district redevelopment project Office, hotel, retail, housing, international convention Yokohama Minato Mirai 21 Yokohama City 186.0 Jul. 1997* Yokohama City, (former) Housing and Urban Development, Mitsubishi Estate Shipyard, railyard Public water reclamation project, land zoning adjustment project center, museum Shinagawa Inter City Minato Ward 4.0 Dec. 1998 Kowa Real Estate, Sumitomo Life Insurance, Obayashi Corporation Office, retail, multi-purpose hall Railyard Redevelopment district plan

Gate City Osaki Shinagawa Ward 5.9 Feb. 1999 Partnership, TEPCO, Osaki Land and Building, Mitsui Fudosan, Fuji Life, etc. Office, retail, housing, cleaning center, plant Plant, apartment, etc. Category 1 urban district redevelopment project

Nippon Life Insurance, NTT Urban Development, Odakyu Department Store, Tokyo Opera City Shinjuku Ward 4.4 Mar. 1999 Theater, office, retail Industry test yard Specified district Keio Corporation, etc. Harumi Island Triton Square Chuo Ward 14.2 Sept. 2001 (Former) Urban Development Corporation, Sumitomo Corporation Office, retail, housing, hall Housing, warehouse, logistics center District plan, Category 1 urban redevelopment project Izumi Garden Minato Ward 3.2 Jul. 2002 Partnership, Sumitomo Realty & Development, Mori Building Office, retail, hotel, housing, museum, etc. Auditorium, housing Category 1 urban district redevelopment project Marunouchi Building Chiyoda Ward 1.0 Sept. 2002 Mitsubishi Estate Office, retail Office, retail Specified district Dentsu, Nippon Television Network Corporation, Matsushita Electric Works, Shiodome Sio-Site Minato Ward 30.7 Jan. 2003* Office, housing, hotel, retail, broadcasting center, etc. Station, cargo station Land zoning adjustment project etc. Mitsubishi Corporation, Mitsubishi Heavy Industries, Mitsubishi Motors, Daito Minato and Shinagawa Grand Commons 5.3 Mar. 2003 Trust Construction, Taiyo Life Insurance, Cannon Sales, Tokyo Tatemono, Office, hotel, retail, housing Office, retail, plant Land zoning adjustment project, redevelopment district plan Shinagawa Wards Kintetsu Real Estate, Nippon Tochi-Tatemono Hanbai, Total Housing Office, hotel, retail, theater, museum, broadcasting Roppongi Hills Minato Ward 11.0 Apr. 2003 Partnership, Mori Building Office, retail, housing, broadcast center Category 1 urban district redevelopment project center, housing

Marunouchi oazo Chiyoda Ward 2.4 Sept. 2004 Mitsubishi Estate, Nippon Life Insurance, Marunouchi Hotel, Chuo Fudosan Office, hotel, retail Office, hotel, retail Comprehensive development design

Olinas Sumida Ward 2.7 Mar. 2006 Tokyo Tatemono, Mitsui & Co., Shoei Office, retail, housing Plant Specified district Mitsui Fudosan, JA Kyosai, Meiji Yasuda Life Insurance, Sekisui House, Fukoku Tokyo Midtown Minato Ward 6.9 Jan. 2007 Office, housing, hotel, retail State-owned land (former Defense Agency) Redevelopment district plan Mutual Life Insurance, Daido Life Insurance Akasaka Sacas Minato Ward 3.3 Mar. 2008 Tokyo Broadcasting System Television, Mitsui Fudosan Office, retail, theater, broadcast center, housing, etc. Office, broadcast center, theater, etc. Redevelopment district plan JA-ZENCHU (Central Union of Agricultural Co-operatives), Nippon Keidanren Otemachi 1-chome Area Private urban redevelopment business plan, Special District for Chiyoda Ward 1.5 Apr. 2009 (Japan Business Federation), Nikkei Inc., Mitsubishi Estate, NTT Urban Office, conference hall, retail Joint public offices Redevelopment Project Redevelopment Development, Tokyo Tatemono, The Sankei Building, etc. Marunouchi Park Building, Chiyoda Ward 1.2 Apr. 2009 Mitsubishi Estate Office, retail, museum Office, retail Special district for urban redevelopment, Special FAR district Mitsubishi Ichigokan Client Council for Promotion of the Shibuya New Cultural District Development Shibuya Hikarie Shibuya Ward 0.9 Apr. 2012 Office, retail, cultural facility Cultural hall Special district for urban redevelopment Project, Tokyu Corporation, Tokyo Metro, etc. Nakano Central Park Nakano Ward 16.8 May 2012 Tokyo Tatemono, Kajima Corporation, Shouei, Nippon Tochi-Tatemono, etc. Office, housing, retail National Police Academy Private urban redevelopment business plan Ark Hills Sengokuyama Mori Minato Ward 2.0 Aug. 2012 Mori Building Office, retail, housing Forestry agency staff quarters Category 1 urban district redevelopment project Tower Urban Renaissance Agency, Mitsubishi Estate, NTT Urban Development, Tokyo Otemachi Financial City Chiyoda Ward 1.4 Oct. 2012 Office, retail, medical institution, etc. Building, auditorium Category 1 urban district redevelopment project Tatemono, The Sankei Building Mitsubishi Estate, NTT Urban Development, Obayashi Corporation, ORIX Real Grand Front Osaka Osaka City 3.8 Mar. 2013 Office, retail, knowledge capital, housing, etc. Station Special district for urban development Estate, Kanden Fudosan, Nippon Steel City Produce, etc.

Note: Construction Completed indicates the month and year of completion of entire project or the grand opening. However, those marked with an "*" indicate the month and year of completion of the main structure.

18 Real Estate in Japan 2014 Real Estate in Japan 2014

Development Construction Name Address Area (ha) Completed Main Developer, Participating Companies, etc. Primary Facilities Previous Use Remarks Kasumigaseki Building Chiyoda Ward 1.6 Apr. 1968 Mitsui Fudosan Office, retail Auditorium Specified district Sunshine City Toshima Ward 6.1 May 1978 New City Development Center Office, hotel, exhibit hall Jail Specified district

Akasaka and Roppongi Ark Minato Ward 5.6 Mar. 1986 Partnership, Mori Building Office, hotel, TV studio, housing Housing, retail, church, etc. Category 1 urban district redevelopment project Hills Osaka City, (former) Housing and Urban Development, Matsushita Investment Osaka Business Park Osaka City 26.0 Mar. 1990* Office, hotel, retail, multi-purpose hall Warehouse (former army depot) Land zoning adjustment project and Development, Tokio Marine & Fire Insurance, etc. Shinjuku Fuku-toshin Construction Corporation, Sumitomo Realty & Shinjuku Fukutoshin Shinjuku Ward 56.0 Jun. 1990* Development, Tokyo Tatemono, Nomura Real Estate Development, Mitsui Office, retail, hotel Water purification center Specified district Fudosan, Keio Teito Electric Railway, etc. Yokohama Business Park Yokohama City 13.2 Mar. 1991 Nomura Real Estate Development Office, R&D facility, retail Glass factory Emergency city base development promotion project

Tennozu Isle Shinagawa Ward 20.0 Jun. 1992* Voluntary Council of Landowners, Mitsubishi Corporation, Ube Industries, etc. Office, hotel, retail, housing Warehouse, housing District plan

Shin Umeda City Osaka City 4.2 Mar. 1993 Sekisui House, AOKI Construction, Toshiba, etc. Office, hotel, retail, aerial park Automobile plant, warehouse Comprehensive development design system Okawabata River City 21 Chuo Ward 17.0 May 1993* Tokyo, (former) Housing and Urban Development, Mitsui Fudosan Housing, retail Shipyard Specified housing land improvement project

Setagaya Business Square Setagaya Ward 2.1 Nov. 1993 Tokyu Land and Tokyu Corporation Office, retail Train depot District plan URBAN REDEVELOPMENT St. Luke’s International Hospital, Seiwa Real Estate, Tokyu Land, Towa Real St. Luke’s International Chuo Ward 3.9 May 1994* Estate Development, Nippon Life Insurance, Matsushita Investment and Hospital, housing, office Hospital Specified district Hospital Redevelopment Development, Mitsui Fudosan Shibuya and Meguro Yebisu Garden Place 8.3 Oct. 1994 Sapporo Breweries Office, retail, hotel, housing, hall, museum Brewery Specified housing land improvement project Wards Canal City Hakata Fukuoka City 4.2 Apr. 1996 Fukuoka Jisho, Organization for Promoting Urban Development Retail, hotel, cultural facility, amusement facility Plant Category 1 urban district redevelopment project Office, hotel, retail, housing, international convention Yokohama Minato Mirai 21 Yokohama City 186.0 Jul. 1997* Yokohama City, (former) Housing and Urban Development, Mitsubishi Estate Shipyard, railyard Public water reclamation project, land zoning adjustment project center, museum Shinagawa Inter City Minato Ward 4.0 Dec. 1998 Kowa Real Estate, Sumitomo Life Insurance, Obayashi Corporation Office, retail, multi-purpose hall Railyard Redevelopment district plan

Gate City Osaki Shinagawa Ward 5.9 Feb. 1999 Partnership, TEPCO, Osaki Land and Building, Mitsui Fudosan, Fuji Life, etc. Office, retail, housing, cleaning center, plant Plant, apartment, etc. Category 1 urban district redevelopment project

Nippon Life Insurance, NTT Urban Development, Odakyu Department Store, Tokyo Opera City Shinjuku Ward 4.4 Mar. 1999 Theater, office, retail Industry test yard Specified district Keio Corporation, etc. Harumi Island Triton Square Chuo Ward 14.2 Sept. 2001 (Former) Urban Development Corporation, Sumitomo Corporation Office, retail, housing, hall Housing, warehouse, logistics center District plan, Category 1 urban redevelopment project Izumi Garden Minato Ward 3.2 Jul. 2002 Partnership, Sumitomo Realty & Development, Mori Building Office, retail, hotel, housing, museum, etc. Auditorium, housing Category 1 urban district redevelopment project Marunouchi Building Chiyoda Ward 1.0 Sept. 2002 Mitsubishi Estate Office, retail Office, retail Specified district Dentsu, Nippon Television Network Corporation, Matsushita Electric Works, Shiodome Sio-Site Minato Ward 30.7 Jan. 2003* Office, housing, hotel, retail, broadcasting center, etc. Station, cargo station Land zoning adjustment project etc. ( URBAN RENEWAL Mitsubishi Corporation, Mitsubishi Heavy Industries, Mitsubishi Motors, Daito Minato and Shinagawa Grand Commons 5.3 Mar. 2003 Trust Construction, Taiyo Life Insurance, Cannon Sales, Tokyo Tatemono, Office, hotel, retail, housing Office, retail, plant Land zoning adjustment project, redevelopment district plan Shinagawa Wards Kintetsu Real Estate, Nippon Tochi-Tatemono Hanbai, Total Housing Office, hotel, retail, theater, museum, broadcasting Roppongi Hills Minato Ward 11.0 Apr. 2003 Partnership, Mori Building Office, retail, housing, broadcast center Category 1 urban district redevelopment project center, housing

Marunouchi oazo Chiyoda Ward 2.4 Sept. 2004 Mitsubishi Estate, Nippon Life Insurance, Marunouchi Hotel, Chuo Fudosan Office, hotel, retail Office, hotel, retail Comprehensive development design

Olinas Sumida Ward 2.7 Mar. 2006 Tokyo Tatemono, Mitsui & Co., Shoei Office, retail, housing Plant Specified district Mitsui Fudosan, JA Kyosai, Meiji Yasuda Life Insurance, Sekisui House, Fukoku Tokyo Midtown Minato Ward 6.9 Jan. 2007 Office, housing, hotel, retail State-owned land (former Defense Agency) Redevelopment district plan Mutual Life Insurance, Daido Life Insurance Akasaka Sacas Minato Ward 3.3 Mar. 2008 Tokyo Broadcasting System Television, Mitsui Fudosan Office, retail, theater, broadcast center, housing, etc. Office, broadcast center, theater, etc. Redevelopment district plan JA-ZENCHU (Central Union of Agricultural Co-operatives), Nippon Keidanren Otemachi 1-chome Area Private urban redevelopment business plan, Special District for Chiyoda Ward 1.5 Apr. 2009 (Japan Business Federation), Nikkei Inc., Mitsubishi Estate, NTT Urban Office, conference hall, retail Joint public offices ) Redevelopment Project Redevelopment Development, Tokyo Tatemono, The Sankei Building, etc. Marunouchi Park Building, Chiyoda Ward 1.2 Apr. 2009 Mitsubishi Estate Office, retail, museum Office, retail Special district for urban redevelopment, Special FAR district Mitsubishi Ichigokan Client Council for Promotion of the Shibuya New Cultural District Development Shibuya Hikarie Shibuya Ward 0.9 Apr. 2012 Office, retail, cultural facility Cultural hall Special district for urban redevelopment Project, Tokyu Corporation, Tokyo Metro, etc. Nakano Central Park Nakano Ward 16.8 May 2012 Tokyo Tatemono, Kajima Corporation, Shouei, Nippon Tochi-Tatemono, etc. Office, housing, retail National Police Academy Private urban redevelopment business plan Ark Hills Sengokuyama Mori Minato Ward 2.0 Aug. 2012 Mori Building Office, retail, housing Forestry agency staff quarters Category 1 urban district redevelopment project Tower Urban Renaissance Agency, Mitsubishi Estate, NTT Urban Development, Tokyo Otemachi Financial City Chiyoda Ward 1.4 Oct. 2012 Office, retail, medical institution, etc. Building, auditorium Category 1 urban district redevelopment project Tatemono, The Sankei Building Mitsubishi Estate, NTT Urban Development, Obayashi Corporation, ORIX Real Grand Front Osaka Osaka City 3.8 Mar. 2013 Office, retail, knowledge capital, housing, etc. Station Special district for urban development Estate, Kanden Fudosan, Nippon Steel City Produce, etc.

19 Real Estate in Japan 2014 History of Supply Volume of Major Office Building in 23 Wards of Tokyo

240 (10,000m2)

Construction not started 210 216 Incomplete (construction started)

Construction completed 180 183 181

150 154

120 125 114 118 119 121 117 114 119 108 104 91 90 100 99 1 92 91 86 85 78 74 77 60 72 65 58 90 30 36

36 45 0 1989 90 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 (year) Source: Prepared using the Major Office Building Market Trends Study for Tokyo (December 2012 Study) issued by Mori Building. Notes: 1. Study covers new major office buildings with total office floor areas of at least 10,000m2 in the 23 wards of Tokyo. 2. Supply indicates the net supply of office floor area in major office buildings excluding that for non-office uses such as stores, residences and hotels.

Promoting Residences in City Centers and gives them the ability to enjoy sufficient recognizing a group of sites (even including leisure time. In part because the collapse of existing structures) as a single lot. These One of the housing policies of recent years land prices in city centers made it possible various deregulation measures and the fall in involves promoting residences in city centers. to supply housing downtown, the Ministry of land and construction prices of recent years The concentration of work functions in city Land, Infrastructure, Transport and Tourism has increased the nighttime populations of centers caused a conspicuous outflow of the and other government agencies have the three central wards to 360,000 people in residential population from city centers. The established various measures to promote the 2009. construction rush of office buildings during the supply of good apartments and condominiums period in which land prices soared remarkably in downtown areas through the efficient and Implementation of Urban accelerated this phenomenon. For example, sophisticated use of land. Regeneration Measures and Progress the nighttime population of the three central of Development Projects wards of Tokyo fell from 550,000 people in The primary measures introduced include the 1960 to 240,000 people in 1995, a halving of creation of a district program for heightening Redevelopment projects have a very high the population in just 35 years. the appeal of town areas in 19956, creation ripple effect on the economy and greatly of areas permitted to have tower residences7, contribute to economic recovery through an This led to the problem of communities a system for comprehensive development expansion of domestic demand. The proactive deteriorating in city centers, the integration design by lot size8 and rationalization of promotion of urban redevelopment projects by and closure of public elementary and junior FAR limits on condominiums and other private companies as measures to invigorate high schools due to the decrease in students apartments9. Furthermore, the Metropolitan the country’s economy, which was mired in and children, and to slumping performance Government of Tokyo established a a continuing slump, had large expectations among local stores in these areas. On the headquarters for promoting residences in placed on it. other hand, many of those working in these downtown Tokyo as a means to reliably city centers reside over a broad range of Due to these expectations, the government implement these measures. In addition, a suburbs in surrounding prefectures and are came up with a number of measures between drastic revision of the Building Standards Law forced to endure long commutes. Thus, it is 1997 and 1998 to promote redevelopment was passed in 1998 and the Consecutive difficult for these people to live a leisurely, projects within its economic measures Building Design System10 was created. This satisfying lifestyle. and improve the business environment. system was established from the perspective These included application of the Urban The promotion of residence in city centers not of promoting efficient land use while securing Development Corporation (presently the Urban only leads to a regeneration of the community desirable city environments and arranged Renaissance Agency) and Organization for in the city but also relieves those working for the unified application of regulations Promoting Urban Development to prepare a in city centers from prolonged commutes on FARs and building height restrictions by support infrastructure along with the creation

20 Real Estate in Japan 2014 Real Estate in Japan 2014

of a system of approved redevelopment Also, subject areas of urgent city regeneration Establishment of the Committee for projects and a specific project participants districts expanded with the complete revision Disaster Prevention at Real Estate system and establishment of measures to of the basic policies of city regeneration State and local governments are promoting speed up and support redevelopment projects. in 2011, and as of the end of the year, 65 the creation of cities that are prepared for districts with a total of about 6,810 hectares In 2001, the Urban Renaissance Headquarters disasters, learning from the lessons of the (designated as 1st to 6th levels) had been was established in the cabinet with then Prime Great East Japan Earthquake of 2011. In designated. Minister Jinichiro Koizumi as its head, with order for developers who provide buildings the objective of promoting the fluidization of and condominiums to engage in the International Competitiveness of Cities land and revitalization of Japan by developing creation of safe and secure working and the necessary urban renaissance platform Because of economic globalization, the living environments, there is a need for and revitalizing cities. The headquarters industrial global competitiveness of cities increasing the quality of concrete aspects reviewed systems without sanctuary. In 2002, has become a national development focus. such as earthquake resistance, energy- through the establishment of the Urban In order to compete effectively with major saving and barrier-free functions, while Renaissance Special Measures Law, urgent world cities such as New York, London and helping to construct systemic aspects such city regeneration districts began. These are other Asian cities, whose progress has been as sophisticated and city-wide disaster critical and important districts designated remarkable, it is necessary for Japan’s cities prevention functions and energy networks, by the central government as bases for city look ahead and build appealing districts that with increased cooperation with a variety of URBAN REDEVELOPMENT regeneration for city lots that should be will attract international talent, capital, and entities in communities. More specifically, developed. This paved the way for sale of land information. due to the need to cooperate with private and by the JNR Settlement Corporation and other In 2011, the Special Measures Act for Urban public sectors to respond to commuters that developments, and an enormous amount of Renaissance was partially revised, designating would have difficulties returning home after large office buildings were supplied to areas regions where strengthening global disasters, develop disaster prevention facilities such as Shiodome, Shinagawa and Roppongi competitiveness would be particularly effective and establish disaster prevention plans in from 2002. as “specific urban redevelopment emergency cooperation with communities, the Real Estate Many of the buildings in these areas have development areas,” and a Comprehensive Companies Association of Japan established built multi-use developments that are not just Special Zone system was set up via the the Committee for Disaster Prevention at Real office buildings but also include functions Comprehensive Special Zone Act.11 In 2013, Estate in September 2011 and is deliberating such as hotels and theaters. Even in 2007 and the National Strategic Special Zone bill was on the measures. A report was compiled in onwards, the areas have seen the completion passed, determining the designation and April 2012. of the Shinmaru Building, Tokyo Midtown, specific details of National Strategic Special Akasaka Sacas, Marunouchi Park Building, Zones.12 Mitsubishi Ichigokan and many more. (

[Endnotes] URBAN RENEWAL

1. Special Urban Block Area building. The implementing party is a local public body or Urban 9. Rationalization of FAR Limits for Condominiums and Districts designated in city plans for preserving and forming Renaissance Agency and they can also expropriate the land. Other Apartments superior city spaces. Within these designated blocks, regulations This heightened the usable FAR by removing hallways and stair concerning FARs, building coverage ratio, height restrictions 5. Comprehensive Development Design System common areas of condominiums and other apartments from the and sunlight regulations under the Building Standards Law are A system in which approval by the specific administrative agency calculations for FAR limits. As a result, it became possible to use not applied and unique FARs, height restrictions and wall plane for a lot area which has secured a certain ratio or more of empty FAR about 1.2 times than if hallways, etc. are included in the floor locations are designated for said blocks (Article 8 of the City land for a building of a certain size recognizes a special exception area (Article 52-5 of the Building Standards Law). Planning Law and Article 60 of the Building Standards Law). on the absolute height in a dedicated Category 1 or Category 2 exclusively low-rise residential district or for FAR or setback 10. Consecutive Building Design System 2. FAR Regulations restrictions (Article 59-2 of the Building Standards Law). This system admits exceptions to the rule of one building for FAR refers to the ratio of the total building floor area to lot area one lot. When buildings are constructed according to a rational that is designated according to the use zone. Prior to introduction 6. Town Environment Promotion District Plan design based on the premise of the existing building remaining of FAR, there were absolute height restrictions of 20 meters in When in an existing city area the building height, arrangement on an integrated land site comprised of several lots, special residential areas and 31 meters in other areas. Creation of this and form are designated as a unified district plan in accordance measure exceptions are applied that recognize several buildings system enabled the construction of tall buildings (Article 52 of the with the district characteristics and necessary regulations are as existing on the same site when the specified government Building Standards Law). implemented, then the application of FAR restrictions and agency recognizes that the location and structures of each ) 3. Air Rights setback restrictions based on the width of the road to the front building presents no safety, fire prevention or sanitation problem. (1) Right to use space above the land (air right) and (2) Right are excluded. This was created to promote the city environment Specifically, FAR and building coverage ratios are applied with to receive transferred FARs from neighboring lots (transferable through individual building activity, rational, healthy and efficient the multiple buildings recognized as a single unit, and sunlight development right). The former is the same as sectional surface use of land and formation of a good environment (Article 12-5 of restrictions and neighboring lot setback restrictions related to rights designated in the Civil Code. Both can be transferred the City Planning Law). each building in that district are judged individually. This system is expected to promote sophisticated use by enabling unused FARs through a sale and an example of the latter is Hibiya City. The 7. Skyscraper Residence Promotion District excess FAR for the Nippon Press Center Building was transferred to of neighboring lots to be used and overcoming of FAR restrictions the Hibiya Kokusai Building and other spaces. Community districts designated as districts for promoting the using road widths when the neighboring lot borders a wide road. building of residential skyscrapers. This is set for Category 4. City Redevelopment Law (Categories 1 and 2) 1 residential districts, Category 2 residential districts, quasi- 11. Comprehensive Special Zone Act In Category 1, landowners in the district (individual implementers) residential districts, neighboring commercial districts and quasi- Based on the “New Growth Strategy: Revival Scenario on the and an association of all landowners (an association can be industrial districts. “New Growth Strategy: Revival Scenario for a Healthy Japan,” formed when there are at least five landowners or leaseholders) this Comprehensive Zone Law packages special measures of along with the local public body become the implementing party. 8. Comprehensive Development Design System regulation and taxation, fiscal and monetary support systems The basic structure involves transferring the rights of landowners by Lot Size utilizing responsible regional strategies, the knowledge and funds before the project is implemented to the new building’s floor A comprehensive development design system in which the of the private sector and perspectives of selection and focus of area and common interest in the site after construction (rights increase in FAR becomes greater the larger the lot size. This national policy to the maximum. conversion), then disposing of remaining floor and site rights provides the developer with an incentive for combining lots by (reserved floor) and applying those funds to project costs. The increasing the FAR in accordance with the size and was created 12. National Strategic Special Zones developer participates in the project as an individual implementer with the objective of promoting the construction of good structures These are special zones in which the international business or member of the association, or as the agent of an individual that contribute to improving city environments. environment is to be improved among other means to strengthen implementer or the scheduled purchaser of the reserved floor. industrial global competitiveness and promote the development of Category 2 involves paying compensation to the rights holders international economic activity hubs. in the district and purchasing the entire rights for the land and

21 Real Estate in Japan 2014 CASE STUDY REDEVELOPMENT OF NIHONBASHI AREA

PROPERTY OVERVIEW

Name Muromachi Furukawa Mitsui Building The Nihonbashi Revitalization Project is a plan (BCP) countermeasures, fulfilling the needs collaboration between Mitsui Fudosan Co., of global companies. The lower, commercial Ltd., the public and private sector and the sections of these buildings opened in March Location local community, “Proceeding to Create 2014 as COREDO Muromachi 2 and COREDO 2-3-1, Nihonbashi-Muromachi, While Retaining and Reviving” the area. Muromachi 3, respectively. Fukutoku Shrine, Chuo-ku, Tokyo The Nihonbashi Muromachi East District which has overlooked Nihonbashi Muromachi Site area Development Project is a cornerstone of for more than a thousand years, will be 2 approx. 3,723m this revitalization, and encompasses the restored as the third phase of the project, and development of five blocks as a whole. Offices, completion is planned for October 2014. Total floor space commercial facilities, rental residences, 2 Muromachi Furukawa Mitsui Building is approx. 62,470m multipurpose halls, cinema complexes, etc., 2 comprised of three sections: the 18th to 21st covering over 180,000m of total floor area all floors are rental residences; the 7th to 17th Floors form part of the redevelopment. floors are offices; and floors B1 through 6th 22 floors above ground, The development will incorporate features are commercial facilities. Park Axis Premier 4 basement floors unlike any other in Japan. Respectful of the Nihonbashi Muromachi, the first luxury Structure harmony and historic views that Chuodori rental accommodation in the Nihonbashi Steel construction, Street, Nihonbashi’s main thoroughfare, brings Revitalization Project; a large-scale cinema steel-reinforced concrete [partial], to the area, efforts have been made to create complex; and the aforementioned COREDO and reinforced concrete structure a landscape uniform with its surroundings, yet Muromachi 2, featuring concentrated dining one that also acknowledges the 31m skyline. zones, all comprise part of the building. On Nakadori Street, the approach to Fukutoku LED lighting and automated electric blinds Name Shrine will be paved with stones and utility with a sunlight-tracking function have been Muromachi Chibagin Mitsui Building lines will be placed underground, to create a incorporated into the building’s design. Digital scene that is both evocative and fitting with its signage has been installed in each elevator Location historical surroundings. Meanwhile, rows of hall, and emergency supply storage is provided 1-5-5, Nihonbashi-Muromachi, cheerful cherry blossom trees are planted along on all floors. Chuo-ku, Tokyo Edozakuradori Street (meaning Edo (old Tokyo) The Muromachi Chiba Bank Mitsui Building is Site area cherry blossom street), the springtime vista 2 comprised of offices and commercial facilities approx. 1,945m befitting the street’s name. at COREDO Muromachi 3. It is directly The first phase of the Nihonbashi Muromachi connected to Mitsukoshimae Station on the Total floor space 2 East District Development Project, Muromachi Tokyo Metro Line, and offers comfortable approx. 29,120m Higashi Mitsui Building (Commercial Facility: access to Nihonbashi’s main Nakadori and COREDO Muromachi), a complex consisting Edozakuradori Streets. Its external appearance Floors of offices and commercial facilities, was was designed to match surrounding historical 17 floors above ground, completed and inaugurated in October 2010. buildings and complement the skyline. This 4 basement floors The second phase coincided with the opening building features environmentally-friendly Structure of the Muromachi Furukawa Mitsui Building characteristics similar to the Muromachi Steel construction, and Muromachi Chibagin Mitsui Building in Furukawa Mitsui Building, and disaster steel-reinforced concrete [partial], February 2014. Both are highly functional and countermeasures are also in place. and reinforced concrete structure “smart” buildings using business continuity

22 Real Estate in Japan 2014 Real Estate in Japan 2014

History of Office Buildings The history of office buildings in Japan began OVERVIEW OF MAJOR with the Mitsubishi Ichigokan completed in 1894. This was followed by the building of REAL ESTATE SECTORS red brick Western style buildings at both ends of Babasakimon Road and thus the creation of the first Western style business avenue. In 1914, the Mitsubishi Nijyuichigokan full of modern facilities was completed and it marked LEASING the beginning of the dedicated building leasing business. The Marunouchi Building The leasing of land and houses has a long history in was completed in 1923 and the importance of Japan and the operation and management of leased the earthquake and fire resistant architecture housing is the root of the real estate business in Japan. It symbolized by the Marunouchi Building has been reported that influential individuals, facilitators, began to be recognized after the Great Kanto or intermediaries called by a variety of names formed this Earthquake. trade in the Edo era. From around the middle of the Meiji Although many rental buildings burned and LEASING era the trade began to be recognized as a business not were lost during the awful events of World War just for individuals but on a corporate scale. In 1921, with II (1941-1945), the full-fledged construction the establishment of the Land Lease Law and Building of rental buildings took off with the recovery beginning in 1950 after derequisition of the Lease Law, a system of Lease Contracts was established buildings remaining from the war and revision that in fact guaranteed equality between the owner and of the Rent Control Act. This was supported renter. by the booming building demand resulting from the high growth period beginning in 1955 and the rental buildings market has been developed remarkably as a result of responding to such demand.

Overcome Post-Bubble Decline in the Market and “2003 Problem” After the collapse of the bubble economy, the leasing office building market kept facing severe conditions for a long time due to lowered rents stemming from economic stagnation and an increasing rate of vacancy. However, the vacancy in five wards in central Tokyo recovered from the 7-8% level in 1993- 1994 to 3-4% in 2000-2001. Among others, an improvement tendency was found in newly- built large-scale buildings that satisfy the so-called conditions of close, new and large to meet the needs of IT-related companies and foreign-affiliated financial institutions to expand the rent area and to move into high specification buildings. After that, the vacancy rate of the five wards in central Tokyo increased to 7-8% in 2002-2003 again due to the bursting of the information technology bubble and the 2003 problem. In tandem with business recovery in major companies, however, the vacancy improved to around 3% in 2006-2007 and rents were raised in central Tokyo. However, a global recession triggered by the subprime loan problem in the U.S. has also had a severe impact on Japan’s real economy

23 Real Estate in Japan 2014 Real Estate in Japan 2014

History of Office Floor Space in the Wards of Tokyo [Increase Rate] Floor space (thousand m2) [Area] 18 peripheral wards Year-on-year rate of increase (%) 90,000 18 peripheral wards Wards 16 Shinjuku and Shibuya Wards 5 central wards 80,000 3 central wards 3 central wards 14

70,000 12

60,000 10

50,000 8

40,000 6

30,000 4

20,000 2

10,000 0

0 -2 1983 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 LEASING (year) Source: Tokyo Land 2012 (Land Data)

There is presently an extreme lack of large rental housing for families. This is because of the strong protection of living rights that Fixed traditionally existed for renters shifting rental housing to students and newlyweds which have a greater turnover. In response to the Leasehold change in attitude from a focus on ownership to one of use, the market expects the supply of good rental housing for the family sector. System It was based on this expectation that the fixed leasehold system was formed based on the “Special Measures Law for Promoting the Supply of Good Rental Housing” established in 2000. This system terminates the rental (lease) contract simultaneous to the expiration of the period designated in the original contract.

since autumn 2008, and the vacancy rate in Asset management represents the formation, being born, etc. Moreover, the total number office buildings increased to 6-8% in 2009. In management and maintenance of real estate of houses in Japan already surpasses the 2010-2011, the figure was around 9%. and other assets based on a commission present number of households but an increase received, which means controlling risks and in the vacancy rate caused by the successive Spread of Asset Management and returns. In addition to appraisal of the value of provision of new properties has become a Property Management assets, diversification of investment portfolios growing concern. The rental housing market boasts an and investment targets as well as the setting While offices, retail facilities and rental increasing number of high quality stock of investment periods are also required. These housing along with competitive properties centering on major metropolitan areas and businesses cover a lot of ground. For example, with the latest facilities prove popular, enjoys the strong support of users. The support asset management that incorporates real older buildings with no competitiveness for the supply of these high quality properties estate is involved not only in the selection are suffering from greater vacancy periods is the voracious investment appetite among and sale of investment real estate but also in and this polarization phenomenon which is funds centering on J-REITs. Therefore, recently other operations including the setting of rent also evident in other markets has become asset management and property management to determine the profitability of real estate and conspicuous. have entrenched themselves centering on the selection of tenants. Players in the rental market must develop buildings and rental housing owned by funds. an ability to flexibly adapt to the market Property management is a business which Polarization Phenomenon at Rental and discern the supply-demand balance by maintains and manages real estate based on Housing Markets accurately watching the market to monitor a commission received. The rental housing market is shifting from the impact of fewer children, an older public rental housing provided by public The business content is roughly divided into population, huge numbers of retirements housing corporations to good quality rental two categories. The first includes the creation of baby boomers and other changes in the housing provided by the private sector. In of a management plan, setting of rent levels, business environment. The players must particular, the luxury rental housing market and the solicitation of tenants and completion create products that have adapted to the has entrenched itself as a strong market in of rental contracts. The second is the diversification of needs among companies central Tokyo. maintenance of real estate facilities as well and general consumers. Adaptive measures as management of the budget and balance From a long-term perspective, however, the that will become more important include of payments. It is considered to be of utmost rental market is facing a number of concerns. remodeling and renovations that raise market importance to integrate both businesses There are concerns over the shrinkage of competitiveness as a means to raise asset mentioned above to optimize profits realized demand for offices triggered by a decrease in values or conversions to form new markets. through real estate. worker population and decrease in demand for rental housing itself due to even fewer children

24 Real Estate in Japan 2014 CASE STUDY GRANCREER AOBADAI 2CHOME

PROPERTY OVERVIEW

Name A Long-term Care Insurance System was the Tokyu Tama Den-en Toshi scheme. GRANCREER AOBADAI 2CHOME introduced in 2000 and this was the impetus In order to provide a safe and secure for the TLC Group to launch its senior housing environment for residents, GRANCREER Location business the same year. TLC established an AOBADAI 2CHOME draws upon the know- operating company “Tokyu E-Life Design Inc.” 2-30-2, Aobadai, Aoba-ku, how accumulated from other GRANCREER in 2003, and in 2004 began development of Yokohama City, Kanagawa facilities, where communication is open and “GRANCREER AZAMINO”, a retirement village Site area support is provided for changes in residents’ for self-reliant residents, and “GRANCARE 4,805m2 lifestyles. The rooms at GRANCREER AOBADAI AZAMINO”, accommodation for elderly 2CHOME are barrier free and equipped with persons requiring nursing care. Both are an emergency-call button and security sensor. Transportation located within walking distance of “Azamino” The units are suitable for not only singles but 8 minute walk from “Aobadai” station station on Tokyu Den-en-toshi Line. It consists also for couples, with layouts varying from on Tokyu Den-en-toshi Line of eleven buildings with a total of 1,077 units 1R to 3LDK. Staff are stationed around the (residence: 854 units, care residence: 223 Use clock, while common facilities include dining units). Senior residence – retirement village areas, large bath, library and theater room. residential apartment, TLC developed the GRANCREER retirement A significant difference from regular rental Senior care residence – nursing home village to alleviate anxiety or the inconvenience apartments, however, is systems in place that suffered by couples or those living alone, are capable of responding to changes in Structure and scale to offer them more active life styles and the residents’ medical and health care needs. Reinforced concrete structure, chance to be part of a new community and 5 floors above ground and 2 below Nurses are present to consult on day-to-day make new friends. The GRANCARE nursing Building area health concerns, while an on-site clinic provides home residence has been designed for those in Total: 2,661.70m2 the peace-of-mind that comes with having need of daily care. a family doctor nearby. The St. Marianna By providing such accommodation to the University School of Medicine Hospital and Total floor area elderly and also by selling or leasing their Showa University Fujigaoka Hospital are Total: 9,333.29m2 former properties to new families, TLC expects also available to assist with residents’ health. a ripple-effect on surrounding businesses and If the residents need care, it is possible for Planned number of units for generations to rotate in suburban Tama them to continue living in the senior residence Total: 114 units Den-en Toshi. and to receive home help and care from services operated by Tokyu E-Life Design Inc. TLC’s role in developing such accommodation Alternatively, the residents can take advantage for the elderly in the town of Tama Den-en Toshi of a system that allows them to move into the is a logical step given its ongoing relationship supervised care facility. Other health services with the local community. The TLC Group, offered include a care-prevention program under the umbrella of Tokyu Corporation, introduced with the cooperation of TOKYU began developing the town in 1953 based on SPORTS OASIS.

24 25 Real Estate in Japan 2014 Real Estate in Japan 2014 Modernization of Real Estate Transactions OVERVIEW OF MAJOR The real estate transaction business is the modern day equivalent to what a broker in the REAL ESTATE SECTORS old days used to do. Brokering is a key original element of the real estate industry along with “management agents,” who are involved in the management of leased land and housing. The license system for these brokers was REAL ESTATE TRANSACTIONS established in 1952 with the establishment of the Building Lots and Buildings Transaction The real estate transaction (brokering) business involves Business Law1. The number of companies rose the brokering of land and buildings through their buying, dramatically through the early 1970s with the selling and leasing. The capital requirement is small concentration of industry and the population and there are strong local characteristics and elements in major cities and growth in housing demand. needed. As a result, this field used to be dominated by There are a number of factors behind this and they include: (1) Increase in housing stock small local players until major real estate firms entered including owner occupied homes used for in the mid-1960s. There are roughly 124,000 companies a long period, (2) The steep increase in the with licenses based on the Building Lots and Buildings supply of condominiums from the early 1970s Transaction Business Law, but most of these remain small and (3) Reinforcement of the attitude that a and medium-sized companies specialized in brokering. person seeks to change residences in line Most of their work involves acting as an intermediary for with life stages. This was right around when the buying and selling of existing homes and renting of major companies began entering the industry. apartments and other housing. However, large brokers are Along with modernizing the real estate also involved in brokering the sale of large buildings and transaction business, this served to bring the acting as the sales agent for new stand-alone housing business under the eye of society including and condominium projects built by developers. the coordination of roles and responsibilities among major as well as small and medium- sized players.

The Real Estate Transaction Modernization Center Foundation Established In 1978, a study group formed by the Ministry of Construction (presently, Ministry of Land, Infrastructure, Transport and Tourism) and private companies issued a report titled, “Report on Promoting Modernization of Real Estate Transactions. ” The report proposed several measures including introducing a joint processing system for property information, securing accuracy, establishing a broker contract system2, establishing appropriate price appraisals and improving the quality of companies and employees. The Ministry of Construction revised the Building Lots and Buildings Transaction Business Law in 1980 in accordance with this and not only established a general and exclusive broker contract system, but it also formed the Real Estate Transaction Modernization Center Foundation to provide instruction in modernizing the industry.

26 Real Estate in Japan 2014 Real Estate in Japan 2014

History of Building Lot and Building Transaction Firms Individual Company 150,000 (Firms) 144,064 142,896 141,493 142,134 141,816 142,094 142,008 141,547 139,288 （ ） （25.1） 138,752 138,816 （ ） 25.6 （24.9） （24.4） （24.3） （23.4） （23.0） 135,283 26.5 （ ） （22.4） （ ） 132,440 130,298 131,251 22.8 22.0 （ ） 130,819 130,647 129,991 126,676 21.7 （ ） 127,702 126,582 125,855 123,922 21.4 （20.9） （20.3） （19.7） （18.9） （18.1） 122,510 120,000 （17.7） （17.4） （16.9） （30.8） （16.3） （15.8） 107,331 （ ） （77.6） （41.1） （ ） （ ） （76.6） 77.0 （77.2） （78.0） （78.3） （ ） （81.1） （ ） （73.5） （74.4） （74.9） （75.1） 75.6 75.7 78.6 （79.1） （79.7） （80.3） 81.9 （82.3） （82.6） （83.1） （83.7） （84.2） 90,000 88,122 （46.1） （69.2）

63,814 60,000 （63.5） （57.9）

（53.9） 30,000

（36.5）

0 1970 75 80 85 90 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 (fiscal year) REAL ESTATE TRANSACTIONS Source: Website of the Ministry of Land, Infrastructure, Transport and Tourism. Notes: 1. Figures represent those as of the end of each fiscal year. 2. The figures in the parentheses indicate the breakdown (unit: %).

Flow of Real Estate Brokerage Work Settlement of remaining funds Apply for removal of mortgage Property Conclude REINS registration Application for payment study of remaining debt and Sale and price intermediary Search and Conclude purchase contract discover Price, delivery removal of mortgage appraisal Explain agreement Delivery of properties buyers period and important Receipt of other terms items (send/receive deposit) brokerage Confirm price Conclude Search and Settlement of fee and other confirmed (Receive brokerage commission) Loan Purchase intermediary discover remaining funds desired contract properties application Establish mortgage conditions Apply for registration

Legal System for Broker Contracting system one step closer to the sharing of organizations. Using REINS, information System information and networking of companies. network organizations integrated by supply/ However, the initial objectives have not been demand region were newly designated by Real estate transaction intermediation, or adequately attained because of the negativity the Ministry of Construction and assumed the brokering, involves a party taking a position shown in exchanging information between responsibilities of the “certified information between the two parties to the sale or lease the organizations and also many cases where network organizations." transaction and acting to bring the contract this is impossible due to differences in the to a conclusion. The broker contract sought Furthermore, the Building Lots and Buildings systems. to clarify a situation apt to cause trouble Transaction Business Law was revised in due to the contractual relationship being April 1997 so that it became necessary for Development of REINS and traditionally unclear. The 1980 revision to exclusive broker contracts to be registered with Reorganization of the Organizations the Law sought to overcome this situation certified information network organizations by requiring documentation for certain items For this reason, in 1986, the Ministry of in addition to the dedicated exclusive broker concerning the content of the broker contract Construction (currently, Ministry of Land, contracts. It is clearly regulated that a certified and to clarify the contract relationship. In Infrastructure, Transport and Tourism) information network organization must be addition, with regard to the exclusive broker established the Real Estate Information a public interest corporation and the new contract in which the contracting party Network System (REINS) with the Real information network organizations eventually cannot ask multiple companies to act as its Estate Transaction Modernization Center were reorganized from 37 certified information broker or agent, the law called for parties Foundation in order to foster cooperation network organizations nationwide to four to register as much information as possible between information network organizations. organizations in four districts. In 1998, new on the purchases in an information network On the other hand, with the implementation registrations at certified information network organization and to disclose information of dedicated exclusive brokers contracts from organizations exceeded 600,000, and this so that conclusion of a contract could be 1990, transactions based on these contracts figure increased greatly, doubling to around promoted. Eight industry bodies, including the required the broker to register with an 1.24 million during 2003 to 2008. Another Real Estate Companies Association of Japan, information network organization designated jump in 2011 and 2012 saw around 1.4 support this information network organization. by the then Minister of Construction3. In million such contracts being registered at As a result, there are now over 100 certified correlation with this, it became necessary certified information network organizations information network organizations nationwide to prepare an information system and to in 2012, of which around 150,000 ended up working to move the real estate transaction organize and integrate the information network signed.

26 27 Real Estate in Japan 2014 Real Estate in Japan 2014 Market Trends for Existing Housing (Properties for sale that are registered with Designated Transaction Organizations)

1,400,000(units) 1,396,662 1,370,163 406,192 420,830 1,300,000

1,237,061 1,213,804 1,200,000 305,881 346,871 Condominiums 1,144,924 1,100,000 Stand-alone housingg 1,112,158 288,500 Land 280,197 Other 1,000,000 Reported contracts 430,512 900,000 898,232 396,452 384,036 855,192 231,531 345,127 800,000 218,395 325,595 366,462 759,464 198,326 700,000 685,887 188,064 614,245 610,399 623,943 638,619 308,131 600,000 583,414 591,327 587,844 607,185 174,626 300,335 559,856 167,665 171,920 169,314 167,439 210,670 179,044 167,354 162,276 500,000 484,384 257,686 465,792 475,403 484,257 453,145 445,743 172,091 232,651 391,585 400,000 221,585 210,921 220,564 217,796 232,334 231,728 225,066 217,275 208,093 300,000 301,696 166,126 289,310 262,843

200,000 212,906 229,668 189,162 199,468 205,378 176,497 150,540 154,689 150,800 157,743 123,823 130,354 136,110 130,521 103,317 108,642 115,413 114,440 114,895 100,000 115,374 88,124 93,661 100,586 87,689 83,588 78,097 79,591 83,509 88,590 84,323 82,117 73,914 81,352 77,684 76,063 77,478 75,701 56,874 0 30,793 34,130 32,528 29,505 30,413 31,295 31,578 30,696 30,562 33,291 35,504 40,609 47,152 1993 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 (fiscal year) Source: Utilization Status of Designated Transaction Organizations report by the Real Estate Transaction Modernization Center Foundation. Notes: 1. This is a compilation of registration and contract information of designated transaction organizations. 2. This includes duplicated registrations of general intermediaries.

Status of Transaction Market for Existing Utilization of the Internet than what is available on the Internet. As such, it is imperative for real estate companies to Houses in the Tokyo Metropolitan Area Trends to use the internet in the real estate acquire even greater expertise so that they In fiscal 2012, there were 11,756 stand-alone transaction sector have taken root due to the may properly serve their customers. houses contracted, the average contract price permeation and spread of such technology was 29.27 million yen (average land area: within society. Vitalization of the Transaction Market 149m2; average building area: 105 m2) and As well as information provided by real estate for Existing Homes the average building age was 19.9 years. companies working online, a number of For condominiums, there were 32,448 units The Basic Act for Housing enacted in 2006 websites demonstrate the uniqueness and contracted, the average contract price was deals with the challenge of shifting the focus industry strength of bodies behind them such 25.15 million yen (average unit price per m2: of housing policy from ensuring quantity to as the Real Estate Japan website launched 433,700 yen; average area: 60 m2) and the improving quality and the utilization of housing in October 2003, or those created by newer average building age was 19.0 years. stock. With regard to the vitalization of the real estate firms presenting more specific transaction market for existing homes, it is In recent years, while the number of stand- information on local areas. The Ministry of hoped firstly that plenty of information will be alone houses contracted has stayed the same Land, Infrastructure, Transport and Tourism provided to consumers who are concerned or has been slightly decreasing, the number also provides information on transaction prices about the quality and capacity of existing of contracted condominiums is increasing, through a general land information system. homes and that, as a premise, processes reflecting an increase in stock. This service is based on transaction price such as home inspections and home deficit information voluntarily provided by parties to The average contract price of stand--alone insurance and warranty will become more land transactions, and is supposed to help houses, reflecting the decline of land prices, widespread. Secondly, it is hoped that general consumers understand real estate has been declining with the exception of 2006 cooperation between involved businesses will transaction market prices. As an example, and 2007 when it increased, while that of be strengthened in order to promote reforms REINs contract information was first published condominiums increased to 25.45 million yen for the transaction of residences. Thirdly, it online in the spring of 2007 and nowadays the by 2007 from the bottom in 2001 and has is hoped that the increase in the quality of general public can easily access information remained flat since. Reflecting the increase in homes by way of appropriate management on real estate online. good-quality stock, the average building age of and reforms will be recognized in the asset stand-alone houses increased by about five and Despite this, however, those thinking value of residences and that this will be a half years in the 16 years between 1996 and of acquiring a specific property require reflected in prices. 2012, and that of condominiums increased by specialized knowledge about real estate about three years in the same period. transactions and more detailed information

28 Real Estate in Japan 2014 Real Estate in Japan 2014

Number of Contracted Stand-Alone Houses in the Tokyo Metropolitan Area, their Average Contracted Price and Building Age

(10,000 yen) (years) 15,000 (cases) 19.9 5,000 20 Number of contracted properties Average contracted price Building age 4,500 18 11,756

10,000 4,000 16

3,500 14

5,000 2,927 3,000 12

2,500 10

0 2,000 8

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (fiscal year) REAL ESTATE TRANSACTIONS

Source: Based on “Trends in the Tokyo Metropolitan Area’s Real Estate Transaction Market (Fiscal 2012)” by the Real Estate Information Network for East Japan. Note: The Tokyo metropolitan area is Tokyo, Kanagawa, Saitama and Chiba prefectures.

Number of Contracted Existing Condominiums in the Tokyo Metropolitan Area, their Average Contracted Price and Building Age 32,448 (10,000 yen) (years) 30,000 (cases) 4,000 20 Number of contracted properties 19.0 Average contracted price 25,000 Building age 3,500 18

20,000 3,000 16

2,515 15,000 2,500 14

10,000 2,000 12

5,000 1,500 10

0 1,000 8 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (fiscal year)

Source: Based on “Trends in the Tokyo Metropolitan Area’s Real Estate Transaction Market (Fiscal 2012)” by the Real Estate Information Network for East Japan. Note: The Tokyo metropolitan area is Tokyo, Kanagawa, Saitama and Chiba prefectures.

29 Real Estate in Japan 2014 Real Estate Securitization Real Estate Investment Trusts OVERVIEW OF MAJOR Investment trusts are a financial vehicle in which funds are gathered from many investors REAL ESTATE SECTORS and managed by an investment professional and earnings are distributed to investors. Traditionally, the primary vehicle managed in this structure was limited to investment REAL ESTATE SECURITIZATION securities. However, in 2000 there was a Partial Revision to the Investment Trusts and Investment The history of real estate securitization is quite long and Corporations Law and real estate was goes back to the mortgage securities system founded in recognized as a target of investment. As a 1931. Later beginning around 1985 real estate small lot result, the first real estate investment trust in products began being sold primarily by real estate firms. Japan (J--REIT) was listed on the Tokyo Stock In recent years, real estate securitization activities have Exchange in September 2001. The market has taken off with the opportunities presented by the 1994 since expanded, and the number of J-REITs establishment of the Real Estate Syndication Act and listed was 43 and the market has grown to the 1998 establishment of the Law on Securitization of about 11 trillion yen in total assets under Specified Assets by Special Purpose Companies (former management. Meanwhile, wild fluctuation SPC Law). Moreover, the revision to the Investment has been seen in aggregated market value in recent years. It had kept growing steadily Trusts and Investment Corporations Law in 2000 made until May 2007. However, J-REIT investment real estate a possible management asset of investment unit prices began to decline due to the trusts and this led to the launch of Japanese Real Estate drain of foreign capital attributed to the sub- Investment Trusts (J-REITs). The revision of the former SPC prime loan crisis in the U.S. and a J-REIT Law into the Law on the Securitization of Assets (SPC Law) investment corporation went under for the also led to an increase in securitization cases because it first time in October 2008 in the aftermath of simplified the procedures for asset monetization type real the global financial crisis due to the Lehman estate securitization. Brothers shock and other factors. Under such circumstances, aggregated market value The progress of real estate securitization expanded fell to less than 2.3 trillion yen in February investment opportunities by diversifying investment 2009. Subsequently, investment unit prices methods for real estate investors, and a new opportunity (equivalent to stock prices) recovered as formed for real estate companies as their business the financial market stabilized. Backing expanded from management and operation of real estate this price recovery was the establishment to the fee business market where they could collect other of the government-led Real Estate Market forms of compensation. Stabilization Fund to support the funding of investment corporations, system reforms to realize mergers and the Bank of Japan’s

History of Real Estate Securitization 1,800 (cases) 8500 (billion yen) 1,700 8,273 8,884 8000 1,582 1,600 1,523 7500 Assets (billion yen) 1,642 1,500 7000 Cases 1,400 6500 6,930 1,300 6000 1,200 5500 1,119 1,100 5000 1,000 4500 5,335 900 4000 3,984 800 3500 685 700 3000 2,838 576 600 3,345 2500 518 500 2,778 620 2,541 2000 2,341 400 456 1,798 2,195 1500 1,867 269 300 1,167 343 1000 161 275 200 500 316 74 100 0 62 9 26 0 1997 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 (fiscal year) Source: Real Property Securitization in Japan issued by the Ministry of Land, Infrastructure, Transport and Tourism. Note: Real estate investment corporations are recognized as single investment corporations.

30 Real Estate in Japan 2014 Real Estate in Japan 2014

J-REIT Structure As of January 24, 2014 Month/Year of Number of Assets (100 Name Fund Characteristic Listing Properties million yen) Sponsors Mitsui Fudosan, Sumitomo Life, The Sumitomo Nippon Building Fund Dedicated to office buildings Sept. 2001 71 10,495 Trust & Banking, etc. Mitsubishi Estate, The Dai-ichi Mutual Life Japan Real Estate Dedicated to office buildings Sept. 2001 62 7,942 Insurance and Mitsui & Co Japan Retail Fund Dedicated to commercial facilities Mar. 2002 84 7,940 Mitsubishi Corporation and UBS AG ORIX JREIT Comprehensive (centering on office buildings) June 2002 73 4,111 ORIX Multi-use (offices and commercial facilities in Tokyo Tatemono, Taisei Corporation, Yasuda Real Japan Prime Realty urban areas) June 2002 62 4,047 Estate, etc. NTT Urban Development, Ken Corporation, Sogoh Premier Multi-use (offices and residences) Sept. 2002 57 2,179 Real Estate, etc. Tokyu REIT Multi-use (offices and commercial facilities) Sept. 2003 30 2,296 Tokyu Corporation Meiji Yasuda Life Insurance The Bank of Tokyo- Global One Real Estate Dedicated to office buildings Sept. 2003 8 1,447 Mitsubishi UFJ, Mitsubishi UFJ Trust and Banking, etc. Nomura Real Estate Office Fund Dedicated to office buildings Dec. 2003 53 3,830 Nomura Real Estate Holdings Comprehensive United Urban (commercial facilities, offices, hotels, etc.) Dec. 2003 97 4,748 Marubeni, Kyokuto Securities MORI TRUST Sogo Reit Comprehensive (centering on office buildings) Feb. 2004 16 3,273 Mori Trust, Parco, Sompo Japan Insurance etc.

Comprehensive (centering on residences, plus REAL ESTATE SECURITIZATION Invincible Investment Corporation offices, etc.) May 2004 78 772 GK Calliope and Big Frontier Real Estate Dedicated to commercial facilities Aug. 2004 28 2,592 Mitsui Fudosan Heiwa Real Estate REIT Multi-use (offices and residences) Mar. 2005 92 1,476 Heiwa Real Estate Mitsui & Co., Sumitomo Mitsui Banking Japan Logistics Fund Dedicated to logistics facilities May 2005 36 1,923 Corporation, KENEDIX Comprehensive (centering on commercial Fukuoka Reit facilities) June 2005 23 1,634 Fukuoka Jisho, Kyushu Electric Power, etc. Kenedix Realty Investment Corporation Comprehensive (centering on office buildings) July 2005 90 3,251 KENEDIX Sekisui House SI Investment Corporation Comprehensive (centering on residences) July 2005 94 1,481 Sekisui House, Spring Investment Ichigo Real Estate Investment Comprehensive (offices, residences, commercial Corporation facilities, hotels, etc.) Oct. 2005 72 1,205 Ichigo Group Holdings Daiwa Office Investment Corporation Dedicated to office buildings Oct. 2005 44 3,527 Daiwa Securities Group Comprehensive Hankyu REIT (centering on commercial facilities) Oct. 2005 19 1,278 Hankyu Corporation Starts Proceed Dedicated to residences Nov. 2005 88 478 Starts Corporation Comprehensive (offices, commercial facilities and Top REIT residences) Mar. 2006 22 1,978 The Sumitomo Trust & Banking, Oji Real Estate Daiwa House Residential Investment Corporation Dedicated to residences Mar. 2006 132 2,299 Daiwa House Industry Japan Hotel REIT Investment Rockrise Sdn Bhd, Kyoritsu maintenance, Corporation Dedicated to hotels June 2006 27 1,576 ORIX Real Estate Japan Rental Housing Investments Dedicated to residences June 2006 185 1,752 Appleringo Ventures 1 Limited, etc. Nippon Steel Kowa Real Estate, Dai-ichi Mutual Life Japan Excellent Comprehensive (centering on office buildings) June 2006 28 2,455 Insurance, Sekisui House, etc. Nippon Accommodations Fund Dedicated to residences Aug. 2006 108 2,717 Mitsui Fudosan MID REIT Comprehensive (centering on office buildings) Aug. 2006 12 1,576 MID Urban Development Mori Hills REIT Investment Comprehensive (offices, commercial facilities, and Corporation residences) Nov. 2006 8 2,108 Mori Building Nomura Real Estate Residential Fund Dedicated to residences Feb. 2007 155 1,619 Nomura Real Estate Holdings Industrial & Infrastructure Fund Multi-use (logistics facilities and infrastructure Investment Corporation facilities) Oct. 2007 29 1,638 Mitsubishi Corporation, UBS AG Advance Residence Investment Itochu Corporation, Itochu Property Development, Corporation Dedicated to residences Mar. 2010 210 4,018 Nippon Tochi-Tatemono, etc. KENEDIX Residential Investment Corporation Dedicated to residences Apr. 2012 80 990 KENEDIX Activia Properties Inc. Multi-use (offices and urban commercial facilities) June 2012 27 2,317 Tokyu Corporation Daiwa House REIT Investment Multi-use Corporation (logistics facilities and commercial facilities) Nov. 2012 25 1,170 Daiwa House Industry GL Properties, GLP Capital, GLP Capital Japan 2 GLP J-REIT Dedicated to logistics facilities Dec. 2012 40 2,488 Private Limited Comforia Residential REIT Dedicated to residences Feb. 2013 55 745 Tokyu Corporation Nippon Prologis REIT Dedicated to logistics facilities Feb 2013 24 3,595 Prologis Multi-use Nomura Real Estate Master Fund (logistics facilities and commercial facilities) June 2013 55 2,380 Nomura Real Estate Holdings Hoshino Resort REIT Dedicated to hotels and Japanese inns July. 2013 6 150 Hoshino Resorts SIA REIT Multi-use (offices and urban commercial facilities) Oct. 2013 20 747 Simplex Investment Advisors Aeon REIT Investment Corporation Dedicated to commercial facilities Nov. 2013 16 1,583 Aeon

Source: Website of the Association for Real Estate Securitization

30 31 Real Estate in Japan 2014 Real Estate in Japan 2014 Real Estate Investment Trust (Company Type) Structure Accounting auditor

Sale of investment units Audit Outsourcing of clerical affairs Payment of funds Investment corporation General clerical Investor (fund) affairs company Outsourcing of asset custodianship General meeting of Asset custodian Issuing securities and paying dividends investors Outsourcing of asset management Investor Asset management company

Board of officers Management Lease Contract Purchase of investment corporation bonds Investor Real estate Interest payments and redemption Lease

Tokumei Kumiai Structure Using Real Estate Syndication

[Tokumei Kumiai] Acquisition Real estate Investment Real estate syndicate Lease TK agreement Tenants Investor (real estate syndication contract) Business entity (Ownership, management Distribution of losses and profits Bulk sales and business decisions) Real estate market

Asset Purchase Program launched in October Investors have shown an interest in REITs investors that bought the specific bonds and 2010 as a comprehensive monetary easing as a new investment vehicle for diversifying pays any remaining profit to the investors measure and its inclusion of J-REITs as their portfolio strategies and real estate in preferred equity securities in the form of acquisition targets. The progress of real companies have interpreted REITs to be a new dividends. estate securitization expanded investment business opportunity for selling, managing Further, a portion of the SPC Law was revised opportunities by diversifying investment and operating real estate as a part of REIT in May 2000. methods for real estate investors and a management. new opportunity formed for real estate The old SPC Law had many restrictions on Asset Monetization Securitization companies as their business expanded from the structure including rigid limits such as The Law on Securitization of Qualified Assets management and operation of real estate prohibiting the purchase of qualified assets by Special Purpose Companies (SPC Law) to the fee business market where they could with borrowings. Thus there were aspects that was implemented in September 1998. Since collect other forms of compensation. The were difficult to apply to the securitization then, many companies have appeared that amount purchased by the Bank of Japan totals of assets like real estate that were highly have tackled real estate securitization using 141billion yen as of the end of 2013. Also, commercial. As a result of the revision, the SPCs centering on apartments for foreigners, April 2012 saw the first listing of a new REIT assets subject to monetization by the SPC major shopping centers, etc. There are great in four and a half years, and in fact nine REITs were expanded from designated monetary expectations for real estate securitization as were listed that year. The aggregate market debts, real estate and their beneficiary a new form of business for the real estate value had increased to ¥7.6 trillion at the end interests in trust to general property rights, industry associated with the structural of 2013, its largest value since the market and restrictions concerning the establishment transformation of the national economy. opened. Also, in 2013, for the first time since and operation of SPCs were simplified and the market was created, broad legal revisions In this case, real estate securitization is one rationalized. Therefore, steps were taken to were made. In order to be prepared in case of the methods for direct procurement of improve the convenience of the system. The a financial crisis occurs, there are plans to capital from the market by issuing investment significance of the SPC Law system is that diversify capital policy measures, such as securities backed by real estate or assets it improves the financial constitution of the creating investment warrants (rights offerings) consisting of real estate or real estate backed originator itself, realizes a high investment similar to share warrants, introducing insider debt (housing loans, etc.). efficiency compared to owning real estate and obtains new business chances by promoting trading regulations, and so forth. The following illustrates the actual flow of real estate monetization. It is expected that the There are two types of REIT structures: 1) the funds and the relationship with real estate: system will take root in step with reforms to “company” type, a structure in which funds 1) SPC issues preferred equity securities and the economic structure such as diversification (investment corporations) gather capital specific bonds to procure funds from the of fund procurement methods, real estate from investors and manage those through a market for purchasing real estate; management emphasizing cash flow, etc. management company; and 2) the “trust” 2) A real estate company or other original real type, a structure in which a trust bank gathers Real Estate Syndication estate owner (originator) sells the real estate capital from investors and manages those Real estate syndication is when multiple to an SPC at market price; through the trust bank itself or a management investors jointly invest in real estate to own company. There are also two types of trust 3) The SPC receives rent from the tenants as and manage the real estate and obtain type: the settlor directed and non-settlor the new owner of the real estate; and earnings from it. directed types. 4) The SPC pays agreed interest to the The syndicated investment product appeared

32 Real Estate in Japan 2014 Real Estate in Japan 2014

Breakdown of Securitized Real Estate Assets by Usage

100 (%) 6.4 Other 12.4 16.1 2.3 19.9 20.4 18.1 33.2 24.8 26.5 24.0 22.2 23.9 29.0 3.2 6.8 0.5 80 0.23.8 0.2 29.2 1.7 mixed-use facility 2.2 0.5 2.0 2.3 20.0 5.5 0.8 6.2 2.1 5.2 5.4 0.9 4.0 3.8 4.2 10.4 1.40.4 2.4 1.8 0.0 10.1 3.1 2.6 13.7 2.5 0.3 3.0 0.0 0.0 Hotel 30.3 1.0 11.1 1.3 0.0 20.8 0.0 12.2 10.1 60 0.1 12.3 16.2 14.3 14.7 11.1 16.5 8.3 17.6 18.9 14.7 Warehouse 20.1 19.3 15.1 21.3 40 8.9 22.7 16.0 23.2 17.9 14.3 Factory 19.3 62.4 20 51.2 41.7 Commercial facility 39.9 34.2 34.1 36.5 38.7 37.1 29.3 31.0 33.8 35.5 24.3 Housing 0 1999 2000 01 02 03 04 05 06 07 08 09 10 11 12 Office (fiscal year) Source: Real Property Securitization in Japan issued by the Ministry of Land, Infrastructure, Transport and Tourism Notes: 1. The following describes what is included in "Others." *Usage other than offices, housing, commercial facilities, plants, warehouses and hotels (parking lots, training facilities, etc.) *Subject real estate is used for multiple usages *That for multiple properties with differing usages 2. Since fiscal 2001, the breakdown of securitization of the underlying property based on the SPC Law is unclear and so is not included. 3. In 2012, in addition to introducing “mixed-use facility” as a usage category, the method of determining the usage category was revised. REAL ESTATE SECURITIZATION around 1987 as a “small lot product” in that procurement of funds from professional Asset Custodians which developers divided ownership of a investors will become easier. One reason for Asset custodians conduct the custodianship commercial property (tenant building, etc.) incorporating the same system as in the SPC of investment corporation assets and do so and sold the equity to investors. Before the act Law into the act lends to the act that it is often in a manner separate from their own assets. enforcement, approximately 700 billion yen difficult in other methods of securitization to Regulations stipulate that trust companies in syndicated investment products have been implement anti-seismic renovation, rebuild and other companies that can appropriately supplied. However, there were many cases in properties for greater earthquake resistance, conduct the custodianship of assets such as which investors suffered damages because establish nursing facilities and acquire real estate may be asset custodians. of subdividing by financially unstable real properties sequentially. According to the General Administrative Affairs estate companies or inadequate information Ministry of Land, Infrastructure, Transport and A general administrative affairs company disclosure to project participants of business Tourism, this revision will lead to about five conducts work other than the asset manage- risks, etc. As a result, the Real Estate trillion yen of new investment in the coming ment and custodianship of the investment Syndication Act was implemented in April 10 years and should also have a ripple corporation. Examples of its tasks include 1995 primarily to protect investors. effect of eight trillion yen on production and placing investment units and investment employment of about 440,000 persons. In addition, from the perspective of promoting corporation bonds, changing titles of such, proactive utilization of real estate syndication, The Real Estate Syndication Act covers five issuing such, administrative work related to the said act was revised in May 1997 to types of contracts consisting of nin-i kumiai, paying distributions to investors, refunding incorporate various deregulatory measures tokumei kumiai, lease, contractual products investors and tax payments, etc. including removing restrictions concerning based on foreign laws and products based the period the business is executed and not on other governmental legislation. Of the Enforcement of Financial Instruments applying regulations prohibiting monetary 541 cases of syndication with cumulative and Exchange Law loans and intermediation of such when the offerings of 2,267.7 billion yen between The Financial Instruments and Exchange Law participants are professional investors. implementation in April 1995 to March 2013, (FIEL) was enforced on September 30, 2007. Securitization with the said act means that 511 cases with 2,217.3 billion yen in offerings Inheriting the philosophy of the Securities there will be the influence from business other used the tokumei kumiai method, which and Exchange Law in the past, the FIEL newly than securitization that the party conducts. proves that performance grew centering on the stipulates the promotion of the formation of As such, the difficulty of procuring funds from tokumei kumiai method. fair prices for financial products, etc. through professional investors such as institutional Businesses Related to REITs the functions of a completely fulfilled capital investors that fear bankruptcies of businesses market, which indicates its clarified character is pointed out as a disadvantage of the current Asset Management Company as the law of the market. In addition, in order system. Investment corporations must outsource to ensure effectiveness, various business not only the management of assets but also In order to resolve this disadvantage, in regulations, behavior regulations, disclosure the custodianship of assets and general 2013, similar to item 2 in SPC Law above, a regulations and an internal control system are administrative duties to outside specialists. legal revision was enacted that establishes required for financial instrument traders. SPCs that own only real estate and entrusts Asset management companoes are involved After implementation of the FIEL, financial operations to real estate syndicates (the in efficiently managing the assets by making instrument traders related to real estate governmental ordinance that stipulates the decisions and conducting practical work business were divided into four groups: 1st details will be formulated in 2014). concerning acquiring the assets, transferring the assets, leasing the real estate, managing grade financial instrument traders that handle In such cases, since the risk of bankruptcies the real estate, etc. sales/soliciting/underwriting/brokerage/offering of businesses will be separated, it is thought of highly liquid securities and OTC derivatives;

33 Real Estate in Japan 2014 Real Estate in Japan 2014

2nd grade financial instrument traders that Though there are various methods of business reports in their own unique formats conduct sales/soliciting/brokerage/handling securitizing real estate, all are similar in (this may require submission via spreadsheet of private offering/self-soliciting of less liquid that funds are gathered from investor and software such as Excel, or input of data securities (deemed securities) and market the revenue of the relevant real estate to websites that only authorized persons derivatives; investment managers that conduct is distributed (dividends). Therefore it is can access). Management companies are asset management based on investment necessary for companies that manage therefore required to make reports in formats discretionary contracts; and investment the securitized real estate (in the case of differing from those that are submitted to real advisors/agencies that provide investment real estate investment trusts, the asset estate owners. advice based on investment advisory management company) to periodically Speed is a necessity in cases of incidents contracts, etc. disclose revenue conditions to investors. that have an impact on real estate revenues Purchase and sales of trust beneficiary rights In normal management business, business and asset management companies need to of real estate fall under the permissible reports are submitted to the owners of real report the situation to investors. For example, activities of 2nd grade financial instrument estate, but in the case of securitized real if flooding or earthquakes have occurred at traders. estate, business reports are submitted to the properties of real estate investment trusts, the The Alternative Dispute Resolution (ADR) asset management company. The content of impact will be disclosed by the following day. system for the financial sector designed to the reports become the basis of disclosure In as much as management of securitized material for investors, who have no direct real estate is concerned, a system that is able REAL ESTATE SECURITIZATION enhance user protection was implemented on October 1, 2010. contact with the company conducting to provide speedy responses is required in management. Due also to such points, addition to the normal periodic reports. Information Disclosure Imposed on management that is more formalized and Management Companies speedy compared to normal management at various points is demanded. The progress of real estate securitization has not been a cause of major change in the Formalizing means making business reports business of real estate companies. However, in the formats requested by the asset it should be noted that when it comes to management company. Because asset entrusting management there are a few points management companies operate multiple real that differ from ordinary business. estate properties in many cases, they request

34 Real Estate in Japan 2014 CASE STUDY LANDPORT LOGISTIC CENTERS

PROPERTY OVERVIEW

Name Nomura Real Estate Group’s Landport series Landport in Atsugi in March 2007, six Landport Landport Atsugi Kaneda are advanced high-performance large- facilities are now operating in Itabashi, scale highly-functional logistic facilities that Urayasu, Hachioji, Kasukabe, and Kawagoe. can respond to recent changes in the field Location Nomura Real Estate Asset Management, the and accommodate a wide range of tenant 1095 Kaneda, asset managing company of Nomura Real needs. The company is expanding with the Atsugi City, Kanagawa Estate Master Fund, has been entrusted with development of such centers, as demand for asset advisory services such as post-construction Site area shipments of consumer products is likely to 2 management. It will operate the Landport 17,946.37m remain strong over the medium- to long-term. series (as developed and operated by Nomura (5,428,77tsubos) The centers (1) are specially designed and Real Estate Development) under its asset Total floor space equipped for ultimate logistics streamline and management service. 38,659.74m2 optimization and take environment and business (11,694.57tsubos) Landport facilities scheduled for completion continuity plans (BCP) into consideration, include “Landport Atsugi Kaneda (January Features such as the incorporation of LED lighting in all 2015), “Landport Kashiwa-Shonan (tentative Effective height under beams: buildings, installation of solar power generating name)” (spring 2016) and “Landport Hachioji 5.5 – 6.5 meters equipment and seismic isolation equipment, II (tentative name)” (summer 2016). (2) are focused on the Tokyo metropolitan Floor loading capacity (warehouse): 2 area, one of the most attractive markets in the Going forward, Nomura Real Estate Develop- 1.5t/m world, and (3) can fully leverage the leasing ment intends to develop Landport series Seismically isolated structure capabilities of Nomura Real Estate Group even primarily in the Tokyo metropolitan area, and LED lightings after existing tenants leave. also in Kansai and Chubu. Nomura Real Estate solar power generateing equipment Master Fund is positioning the Landport series The development of logistic centers is presented as properties that will secure stable income Effective ceiling height: as one of Nomura Real Estate Group’s growth over the medium- to long-term. By fully utilizing 2.7m strategies. The group is using its accumulated the planning, developing and managing experience and company know-how to take Office space with OA-compatible floors capabilities of Nomura Real Estate Group, the full charge of land acquisition, planning, Landport series will also contribute to the steady Fully equipped common use area development, leasing, securitization and growth of operating assets. (cafeteria, rest room) operation/management in developing such logistics facilities. Since completion of the first

34 35 Real Estate in Japan 2014 Real Estate in Japan 2014 The Development of Economic Globalization OVERVIEW OF MAJOR In 1973, Japan switched to a floating exchange rate system, which triggered the REAL ESTATE SECTORS development of economic globalization, such as the movement of capital and labor beyond the country’s borders. Subsequently, thanks to the ongoing strength of the yen, more and more companies have ventured overseas, INTERNATIONALIZATION and in recent years, there has also been an increase in corporate overseas real estate With regard to overseas business development in the acquisition. Although there was a temporary real estate industry, some major Japanese real estate reduction after the global financial crisis, these companies had already begun operations in western activities are now growing again. countries by the late 1960s. Although overseas operations The fact that the domestic population has were downsized due to the collapse of the bubble passed its peak and it is becoming hard economy, since 2010 major general real estate companies to envision future market expansion has have once again been developing business in various been mentioned as a reason for Japanese regions including Asia, North America, and Europe. companies moving ahead with overseas The opening of new markets by leveraging advances development. In light of this, real estate industry companies, in addition to pursuing and managerial know-how cultivated in Japan, as well development in major Western cities with as ongoing growth-oriented development, is steadily large markets, have recently been developing continuing. business in Asia, where there continue to be In recent years, inbound business development to attract population increases and economic growth. international investors to the Japanese real estate market and foreign tourists has also become more active. Government Initiatives In recent years the government has taken a proactive approach to pursuing business in other, fast-growing countries (especially in Asia) that are important to Japan’s continued growth. In April 2013, the Ministry of Land, Infrastructure, Transport and Tourism created a new International Affairs Division in the Land Economy and Construction and Engineering Industry Bureau to support the overseas development of real estate and construction companies. In August of the same year, it published the Global Business strategy for Real Estate Market. In terms of its basic approach to overseas (outbound) development, this strategy states the need to enhance competiveness through rapidly entering emerging markets and pursuing diverse real estate business models. It also states the need for collaborative initiatives with general contractors, trading companies, etc.

Outbound Business Development Regarding outbound business development in the real estate industry, some major Japanese real estate companies had already begun operations in western countries by the late 1960s. After that, throughout the bubble economy era, companies gradually moved forward with building construction activities, housing development, etc. in the likes of New York and London. In recent

36 Real Estate in Japan 2014 Real Estate in Japan 2014

Major International Projects Announced in Recent Years (Implemented and Planned)

Site/ Project Name Location Project Operators Summary Development Area (ha) (at Time of Development)

1101K Street Washington D. C., USA 0.2 Mitsubishi Estate, Rockefeller Group International Office building acquisition

Homer Building Washington D. C., USA 0.4 Mitsui Fudosan Office building acquisition 1200 17th Street Development Project (provisional name) Washington D. C., USA 0.1 Mitsui Fudosan Land acquisition for office building development

160 Madison Project New York State, USA 0.1 Mitsui Fudosan, J. D. Carlisle Development, and others Rental housing development

270 Brannan Development Project (tentative name) California, USA 0.3 Mitsui Fudosan, SKS Investments Land acquisition for office building development

Redevelopment comprising office buildings, housing, Central Saint Giles London, England 0.7 Mitsubishi Estate, Legal & General and shops

150 Leadenhall Street London, England 0.1 Mitsubishi Estate Office building acquisition

6-8 Bishopsgate London, England 0.1 Mitsubishi Estate Office building acquisition

5 Hanover Square London, England 0.1 Mitsui Fudosan Office building development

1 Victoria Street London, England 0.7 Mitsubishi Estate Office building acquisition

1 Angel Court London, England 0.3 Mitsui Fudosan Office building acquisition INTERNATIONALIZATION

Clive House London, England 0.1 Mitsubishi Estate Office building acquisition

Moorgate Development Project (tentative name) London, England 0.6 Mitsui Fudosan Land acquisition for office development

Mark Lane Development Project (tentative name) London, England 0.1 Mitsui Fudosan Land acquisition for office building development

Tokyu Land Corporation, Shanghai Lujiazui Finance & Trade Towakogu Shanghai, China 3.3 Zone Development Serviced apartment management business

Shifu Dalu, Shenhe District, Shenyang City Mixed-use development comprising housing, commercial (unofficial name) Shenyang, China 2.7 Tokyu Land Corporation, Marubeni, Sun Wah Group facilities, etc.

Sugii Outlet Plaza, Ningbo Zhejiang Province, China 11.6 Mitsui Fudosan, Shanshan Group, Tah Tong Group, others Commercial facility development

Shenyang Park Outlets Shenyang, China 13 Mitsubishi Estate, Shenyang Outlet Real Estate Development Commercial facility development

Mixed-use development comprising condominiums and Hao Shi Huang Ma Yuan Shanghai, China 6.5 Marubeni, Mitsui Fudosan Residential commercial facilities

Tianjin Eco-city Mitsui Fudosan Residential, Sino-Singapore Tianjin Mid- and high-rise housing, elementary school, kindergarten Tianjin, China 3 Eco-City Investment and Development Co., Ltd. and others housing development centered on low-rise townhouses, etc.

Guangdong Province, Mixed-use development comprising housing, commercial Foshan Lingnan Tiandi (Lot 18) China 2.4 Mitsui Fudosan Residential, Shui On Group facilities, kindergarten, etc.

Mixed-use development comprising condominiums and Hao Shi Feng Shiang Yuan Shanghai, China 8.5 Mitsui Fudosan Residential, Mitsubishi Estate, Marubeni commercial facilities

Tokyo Tatemono, Shenyang Vanke Real Estate Mixed-use development comprising condominiums, offices, Chunhe Project, Shenyang (tentative name) Liaoning Province, China 8.1 Development, others etc.

Mitsui Fudosan, Shanghai Jinqiao Export Processing Zone Mixed-use development comprising commercial facilities LaLaport Shanghai Jinqiao (tentative name) Shanghai, China 4.2 United Development and offices

Mixed-use development comprising condominiums, offices, Shenyang Ming Tian Plaza Project (tentative name) Liaoning Province, China 19.9 Tokyo Tatemono, Shenyang Vanke Real Estate Development etc.

Longquanyi District, Chengdu (unofficial name) Sichuan Province, China 7.5 Mitsubishi Estate, Surbana Housing development

Mitsui Fudosan Residential, Shui On Group, Mixed-use development comprising housing, offices, R&D Dalian Software Park Phase 2 Liaoning Province, China 2.7 Yida Group facilities, etc.

No. 289 and others, Section 7, Zhongxiao East Road, Mixed-use development comprising offices, commercial Taipei (unofficial name) Taipei, Taiwan 6.7 Mitsubishi Estate, Ruentex Development facilities, and hotels

Taiwan Linkou Outlet project (tentative name) New Taipei, Taiwan 6.7 Mitsui Fudosan, Farglory Construction Commercial facility development

No. 381 and others, Jianlin Section, Linkou District Construction, New Taipei, Taiwan (unofficial name) New Taipei, Taiwan 6.7 Mitsui Fudosan Commercial facility development

Bishan Street 14, District 20, Singapore Bishan District, (unofficial name) Singapore 1.1 Mitsubishi Estate, CapitaLand High-rise condominium development

The Mews Project (tentative name) Kuala Lumpur, Malaysia 0.5 Mitsui Fudosan Residential, Eastern & Oriental High-rise condominium development

Mixed-use development comprising housing, commercial Rama IV (tentative name) Bangkok, Thailand 0.9 Mitsui Fudosan Residential, Ananda facilities

Citra Garden City, Citra 6 Jakarta, Indonesia 1.2 Mitsui Fudosan Residential, Ciputra Group Condominium development

Ecopolis district in CitraRaya Tangerang, Indonesia 67.1 Mitsui Fudosan Residential, Ciputra Group Housing development with detached houses and stores

Mitsui Outlet Park (tentative name), Kuala Lumpur International Airport (KLIA) Kuala Lumpur, Malaysia 4.6 Mitsui Fudosan Commercial facility development

Source: Prepared from press releases published by various companies from 2010 onward. Note: “Unofficial name” = the location is used as the name since the project name has not yet been decided.

36 37 Real Estate in Japan 2014 Real Estate in Japan 2014 Real Estate in Japan 2014

years, besides Mitsui Fudosan and Mitsubishi There have been more active efforts aimed made to meet tourist demands from a variety Estate’s acquisition of business area office at making Japan a tourism-based country of perspectives, such as providing multilingual buildings in England, there are companies – for example, in 2007, the Tourism Nation services within the facilities and holding trade which have opened local affiliates in the U.S. Promotion Basic Law was enacted, and shows aimed at travel agencies from Asian and are planning mixed-use office/commercial in 2008, the Japan Tourism Agency was countries. projects. Outbound business development launched. In 2013, the number of foreign As the 2020 Olympics to be held in Tokyo has also become more vigorous in Asian visitors to Japan reached a record level, approach, it is to be expected that more countries in recent years. In China, the likes surpassing 10 million people. Meanwhile, in attention will be focused on the Japanese of Mitsui Fudosan, Mitsubishi Estate, and December of the same year, National Strategic real estate market. However, the main Tokyu Land Corporation are involved in office Special Zones were created with the goal of goal is not the hosting of the Olympics; the buildings, commercial facilities, housing, and fostering the development of international top priority is continued economic growth mixed-use developments that combine all of economic activity hubs, and the government after the Olympics, so going forward, these. In southeast Asia, which is undergoing is making efforts to create special zones urban development based on a long-term remarkable growth, Mitsubishi Estate is aimed at setting up international business perspective will become more and more planning housing development projects in environments and forming international important. Singapore and Vietnam, while Mitsui Fudosan innovation centers in fields such as medicine is planning work on housing developments in order to attract global capital and talent.

INTERNATIONALIZATION and commercial facilities in Malaysia. Some private-sector companies are also moving to identify commercial opportunities Inbound Business Development related to overseas tourists and the entry of Inbound business development to attract foreign companies into Japan. In state-of- international investors to the Japanese real the-art downtown office buildings, not only estate market and bring in foreign tourists are disaster prevention and environmental has also become more active in recent years. features becoming more sophisticated, but Inbound business initiatives to encourage not multilingual clinics and the like are also only direct investment in domestic real estate being provided to help businesspeople of but also the entry of foreign companies due to various nationalities working there feel more the enhanced competitiveness of major cities, comfortable. In addition, in commercial and increases in tourist numbers etc. are facilities and other locations popular with important measures for Japan. foreign visitors to Japan, efforts are being

38 Real Estate in Japan 2014 CASE STUDY INITIATIVES FOR THE INBOUND MOVEMENT

Thinking globally but acting locally: Mitsubishi Estate As for Marunouchi’s retail facilities, information and Co., Ltd. is at the forefront in responding to inbound websites are multilingual, while workers are trained investment and tourism through its various businesses in English creating an environment where tourists can such as offices, retail facilities and hotels. enjoy shopping without difficulties. Other services offered at some shops include duty-free shopping, The company not only provides its businesses with the use of Union Pay cards, rest lounges for tour multilingual support tools, but has also adopted attendants and foreign exchange facilities. other initiatives including launching the FINE TOKYO center (Finance, Innovation, Networking A similar experience can be had at Mitsubishi’s and Education of TOKYO) to help grow and nurture Shisui PREMIUM OUTLETS, a retail facility opened international financial professionals. It has also in 2013, and only a 10-minute ride from Narita invited St. Luke’s MediLocus in Otemachi Financial International Airport. Shisui PREMIUM OUTLETS City to provide international medical services for offers an array of services providing overseas foreign workers and their families. visitors—mainly from Asia—and locals with a comfortable shopping experience, and is the first One of Mitsubishi Estate’s long-standing key outlet mall to set up a foreign exchange section and projects has been the reformation of the Marunouchi information services providing Narita Airport flight area. In order to improve Japan’s international status updates. Staff are multilingual and multilingual competitiveness within Asia, the firm adopted three maps are available at the information center. Free brand management strategies for Marunouchi: Wi-Fi is available in some areas of the building, “Globalization of the area,” “Expansion of business while some shops offer duty-free shopping services. functions” and “Establishment of an innovation platform.” Marunouchi Frontier, a scheme to support Mitsubishi Estate’s hotel business is another area business ventures, was launched in 2000, and in which multilingual services, the recruitment of seven years later the green light was given for EGG foreign staff and events are held (to attract foreign JAPAN. In conducting the Strategic Growth Center travelers) to improve global customer satisfaction. Of Project, Mitsubishi Estate invites and provides note is “Royal Park Hotel THE Haneda,” scheduled business support for foreign companies wishing for launch in September 2014, to coincide with the to enter the Japanese market, as well as small- to expansion of the international passenger terminal medium-sized domestic venture companies seeking at Haneda Airport. Located within the departure opportunities to expand abroad. Located in both terminal itself, the hotel will allow guests to refresh the Shin-Marunouchi Building and Nippon Building, and rest in comfort without clearing immigration. The EGG JAPAN thus serves as a hub, a business opening of Japan’s first transit hotel can only help development support services provider and office reinforce the role that Haneda Airport plays as a space. contributor to Japan’s globalization.

38 39 Real Estate in Japan 2014 Real Estate in Japan 2014 Resort Development Takes Off From the early 1960s, the general public OVERVIEW OF MAJOR once again was able to afford the luxury of leisure and steps were taken to develop tourist destinations throughout Japan. In particular, REAL ESTATE SECTORS business groups centered on mass transit companies such as Tokyu and Seibu began development of comprehensive projects that included transport, vacation homes, hotels and sightseeing at famous resort areas such RESORTS as Izu, Hakone and Karuizawa. In addition, large and small real estate companies The first resort project in Japan that was developed to launched businesses selling vacation homes serve as a health resort within the mountains, ocean and in the respective resort areas starting with the nature was the Shonan (Kanagawa Prefecture) area Nasu area. which began full-scale development from around 1877. Responding to Increasing Time Off Shonan since then developed as a villa area and was and Diversifying Needs followed by Karuizawa, Nasu, Unzen and other areas From the mid-1970s, the people began to primarily developed by foreigners. Upon entering the have more time off with the spread of the Showa era in the mid-1920s, resort hotels were repeatedly five-day workweek. This combined with such developed in national parks including Nikko and Hakone. factors as diversifying needs and the switch From the mid-1970s, with the spread of the five-day to a domestic demand-driven economy workweek, the Japanese people had more time available resulted in the re-emergence of a resort development boom. It was around this time for leisure and construction of resort facilities boomed that Japan witnessed numerous developments including the emergence of large multi-use resorts with of large multi-use resorts with ski hills, seaside marinas, ski resorts with lodging facilities, theme golf courses, marinas and various lodging parks and oceanside resorts. facilities expanding over spaces ranging from several hundred to over a thousand hectares. However, the Heisei recession drastically lowered the Another characteristic at this time was that volume of the formerly booming resort condominiums participants in the resort business were not and some facility management companies filed for limited to transport and real estate companies, bankruptcy. but also expanded to include steel, ship and chemical manufacturers, trading companies In response to these developments, recent years have and companies from various other industries. seen the emergence of the resort regeneration business In correlation with the transformation of the industrial structure, theme parks and seaside and new efforts to rebuild the resort business including the resorts began to be built on sites where expansion of services focusing on facility management. large factories had once been. Investment in overseas resorts also took off, centering on Hawaii, Australia and other areas in the Pacific region.

Establishment of the Resort Law and End of Boom These developments were further spurred by the establishment of the Law for Development of Comprehensive Resort Areas, the so-called “Resort Law” in 1987. This Law sought to comprehensively develop sites of tens of thousands of hectares through private-public collaborations all over the country with the aim of realizing a leisurely lifestyle for the Japanese people and promoting local areas. By the end of March 1994, 41 prefectures had established and approved basic concepts and resort development had become the centerpiece in promoting local areas. The Government Housing Loan Corporation (currently Japan Housing Finance Agency) also began providing loans for second homes in 1987. Japan had finally entered an era

40 Real Estate in Japan 2014 Real Estate in Japan 2014

where the national government was actively industry took steps to form an organization begun to be provided in a variety of formats supporting the enhancement of the leisure to nurture a healthy resort business and based on memberships. These steps include time of its citizens and helping them to realize launched the Japan Resort Enterprise organizations and corporations concluding tie- multiple residences. Association in 1995. The Association actively ups with other facilities, soliciting for members conducts fact-finding studies on resort and providing services at inexpensive prices, However, this resort boom also began to taper development and operations, as well as along with companies contracting to manage off with the start of the Heisei recession in researching and proposing resort policies. the idle resort facilities. There are also growing Japan at the beginning of 1991. In 1990 there These activities were taken over by the Real signs of efforts to effectively and efficiently were 16,000 resort condominium units sold, Estate Companies Association of Japan in operate and utilize facilities that were but this drastically dropped to 1,900 units by 2007. constructed during the resort era through a 1993, a precipitous 88% drop. Since 1995, variety of services. the number of units sold per year has been Support for the acquisition of second homes 600 to 700 units at most. has taken the form of an expanded financing There is a great need among the people of system and also tax reduction measures such Japan to spend their leisure time amongst Also, due to the application of the Resort Law, as reduction of the real estate acquisition tax nature and there is a large number of many of the large resort facilities developed and real property tax that went into effect in baby boomers who are considering living filed for bankruptcy from overinvestment April 1998. In addition, the Law promoting in the country or having a second home caused by ill-conceived budget plans and the Building of Superior Suburban Housing upon retirement. This requires not only unfounded prospects for customers. Many was passed to promote the construction of an augmentation of the vacation system plans were therefore aborted before they could

superior standalone housing in good natural and enhanced measures on taxation, but RESORTS be carried out. environments such as agricultural and also rebuilding the resort business (facility Rebuilding the Resort Business mountain villages and areas near cities. operations, operating skills, etc.) and enhancing support. On the other hand, resort services have Within this environment, the real estate

Major Resort Projects of Japan

Acquisition, Takeover, Project Location Total Area Developer/Operator Primary Facilities (ha) (at time of development) Support Companies, etc. Seiyo Kankyo Kaihatsu (Sahoro Shintoku Town, Sahoro Resort 2,200 Resort, SCM Leisure Development Ski hill, golf course and hotel Kamori Kanko Hokkaido and Karikachi Kogen Development) Shimukappu Village, Golf course, ski hill, artificial lake, Alpha Resort Tomamu 4,780 Sekihyo Seibaku Hoshino Resort Hokkaido water chapel and hotel Ashiro Village and Matsuo Appi General Development Appi Kogen Resort Village, 2,500 Ski hill, hotel and pensions Kamori Kanko (third sector) Iwate Prefecture Naruko Town, Onikoube Kogen Kaihatsu Osaki City, Resort Park Onikoube 1,000 Ski hill, golf course and hotel Miyagi Prefecture (third sector) Hotel Sun Valley Myoko Village, Myoko Pine Valley 600 Myoko Pine Valley Hotel, golf course and ski hill APA Group Niigata Prefecture Kitashiobara Village, Tokyu Group, Urabandai Deco Daira Gran-Deco Ski Resort 338 Hotel, ski hill and tennis courts Fukushima Prefecture Kaihatsu (third sector) Tennis courts, vacation homes, pensions, artificial Hatoriko Highland Regina Tenei Village, 197 Tokyo Tatemono lake, automobile campsite, hot spring facilities and Forest Fukushima Prefecture cottages Nasu Town, Towa Real Estate Development, Towa 3,700 vacation lots, amusement parks, hotels Towa Nasu Highland 1,000 Tochigi Prefecture Nasu Resort Co., Ltd. and golf courses Yokohama Hakkeijima Sea Yokohama City, Marinas, amusement parks, aquariums and 24 Yokohama Hakkeijima Paradise Kanagawa Prefecture restaurants Karuizawa Town, 5,200 vacation lots, hotels, golf course, tennis Karuizawa Sengataki 690 Kokudo Prince Hotel Nagano Prefecture courts and, ski hill Chino City, Tennis court, jogging road, restaurant, craft Tateshina Certo Forest 436 Kajima Resort Nagano Prefecture center, rental vacation homes, pool and hotel Chino City, 2,400 vacation lots, golf course, tennis courts, Tokyu Resort-Town Tateshina 664 Tokyu Land Nagano Prefecture ski hill and hotel Chino City, Tateshina Mitsui-no-mori 470 Mitsui Fudosan Vacation lots, hotel and golf course Nagano Prefecture Minamimaki Village, Vacation lots, lodging facilities, tennis courts, Uminoguchi Natural Villa 700 Seiyo Kankyo Kaihatsu Sogo / Seibu Nagano Prefecture pottery studios, music studio and golf course Isobe Town, Shima Spain Village 104 Kintetsu Corporation (JV) Spanish village Mie Prefecture Hamajima Town, Nemu no Sato 252 Yamaha Recreation Hotel, golf course, marina Mitsui Fudosan Mie Prefecture Wakayama Prefecture, Ministry of Wakayama City, Transport, Matsushita Investment and Theme park, fishermen’s wharf, marina and Wakayama Marina City 65 Royal Pines Wakayama Prefecture Development and Wakayama Marina condominiums City Kitakyushu City, Space World 200 Space World (third sector) Leisure facility with a space theme Kamori Kanko Fukuoka Prefecture Sasebo City, Marina, hotel, condominium and Dutch Huis Ten Bosch 140 Huis Ten Bosch (third sector) HIS Nagasaki Prefecture streetscape Hotel, international convention center, Ocean Ripplewood Holdings Miyazaki City, Phoenix Seagaia Resort 135 Phoenix Resort Dome, golf courses, condominiums and cottages, (currently RHJ Miyazaki Prefecture and tennis club International) Shimoji Town, Miyakojima Tokyu Resort 230 Tokyu Corporation Marina, golf course and hotel Okinawa Prefecture

40 41 Real Estate in Japan 2014 Real Estate in Japan 2014 The Role of the Real Estate Industry

Environmental Measures Until now, the nation has worked in concert to establish various measures to confront changes in the global environment that are accelerating yearly. The fact is, however, that the deterioration of the global environment is progressing at a faster pace than these measures. In the real estate industry, global warming measures such as energy conservation and measures to prevent the heat island phenomena, as well as waste disposal and recycling have been positioned as urgent issues, and many companies have set reduction targets and devoted themselves to moving forward with such measures. Activities of the real estate industry are diverse and include conceptualization, planning and design; development and building; residential unit sales; building leasing management and maintenance; secondhand sales; and dismantling and disposal. Each of these operations has many counterparts, including vendors, tenants, condominium owners’ associations and general users. Thus, there is also a need for discussion and collaboration with these interested parties when conducting environmental measures. Another important theme that arises out of the fact that the life cycles of buildings span decades is the need to provide buildings that have high environmental performance based on a medium- to long-term perspective and to build a stock with a small environmental load.

Efforts Related to Global and that by COP21, to be held in 2015, consensus 2) Formulation of new energy-conservation Japanese Environment should be reached on a new legal framework standards: With regard to housing and for 2020 onward. At COP19 held in Warsaw, building energy-conservation standards Global warming due to increases in atmos- Poland in 2013, it was agreed all countries stipulated in the Energy Conservation Law, a pheric greenhouse gases has caused various would set self-directed targets for 2020 notice based on the Energy Conservation Law problems, such as climate change and the onward in plenty of time for COP21. was amended and enacted in 2013, with the accompanying impact on the ecosystem, aim of further energy and CO2 conservation. making the reduction of greenhouse gases In terms of domestic initiatives, there are four This amendment formulated new energy- an important issue. Subsequently, the United broad trends: 1) revising the Basic Energy conservation standards for housing and Nations Framework Convention on Climate Plan, 2) formulating new energy-conservation buildings, and required that reports be made Change, which stipulated regulations etc. standards, 3) developing a rating system based on the new standards starting from April to stabilize atmospheric greenhouse gas as a peak power demand countermeasure, 2015 for housing and April 2014 for other amounts and prevent various problems and 4) introducing a Top Runner system for buildings. caused by climate change was ratified at Earth construction materials. 3) Development of a peak demand Summit, a United Nations conference relating 1) Revision of the Basic Energy Plan: Based countermeasure rating system: After a power to the environment and development in 1992. on the change of government in December supply crunch following the Great East At the Conference of Parties III (COP3) held 2012, the Innovative Energy and Environment Japan Earthquake, efforts were made to set in Kyoto in 1997, the Kyoto Protocol which Strategy formulated in September of that year up a system when calculating targets in the imposed greenhouse gas emissions reduction was revised, and consideration was given to regular reporting system, based on the Energy targets was adopted by advanced nations, and modifying the Basic Energy Plan. In December Conservation Law that enables consumers came into effect in 2005. 2013, the direction of these revisions was to receive a positive evaluation if they try to Because the Kyoto Protocol covered the five- announced in the Opinion on the Basic Energy reduce grid power usage during peak demand year period from 2008 to 2012, discussions Plan. With regard to the civilian sector, details times through energy management such as were held at COPs with regard to a new included the importance of demand response storage batteries and BEMS/HEMS or home international framework for 2013 onward, to suppress demand-side consumption based power generation in addition to existing and in 2011, at COP17 held in Durban, South on energy supply amounts and strengthening energy conservation measures. The revised Africa, it was decided to extend the Kyoto energy saving measures aimed at the Energy Conservation Law introducing this peak Protocol. Japan, however, declared it would realization of zero-energy buildings/houses demand countermeasure rating system was to not participate in the second commitment (ZEB/ZEH). In addition, it was specified that be enacted in April 2014. period of the Kyoto Protocol, which not mandatory compliance with energy-saving all major nations were a party to, and has standards for housing and buildings will be 4) Introduction of a Top Runner system proceeded with self-directed emissions gradually introduced up until 2020, starting for construction materials: the Top Runner reduction efforts. At COP17 it was also agreed with large-scale buildings. system used to date covered only machinery

42 Real Estate in Japan 2014 Real Estate in Japan 2014

and equipment that consumes energy, but History of Energy Consumption by Usage in the Business Sector construction materials that do not themselves Basic unit (MJ/m2 per year) Energy consumption (PJ) Floor area (million m2) Other consume energy (windows, insulating 2,500 2,500 materials) have been added as products Schools 2,000 2,000 1,759 1,834 that help improve the energy-conservation 1,656 Wholesale performance of housing and buildings. This 1,500 1,500 662 1,059 874 change was enacted in December 2013. 1,285 1,187 1,126 734 Offices and buildings 1,000 1,188 973 1,000 924 152 145 138 790 785 Basic unit 149 859 (Offices and buildings) Voluntary Action Plan on the 500 584 596 535 500 426 Basic unit Environment 374 363 376 (All business) 0 289 0 1990 2000 2005 2010 (fiscal year) Floor area CO2 emission amounts have increased (All business) Source: EDMC/Handbook of Energy & Economic Statistics in Japan issued by the Energy Conservation Center (Japan) substantially of late in the civilian sector, which combines the business and residential sectors. In the business sector, increases Breakdown of Housing Stock and Energy Consumption in the Household Sector in the floor space of office buildings, the Distribution of Number of Dwelling Units Breakdown of Energy Consumption by Residence Type per Family by Usage lengthening of working/opening hours, and Cooling the advance of office automation and IT due 3％ Apartment Stand-alone complex to the greater refinement of business activities (ownership) THE ROLE OF REAL ESTATE INDUSTRY (renting) Power, etc. Heating ％ 51％ have been mentioned as key factors in this 32 35％ 27％ Total number of increase. In the residential sector, increases dwelling units 49.6 million in the number of households and changes in Apartment complex people’s lifestyles in pursuit of comfort and (ownership) 11％ Kitchen Water heating 8％ 28% Stand-alone convenience may be considered key factors. (renting) 4％

In light of this, RECAJ formulated a Voluntary Source: Fiscal 2008 Housing and Land Survey by the Ministry of Internal Affairs and Communications’ Bureau of Statistics and EDMC/ Handbook of Energy & Economic Statistics in Japan issued by the Energy Conservation Center (Japan) Action Plan on the Environment for the Real Estate Industry in 1997, and in 2008, it published a revised 5th edition, which for which lifecycle CO2 performance is superior ation is being given to a target using primary sets numerical targets primarily for newly to the standard reference values in CASBEE for energy consumption as an indicator). constructed office buildings. In addition, a New Construction: 2008 Edition. In order to achieve these targets, active efforts Voluntary Action Plan for the Environment for Target achievement status: From 2009 to need to be undertaken in the office building New Condominiums was formulated in 2009. 2012, 100% of member companies who and condominium construction phase. The targets for the respective voluntary supplied new condominiums met the target in Moreover, in order to reduce office building action plans and target achievement their standard construction specifications. and condominium energy consumption in the status of member companies are shown operation phase, collaboration with tenants below, demonstrating the effect of member Formulation of Real Estate Industry or buyers is vital, and there is a need to companies’ ongoing efforts (performance Environment Implementation Plan cooperate with both in undertaking energy- figures are for member companies who Based on the target achievement status for conservation efforts (e.g., increasing visibility completed a questionnaire survey conducted these voluntary action plans and the move for energy consumption amounts, providing in 2013). toward new governmental energy-conservation energy-conservation know-how). ■ Voluntary Action Plan on the Environment standards, RECAJ considered new targets for In keeping with the idea of “integrating the for the Real Estate Industry 2020, and in March 2013 formulated the Real economy and environment” in past voluntary Target: When constructing a new office Estate Industry Environment Implementation action plans, the Real Estate Industry building, as a general rule the aim is a level Plan. The new targets for newly constructed Environment Execution Plan does not view at least 10% superior to the Standards of office buildings and condominiums in this environmental measures as restrictions on Judgment for Construction Clients stipulated Implementation Plan are as follows. economic activity but instead defines them by the Energy Conversation Law (i.e., an ■ New Office Buildings more proactively as aiming to promote improvement of 10% or more for ERR, which Target: When constructing new office green growth (economic growth based on indicates the primary energy consumption buildings, as a general rule the aim is achieve environmental measures). In addition, based reduction rate for the overall facilities, and a reduction rate of at least 15% for ERR and on the experience of the energy supply PAL, which indicates the building envelope at least 10% for PAL (in the case of ERR, there crunch after the Great East Japan Earthquake, performance). is a plan to convert to the government’s new increased awareness of business and living Target achievement status: For buildings energy-conservation standard indicator, BEI). continuity planning (BLCP) and the impact of completed during the 2008 to 2012 period real estate development on the ecosystem, the ■ New Condominiums covered by the plan, the target achievement plan stipulates qualitative targets for efforts to Target: When constructing new con- rate improved from 59% to 100% for PAL and improve energy independence and preserve dominiums, the aim is to achieve a high level from 77% to 100% for ERR. the natural environment and biodiversity (in of environmental performance, at least 5% ■ Voluntary Action Plan on the Environment addition to existing efforts to reduce energy superior to the operation phase reference for New Condominiums consumption and reduce waste emission value in CASBEE for New Construction (bearing Target: When constructing new con- amounts), as well as proposing specific details in mind consistency with the government’s dominiums, the aim is to construct buildings for such initiatives. new energy-conservation standards, consider-

43 Real Estate in Japan 2014 Roles the Real Estate Industry Should Take against Major Disasters The Great East Japan Earthquake on March 11, 2011 inflicted significant for people having difficulty returning home that codifies initiatives damage primarily to the Tohoku (northern Japan) and Kanto regions. dealing with such people for government, businesses and citizens The earthquake caused tsunamis (tidal waves) which inundated towns (announced in March 2012; enforcement in April 2013). along the coast, and many area residents who suffered the loss of their 1. Enhance Building Quality and Construct Networks of An Entire City houses were forced to live in temporary dwellings. Rehabilitation of the In the Tokyo metropolitan area, high-rise building structures had only sufferers’ livelihoods and recovery of the affected areas are top priorities slight damage from the Earthquake, proving their high earthquake- to be addressed by the entire country. resistant performance. However, there were some areas in which Moreover, an important lesson was learned from the Earthquake: to buildings tilted (primarily stand-alone houses) due to soil liquefaction. In reinforce disaster prevention functions and create safe and secure addition, paralyzed transportation systems on the day of the Earthquake cities. As such, the Ministry of Land, Infrastructure, Transport and left a massive number of people who found it difficult to return home, Tourism amended part of the Enforcement Ordinance of Construction and subsequent scheduled blackouts led to confusion as elevators, Standard Law that specified the non-inclusion of storehouses for disaster water supply and drainage equipment, railways, production facilities and prevention and mitigation and that sections be set apart for private other functions stopped operating. Based on these occurrences, national power generators, etc. in the floor area ratio (enforced in September and local governments are promoting the creation of strong cities that 2012). The Tokyo Metropolitan Government also enacted an ordinance are resilient to disasters.

Report of the Committee for the Study of the Role of Real Estate in Reinforcing Disaster Prevention Functions of Cities (Summary)

Initiatives that ought to be promoted by real estate for development of cities with excellent disaster prevention

(1) Promotion of integral urban development that reinforces disaster prevention (4) Promotion of area management activities and the construction of cooperative performance of districts and areas relationships between various entities involved (2) Improvement of disaster prevention performance of transport terminals, etc. (5) Consideration towards the safety and security of employees, tenants, visitors (3) Improvement of disaster prevention performance of individual buildings and residents

(1) Increasing reserve fuel of emergency power generators at office (1) Promotion of establishment of disaster management storehouses (1) Making sure people know to stay buildings to be newly built, etc. (2) Increasing reserve fuel of emergency power generators at patient and to prevent people (2) Installment of emergency power generators such as large-scale condominiums, etc. from leaving at once cogeneration facilities at large-scale office buildings to be newly (3) Long-period ground motion measures for skyscraper (2) Cooperation with provision of built condominiums to be newly built temporary accommodation (3) Water damage countermeasures to prevent the loss of (4) Water damage countermeasures to prevent the loss of facilities emergency power at office buildings to be newly built

hard emergency power (3) Securing stockpile for people (4) Promotion of disaster prevention renovation for existing office having difficulty returning home buildings (5) Quick responses to elevator lock-ins and restoration (6) Long-period ground motion measures, introduction of monitoring systems, etc. for skyscraper office buildings

(7) Awareness activities concerning disaster prevention (evacuation, (5) Promotion of measures to prevent the falling of furniture anti-disaster stockpile, etc.) for tenants (6) Promotion of activities for residents’ awareness of disaster (8) Promotion of measures to prevent the falling of fixtures, OA prevention and self-reliance equipment, etc. (deliberation on guidelines, etc.) (9) Promotion of periodic implementation of communications

soft training, training for walking home, safety confirmation (including families) training, etc. (10) Promotion of the establishment of cooperation among involved industries for innovation in disaster prevention-related technologies

Note: While some initiatives apply to both “hard” and “soft,” the above focus on the main initiatives and were discriminated as either “hard” or “soft.” ・Promotion of urban development that utilizes business know-how and financial muscle acquired by the private sector ・Promotion of disaster prevention initiatives through cooperation of various involved parties ・Awareness activities targeting tenants of buildings and residents of condominiums ・Response to countermeasures for people having difficulty returning home

Support expected from the public sector under public-private cooperation

Policy for advancing area-wide improvement Policy for forming quality stock Comprehensive policy for promoting disaster management measures

44 Real Estate in Japan 2014 Real Estate in Japan 2014

As part of this endeavor, the real estate industry, which supplies buildings Disaster Prevention as Real Estate Industry” (chaired by Yasushi Aoyama, and condominiums, is specifically required to provide safe and secure Professor, Meiji University Graduate School), which complied a report working and living environments. To respond to such requirements, the in April 2012 on such issues as “creation of cities that have excellent industry must work to enhance building quality, such as earthquake disaster prevention capabilities,” “enhancement of office buildings and resistance performance, capabilities to create/store/save energy, and for-sale condominiums” and “responses as real estate industry to people barrier-free specifications. In addition, it is also important to construct having difficulty returning home upon disaster, etc.” high disaster prevention functions and energy networks, etc. within an 3. Bolster Recovery through Such Endeavors as Reinforcing Inter- entire city by enhancing coordination with responsible organizations and national Competitiveness of Cities relevant parties within the community and society. It is also essential to revitalize the Japanese economy in order to support 2. Investigate Issues on Disaster Prevention as Real Estate Industry the victims and help recover the affected areas. Promoting growth Joint implementation by the public and private sectors is required for strategy, especially in the housing and urban enhancement areas, is such initiatives as creating countermeasures for people having difficulty integral to this process. As such, it is necessary to promote and reinforce returning home, establishing disaster prevention centers, and preparing the global competitiveness of Tokyo and other large cities, while further disaster prevention plans in unison for communities. As part of this improving their disaster prevention performance. Steady implementation process, the real estate industry needs to investigate what suggestions it is also needed for measures such as forming a good stock of houses by should make. For this purpose, The Real Estate Companies Association supplying houses with excellent earthquake resistance and energy-saving of Japan (hereafter, the “Association”) established the “Study Group on qualities and creating low-carbon cities. THE ROLE OF REAL ESTATE INDUSTRY

Initiatives to Eliminate Organized Crime Groups, Other Anti-Social Forces from Real Estate Transaction and Money Laundering With an aim to eliminate boryokudan (organized crime groups) and other in real estate transaction, The Real Estate Transaction Modernization anti-social forces from corporate activities, the government compiled Center Foundation, the National Police Agency, the Ministry of Land, the Guideline for How Companies Prevent Damage from Anti-Social Infrastructure, Transport and Tourism, The National Center for the Forces in June 2007. Based on the Guidelines, a report titled “Initiatives Elimination of Boryokudan, Lawyers, etc.) was established for the to Eliminate Organized Crime Groups from Corporate Activities” was purpose of strengthening coordination between relevant governmental publicized in December 2010. Also, Tokyo and Okinawa Prefectures agencies and the real estate industry and promoting elimination of enforced local ordinances prohibiting companies from trading with organized crime groups and other anti-social forces from real estate organized crime groups in October 2011, which has led to further transactions. The Council is working to promote popularization of promotion of initiatives to eliminate organized crime groups throughout provisions for eliminating anti-social forces, planning training and Japan. lectures on the subject and information exchanges, etc. The real estate industry groups set up a “Liaison Council for Preventing Meanwhile, as part of the international community’s anti-money Transfer of Criminal Proceeds and Damage from Anti-Social Forces in laundering measures, the Act on Prevention of Transfer of Criminal the Real Estate Industry” (comprised of The Real Estate Companies Proceeds was fully enforced in March 2008, requiring entities in the Association of Japan (hereafter, the “Association”), four industry groups building lots and buildings transaction business to make transaction involved in real estate transaction (*) and The Real Estate Transaction confirmations, preparation and preservation of transaction records and Modernization Center Foundation) in December 2007, with an aim report suspicious transactions when selling or buying buildings and when to appropriately respond to the enforcement of the Act on Prevention serving as a proxy or brokering transactions. of Transfer of Criminal Proceeds and establish a relevant compliance Also, with the enforcement of the partial revision of the Act on April system. The Council worked to encourage establishment of responsibility 1, 2013, there will be such requirements as addition of items for structures and prevention of damages. confirmation in transactions, addition of the category for high- Also, the four industry groups involved in real estate transaction took risk transactions, addition of measures for accuracy of transaction measures such as preparing model provisions concerning elimination confirmations (effort for implementation of educational training), etc. of organized crime groups and other anti-social forces for real estate transaction contracts (brokerage contracts, sales contracts and lease housing contracts). The Association also prepared “example provisions for eliminating anti-social forces” in transaction contracts and lease *Four industry groups involved in real estate transactions contracts, in which its member companies are the sellers or the National Federation of Real Estate Transaction Associations, All Japan Real Estate lessors, in September 2011 in consultation with the Ministry of Land, Federation, The Association of Real Estate Agents of Japan and Japan Association Infrastructure, Transport and Tourism and the National Police Agency, of Home Suppliers. and requested its member companies to adopt the said provisions, etc. Also in the same month, the “Central Liaison Council between the Real Estate Industry and Police for Eliminating Organized Crime Groups, Etc.” (comprised of the Association, the four industry groups involved

45 Real Estate in Japan 2014 Political, Social and Economic Events; Real Estate-related Policy

Land Planning, City Political, Social and Year Planning, Architectural Land and Housing Policy Land and Housing Taxation Real Estate Industry News Economic Events Regulations, etc.

1995 The Great Hanshin-Awaji Act on Special Measures Execution of emergency Special Lots and Buildings Sarin gas attack by the Aum Urban Districts Damaged by buildings; Revision to the extraordinary taxation Transaction Business Law [a. cult; Disaster (special exceptions Large City Law (creation standard for real property tax, Requirement of registration Sharp appreciation of the yen for land readjustment of projects to supply joint etc.; Reduction of personal with information network to below 100 yen per dollar. business in disaster areas, housing to city centers, long-term transfer tax (39% organization certified etc.); Revised City Planning deregulation of enforcement to 32.5% for 40 million yen property information of an Law (creation of a district requirements for projects to or less); Partial reduction of exclusive broker contract; planning system for town improve housing districts); land value tax (Reduction in b. Clarification of legal promotion); Revised Law on Rebuilding, etc. half of parking lots that must standing of information Urban Redevelopment Sectional Ownership be attached, etc.). network organizations and Law (improvement of Buildings in Disaster Areas supervision by minister; c. implementation requirements (possible to ratify rebuilding Extension of valid license for city redevelopment with 80% or more of voting period (3 years to 5 years), projects, etc.); Revised rights approving such in the abolishment of certain Building Standards Law event a property completely reporting items; and d. (rationalization of FAR collapses in a major Abolishment of testing restrictions in accordance disaster); Establishment qualifications for the testing with the width of road in of Design Guidelines for of brokers, partial test front, rationalization of road Housing in an Aging Society exemption of individuals setback rules); City Park Law (installing hand rails, who have passed certain Enforcement. eliminating different levels, courses]. etc.).

1996 Act on Special Measures Revision to the Law for 7th Housing Construction Reduction of land value Hold general meeting of Concerning Promotion of the Improvement of the 5-Year Plan (7.3 million tax rate (0.3% to 0.15%); International Real Estate Disposal of Claims and Debts Areas along Trunk Roads houses, half of all houses, Enlargement of measure Federation in Tokyo; of Specific Jusen Companies; (enhancing the roadside meet guidance living to adjust burden of real Chairman Tsuboi of the General elections based on improvement planning standards; Goal of average property tax; Reduction of Real Estate Companies the single-seat constituency system, transferring housing floor area of 100m2); personal long-term transfer Association of Japan system. roadside improvement Focused Emergency Plan tax (32.5% to 26% for 40 suddenly passes away and rights, etc.; added roadside for Reducing Housing million yen or less; 39% to Mitsui Fudosan President district planning and Construction Costs (dramatic 32.5% for more than 40 Junichiro Tanaka assumes district planning districts review of the Building million yen to 80 million the chairmanship. to the requirements for Standards Law, smoothing yen or less); Reduction in implementation districts the importing of housing, focused corporate tax rate and such of city area overseas materials and (very short period 30% to redevelopment projects). overseas components, 15%, short period 20% etc.); Revision to the GHLC to 10% and general 10% Law (strengthening policy to 5%; Enlargement of guidance function by special measure for taxation applying different interest standard on land acquisition rates according to housing (registration license tax structures when loaning to 50/100 to 40/100 and real certain new houses). estate acquisition tax 2/3 to 1/2).

46 Real Estate in Japan 2014 Real Estate in Japan 2014

Land Planning, City Political, Social and Year Planning, Architectural Land and Housing Policy Land and Housing Taxation Real Estate Industry News Economic Events Regulations, etc.

1997 Consumption tax rate raised; Act on Promotion of New General Land Reduction and deferment of Establish 4 information Failure of the Hokkaido Improvement of Disaster Policy Promotion Outline burden from the perspective network organizations Takushoku Bank and Control Districts in Populated (proclaimed that the new of balancing the burden (welfare corporations) Yamaichi Securities; Urban Districts (creation of objective of land policy standard of real property tax, nationwide; Revision to the Opening of the Trans-Tokyo a system for planning the would shift from suppressing etc.; Enlargement are participating in the Revision to the City Planning the preferential interest of housing acquisition project, the application of Law and Building Standards rate terms and repayment promotion tax system regulations to protect general Law (creation of zones for period for loans when buying and phased reduction in investors is exempted); attracting high-rise housing certain existing housing); residing years (maximum Ministry of Construction and rationalization of FAR Bring transparency, simplicity of 1.8 million yen in 1997, issues its Real Estate rules for condominiums and and speed to procedure for 1.7 million yen in 1998, 1.6 Renovation Vision (future other joint housing); Creation approving use conversion for million yen in 1999 and 1.5 direction of the real estate of a type of sophisticated use agricultural land. million yen in 2000 and industry and countering

zone for upgrading functions; 2001); Halving of reduced present issues including POLITICAL, SOCIAL AND ECONOMIC EVENTS; REAL ESTATE-RELATED POLICY Creation of a general design tax rate for registration the promotion of IT and system by lot size; Creation of license tax related to housing modernizing a transparent mini lot readjustments. buildings; Raising of special and fair investment market deduction of real estate to meet the changes in the acquisition tax for new socio-economic structure); housing (10 million yen to Building Lots and Buildings 12 million yen); Reduction of Transaction Business Law stamp tax. (extended the valid period of broker licenses from 3 to 5 years); The Real Estate Companies Association of Japan issues its 21st Century Vision and Corporate Code of Conduct; Sumitomo Realty & Development Chairman Shinichiro Takagi appointed chairman of the Japan Condominium Association.

1998 Nagano Olympics; Revision to the City Planning Law Promoting the Building Suspension of land tax Law on Securitization of Financial Reconstruction Law (expansion of the area of Superior Suburban taxation; Reduction of Specified Assets by Special Law, etc., Act on Emergency for which district plans Housing (promoting the personal long-term transfer Purpose Companies (SPC Measures for Early can be established within building of superior houses taxation (26% for 60 million Law). Strengthening of Financial urbanization adjustment in agricultural towns and yen or less and 32.5% for Functions; districts, diversification suburbs); Revision to the more than 60 million yen); Nationalization of the Long- of special use districts, Agricultural Land Law Elimination of weighted tax Term Credit Bank of Japan etc.); Revision to the (transferred authority on very short-term ownership and the Nippon Credit Bank. Building Standards Law (a. to approve change of by corporations; Non- Establishing rules for the agricultural land of 4ha application of short-term and performance of building or less to the governor); general ownership categories standards, b. Rationalization Revision to the National Land (through 2000); Abolishment of rules concerning sunlight, Law (transfer to a system of restrictions on including etc., c. Opening of structure for reporting after the fact interests on loans when confirmation and inspection and creation of emphasized corporations acquire land business to private sector, districts); Emergency as expenses; Creation of etc.; Revision to the City measures to expand housing system for carrying forward Redevelopment Law and investment. deduction of capital losses Law on the Loaning of on residential property; Urban Development Funds Application of measures to expansion of cities subject reduce real estate acquisition to the establishment of city taxes and real property taxes redevelopment policies, on second homes. creation of a system for participants in special projects and creation of a system for certifying redevelopment projects); Law on Improvement and Vitalization in City Center (promotion of comprehensive and integrated measures based on the improvement of city areas and activating commerce utilizing the creativity of the area, in order to activate city centers that are hollowing out).

47 Real Estate in Japan 2014 Land Planning, City Political, Social and Year Planning, Architectural Land and Housing Policy Land and Housing Taxation Real Estate Industry News Economic Events Regulations, etc.

1999 Criticality accident in Revision to the Act Special Provisions Law Creation of new housing Launch of the Housing Tokaimura, Ibaraki; concerning Lending of concerning Promotion of loan deduction system & Urban Development Mergers or business mergers Urban Development Funds the Supply of Good Quality (deduction period of 15 Corporation; Real estate between major banks, etc.; (smoothing the capital Leased Housing (creation of years, etc.); Enhancement of monetization and Response to Y2K. raising process; enhancing fixed-term leasehold rights system for carrying forward securitization; Taking off of measures for efficiently using and enforcement in 2000); deduction of capital losses Internet transactions. land with low use or non-use; Housing Quality Assurance for residential property; improving and enhancing Law (requirement of 10-year Improvement of special redevelopment methods); warranty and enforcement in exception to cash gift for Promoting efficient use of 2000). acquiring housing; Reduction former factory sites (circular in tax rate on personal long- from the City Bureau and term ownership transfer Housing Bureau Chiefs). income tax (uniform 26%); Improvement in special measure for registration and license tax; Enhancement of special measures for real estate acquisition tax related to the house and its lot.

2000 Prime Minister Obuchi Revision to the City Law for Promoting Half-year extension of the Growing popularity of large passes away; Miyake Island Planning Law and Building Appropriate Condominium housing loan deduction and tower condominiums; erupts, floods in the Tokai Standards Law (enhancing Management (condominium system (up to taking up Start of real estate region; Turmoil in the U.S. the master plan; reviewing manager and managerial residence in June 2001); investment trusts; Creation presidential elections; the demarcation and chief qualification system Improvement in floor of the investment consultant Number of juvenile crimes development permit and condominium area requirements of registration system; JICPA rise. system; enhancing the management company special real property tax issues the "Audit Handling system for securing a good registration system; measures for new housing of Judgment on Decision to environment; introducing the enforcement in 2001). and 2-year extension of Forcefully Reduce Valuation new system for re-adjusting application period; Phased of For-Sale Real Estate"; existing city areas; reduction of real property Integration of the Japan introducing regulations for tax on land (75% in fiscal Home Builders Association developing and building 2001 and 70% in fiscal and the Housing Industry non-city planning districts; 2002); 3-year extension of Development Association to promoting transparency and special measures on land form the Japan Association citizen participation in the transaction tax (1/3 for of Home Suppliers. city planning and decision registration license tax and system, etc.); Law for the 1/2 for real estate acquisition Recycling of Construction tax). Materials (segregation and dismantlement of construction materials and such; recycling of specified constructions materials; fully enacted May 2002).

2001 Inauguration of the Koizumi Launching of Urban Enforcement of Law for Creation of new housing loan Integration of the Real Estate Cabinet which upheld Renaissance Headquarters Securing Dependable deduction system (deduction Companies Association and structural reform; September (led by the prime minister); Residences of the Elderly; rate of 1%; borrowing limit the Japan Condominium 11 attacks in the U.S.; Anti- Finalization of urban Establishment of the 8th of 50 million yen; deduction Association with Junichiro terrorism Special Measures regeneration project (phases Housing Construction 5-Year period of 10 years); Tanaka serving as chairman Law enacted; Universal 1 through 3); Emergency Plan; Decision to abolish the Enhancement of donation (chairman of the Real Estate Studio Japan (Osaka measures for promoting city Government Housing Loan tax on house acquisition Companies Association); prefecture) and Disney development investment by Corporation within 5 years; funds (tax exempt limit of Real estate investment trusts Sea (Urayasushi) opens, the private sector; Direction Abolish the Housing & Urban 5.5 million yen); Creation are listed. established in January by of emergency system reforms Development Corporation by of rental housing supply MLIT. for urban renaissance; Report fiscal 2003 and have a new promotion tax for elderly of the urban renaissance independent administrative housing (5 years and 40% regeneration strategy team; corporation established to premium depreciation); Establishment of new city succeed a portion of the 3-year extension of the creation vision for Tokyo original functions. special taxation on transfer by Tokyo Metropolitan income of personal general Government; Establishment long-term ownership of City Planning Operational (26% (20% income tax Guidelines. and 6% residential tax)); Enhancement of collection grace period system for special land ownership tax; Creation of measures to reduce transaction taxes on real estate securitization (SPC and investment corporation); Reduction in capital gains tax on listed real estate investment securities for individuals.

48 Real Estate in Japan 2014 Real Estate in Japan 2014

Land Planning, City Political, Social and Year Planning, Architectural Land and Housing Policy Land and Housing Taxation Real Estate Industry News Economic Events Regulations, etc.

2002 Prime Minister Koizumi Creation of the Special Passage of the Soil Reduction in registration Rebuilt Marunouchi Building visits North Korea to Measures Act for Urban Contamination license tax on sale of existing opens; Caretta Shiodome, normalize diplomatic Renaissance; Designation Countermeasures Law; buildings (25/1000); the first wave of Shiodome’s relations; Holding of the of the urban renaissance Revision to the Law for Expansion of collection redevelopment opens. Korea/Japan World Cup; emergency improvement Smoothing Condominium grace period measures for “Prompt Countermeasures to district (total of 44 districts Reconstruction and revision special land holding tax Deflation” formulated. in phases 1 and 2 totaling to Sectional Ownership Law. (allow change to exempted about 5,700ha); Revision to land and transfer); Abolish the Urban Redevelopment maximum tax rate of 39% Law (conferral of for tax on personal general enforcement function for long-term ownership private condemnation, etc.); transfer income (taxation Revision to the Building suspended). Standards Law and City Planning Law (maximum floor area ratio of 1300%, urban proposal system,

speeding up comprehensive POLITICAL, SOCIAL AND ECONOMIC EVENTS; REAL ESTATE-RELATED POLICY design procedures, etc.); Abolishment of the Industry (factory) Restrictions Law; Deregulation of the environmental impact assessment ordinance procedure (Tokyo); Flexibility in obligation to provide parking spaces (Tokyo); Finalization of Urban Renaissance Project (phase 4).

2003 Iraq War; Finalization of Urban Launch of securitization Reduction in registration Shinichiro Takagi becomes Second Koizumi Cabinet. Renaissance Project (phases support business by and license tax rate (sale, chairman of the Real Estate 5 and 6); Designation Government Housing Loan etc. 10/1000); Suspension Companies Association of urban renaissance Corporation (acquisition of levying of special land (chairman of Sumitomo Land emergency improvement type). holding ownership tax and Realty); Roppongi Hills districts (phase 3); ; Start of operations by city Creation of settlement regeneration fund investment taxation system at time of corporation. inheritance; Abolishment of business office tax (new or expanded portion); Creation of urban renaissance promotion tax system.

2004 Athens Olympics; Finalization of Urban Revision to Condominium Creation of measures to Construction completed Second reshuffled cabinet of Renaissance Projects Management Rules; Partial reduce ordinance concerning on COREDO Nihonbashi the Koizumi Cabinet; (phases 7 and 8); enforcement of the Personal real property tax and city and Marunouchi OAZO; Occurrence of major natural Enhancement of community Information Protection Law; planning tax of commercial Growth in housing loans disasters including a wave regeneration measures and Launch of the securitization property, etc.; Rebuilding issued by private financial of typhoons hitting Japan, town creation subsidies; support business by the of taxation system for institutions; Repeated release the Mid Niigata Prefecture Establishment of 3 Government Housing Finance capital gains from personal of skyscraper condominiums Earthquake, and earthquakes landscaping and greenery Corporation (warranty type). land transfers; Extension and progression of and tsunamis in the ocean laws including the Landscape of suspension period for population's return to off Sumatra Island. Law. application of taxation residing in city centers. system on land transfers by companies; Extension of system for reducing home loan taxation (phased contraction through 2008).

49 Real Estate in Japan 2014 Land Planning, City Political, Social and Year Planning, Architectural Land and Housing Policy Land and Housing Taxation Real Estate Industry News Economic Events Regulations, etc.

2005 Aichi Expo held; Toward activation of urban The Government Housing Extension of the scope to Hiromichi Iwasa (President LDP wins the Lower House areas in local regions, Loan Corporation, which apply various preferential of Mitsui Fudosan) was elections in September by discussion on review of 3 engaged in direct financing measures for taxation related inaugurated as the president an overwhelming majority, urban development laws utilizing the government to existing homes (mortgage of the Real Estate Companies followed by the enactment begins to intensify. fund, was abolished and tax reduction system, Association of Japan; of the Postal Service instead, the Japan Housing preferential measure for Tsukuba Express which Privatization Act; Finance Agency, an replacement of residential cuts travel from Akihabara Princess Nori marries. independent administrative properties, preferential to Tsukuba in 45 minutes institution, was established measures for the tax system was opened in August; to support and supplement for settlement at the time Trust in safety of buildings loans for the housing fund; of inheritance concerning was shaken such as with Kubota Corporation, a housing purchases and the quake-resistance data machinery manufacturer, other funds, reduction of falsification scandal and announced to the public registration and license surfacing of deficiencies that employees working at tax for registering retention in checking functions of Kubota's factory had been of ownership of housing building construction; The suffering health problems buildings, preferential Akihabara Dai Building, caused by asbestos. measures for taxation Nihonbashi Mitsui Tower Based on the fact that a standards, etc. for real estate and other buildings were lot of asbestos is used for acquisition tax on existing completed; Vacancy rate in architectural and other houses, etc.); Extension central Tokyo improves. materials, anxiety about and enhancement of urban health in relation to asbestos renaissance promotion has spread to the general taxation system; Review public. of system to postpone collection of special landholding tax; Required taxation measure in relation to term leasehold interest (clarification of handling of lump-sum payments).

2006 Zero-interest rate policy lifted In the wake of the quake- Basic Act for Housing was Reduction and extension Prefectural land price in July; Inauguration of the resistance data falsification enacted. of preferential measures research revealed that the Abe Cabinet in September. scandal, the Law to Revise for land and building prices of both residential Portions of the Building related transaction taxes land and commercial land Standards Law, etc. to Secure (registration and license tax, in 3 major metropolitan Safety of Buildings was real estate acquisition tax); areas rose for the first time enacted. Extension of measures to in 16 years. The number of Three urban development reduce ordinance concerning listed REITs reached 40 in laws were enacted. real property tax, etc. of December and the aggregate commercial property, etc.; market value increased to Extension and abolishment about 5 trillion yen. of preferential measures in relation to housing acquisition fund donations; Foundation of taxation system to promote quake- resistance renovation of existing homes; Extension of special measures for real estate acquisition tax related to the house and housing land.

50 Real Estate in Japan 2014 Real Estate in Japan 2014

Land Planning, City Political, Social and Year Planning, Architectural Land and Housing Policy Land and Housing Taxation Real Estate Industry News Economic Events Regulations, etc.

2007 IInauguration of the Fukuda The Law to Revise Portions of Japan Housing Finance Extension of preferential Financial Instruments and Cabinet in September. the Urban Rejuvenation Law Agency was inaugurated. measures on replacement Exchanges Law was enacted. was enacted. of commercial property Tokyo Midtown, Shin- Law to Secure Execution of concerning land owned Marunouchi Building, Defect Warranty for Specific over the long term, etc. Kasumigaseki Common Gate Housing was enacted. to land, buildings, etc.; and other buildings were Extension, etc. of special tax completed. measures concerning city and regional regeneration projects; Securing effect of reduction of housing loan tax for residents moving into property in 2007 and 2008 in association with transfer of tax sources to individual residential tax; Extension of special measures for

aggregation of profits and POLITICAL, SOCIAL AND ECONOMIC EVENTS; REAL ESTATE-RELATED POLICY loss/deductions carried forward of loss on transfer accompanying replacement of residential properties; Extension of decreased tax rate of registration and license tax of houses and special measures to reduce stamp tax on purchase and sale agreement, etc. for real estate transactions; Extension of system of special deduction of 15 million yen concerning specified sector housing development projects.

2008 Inauguration of the Aso National Sustainability Plan Emergency Measures for Extension of decreased Law for Prevention of Cabinet; Effects of the (national plan) was approved Activation of Housing/ tax rate of registration and Transfer of Criminal Proceeds financial crisis stemming at a Cabinet meeting. Real Estate Market were license tax of houses and was enacted. Real estate from the U.S. subprime loan announced. special measures to reduce companies went under in problem spread across the stamp tax on purchase and succession. globe. sale agreement, etc. for real estate transactions; Extension of system of special deduction of 15 million yen concerning specified sector housing development projects.

2009 H2N1 virus spreads from National spatial strategy Policy Package to Address Tax Reduction System Real Estate Market around springtime; Citizen (regional plan) approved by Economic Crisis was for Housing Loans was Stabilization Fund was judge system begins in the minister. announced. extended and expanded, established. Both land prices May; DPJ wins the Lower Emergency Economic Tax Reduction System that were published and land House elections by an Countermeasures for Future for Long-term Excellent prices according to surveys overwhelming majority Growth and Security were Houses was established, by prefectures decreased in August; change of announced. etc.; Special income tax nationwide. The number of government for the first time Eco-point system for housing deduction for barrier free new housing construction in 16 years; Inauguration was established. New Growth and energy conservation fell under 1 million units to of the Hatoyama Cabinet in Strategy (basic policies) was renovations of existing 780,000 units for the first September; Inauguration of announced. houses was established; time in 42 years. Completion the Consumer Affairs Agency Tax rate for registration of construction for Mitsubishi in September. license tax related to real Ichigokan. estate transactions was left unchanged; Special measures to arouse demand for land during the economic recovery were established.

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Land Planning, City Political, Social and Year Planning, Architectural Land and Housing Policy Land and Housing Taxation Real Estate Industry News Economic Events Regulations, etc.

2010 Inauguration of the Kan Low Carbon City Increased the interest-rate Expansion of measures for Completion of construction Cabinet in June; Development Guidance reduction from “Flat 35S”; exemption of donation tax for Coredo Muromachi, Bank of Japan announces its created (MLIT). “MLIT Growth Strategy” for housing purchases and Yuito, etc.; RECAJ formulates “Comprehensive Monetary announced; “New Growth other funds, etc.; Extension of the “RECAJ Action Plan Easing Policy” in October. Strategy” announced; special measures concerning for Low Carbon City “Three-Step Economic donations of funds for Development” and “‘Future Measures for the Realization housing purchases, etc. in Urban Development of the New Growth Strategy” the tax system for settlement Strategy’ for the Growth announced. at the time of inheritance, of the Housing and Urban etc.; Extension of exceptions Development Sectors”; for fixed asset tax reduction “Tohoku Shinkansen” opens for newly constructed in December. housing.

2011 Great East Japan Earthquake Establishment of “Serviced Silver Home Establishment of special Complete opening of Kyushu POLITICAL, SOCIAL AND ECONOMIC EVENTS; REAL ESTATE-RELATED POLICY in March; “Comprehensive Special System” begins; measures for specific urban Shinkansen Kagoshima Yen records highest post-war Zone System”; Implementation of redevelopment emergency Route; value in March; Revision of Special Measures Registration System for development areas; Keiji Kimura (President Inauguration of Noda Cabinet Act for Urban Rental Housing Management Establishment of special of Mitsubishi Estate) in September; Renaissance (establishment Operator; measures for international inaugurated as the president World population hits 7 of emergency development Establishment of system strategy comprehensive of the Real Estate Companies billion. areas designated for urban for Flat 35S Eco Points and zones; Extension of the tax Association of Japan; reconstruction). Recovery Support/Residence system for the promotion Adoption of “Five Principles Eco Points. of construction of prime of Removing Antisocial rental senior housing upon Forces such as Crime restructuring as targeting Syndicates from Real Estate senior housing with services. Transaction.”

2012 Tokyo Skytree, the world’s Partial revision of Disaster Reconstruction Extension of exceptions for Terms for display of real highest free-standing tower enforcement order of Special Support and Eco Point replacement purchases of estate advertisement, etc. (643m), opened in May; Measures Act for Urban System for Housing System business assets in long- changed; Existing homes Summer Olympics held in Renaissance; Statistics starts accepting applications; term ownership of land; allowed to display double London during July and for stock of buildings Maximum of loan rate Extension of exceptions for price; Shibuya Hikarie and August and Japan won subject to special easing for Flat 35 lowered from fixed asset tax reduction for Tokyu Plaza Omotesando 38 medals, its most ever; measures for extension 100% to 90%; Standard newly constructed housing; Harajuku completed. Inauguration of the 2nd Abe announced; Buildings with apartment contract Enhancement and extension Cabinet in December. new earthquake resistance revised; Law concerning of exceptions for donation standards becomes 67%. the promotion of low- of funds for acquisition of carbon cities established; housing, etc. First announcement of Establishment of special the real estate price index measures to promote (residence); Formulation of Approved Energy-Saving total plan for renovation of Houses. existing homes; Compilation of proposals of Real Estate Transaction Market Vitalization Forum.

2013 Introduction of Special Passage of National Strategic Ministry of Land, Measures accompanying City of Osaka opens Grand Reconstruction Income Tax Special Zone Law; Infrastructure, Transport, consumption tax rate hike Front Osaka redevelopment (until 2037) in January; Passage of Industrial and Tourism formulates (relating to home buying, of former Umeda Freight Prime Minister Abe declares Competitiveness Inspection Guidelines for etc.); Station site; intent to participate in TPP Enhancement Act; Existing Housing; Extension of the Urban Completion of Otemachi negotiations in March; Passage of Basic Law of City of Tokyo implements Renewal Promotion Tax Tower; Bank of Japan announces National Land Enhancement; Special Development Zones system; Japan Association of Home Quantitative and Qualitative to Advance Fire Resistance Creation of special Suppliers and National Monetary Easing in April; and creates housing subsidy exceptions in order to Federation of Housing Revision of the Public system; strengthen disaster- Industry Associations merge Officers Elections Law Amendment to the Real prevention capacity of cities; to form the National Housing passed in April, lifting the Estate Specified Joint Creation of tax system- Industry Association. prohibition on online voting; Enterprise Act passed; related preferential Tokyo selected as host of the Revised Seismic Retrofitting measures for intensive urban 2020 Summer Olympics/ Promotion Law passed; development projects; Paralympics in September; Implementation of 100% Extension and expansion of in October, it is decided to financing for Flat 35 special exceptions for stamp raise consumption tax to 8% mortgages, and further tax on real estate transaction starting 2014. lowering of Flat 35S interest contracts. rate; Finalization of Japan Revitalization Strategy.

52 Real Estate in Japan 2014 Real Estate in Japan 2014

Overview of Present Land and Housing Taxation

Personal Corporation

Acquisition ❍ Income tax (national tax) ❍ Personal residential tax (local tax)

• The Housing loan tax deduction system: If taking out a mortgage to buy a house, for a 10-year period 1% of the mortgage balance at the end of each year is deducted from income tax. If deduction from income tax is not possible, a portion will be deducted from residence tax.

Occupancy Year ~March 2014 April 2014 ~ End of 2017*1

Maximum Deduction(10-year total) 2 million yen*2 (200 thousand yen × 10 years) 4 million yen*2 (400 thousand yen × 10 years)

Deduction Rate, Deduction Period 1%, 10 years 1%, 10 years

Maximum deduction from 97.5 thousand yen per year 136.5 thousand yen per year residential tax (taxable income of previous year × 5%) (taxable income of previous year × 7%) 1) Floor area must be 50m2 or more Main requirements OVERVIEW OF PRESENT LAND AND HOUSING TAXATION 2) Period until loan maturity must be 10 years or more

*1 Measures up until March 2014 will also apply in April 2014 and after for loans where 5% of consumption tax rate is applied due to provisional measures, transactions of used housing among individuals which are exempt from consumption tax, etc. *2 For approved long-term high-quality housing and approved low-carbon housing, maximum deduction is 3 million yen (until March 2014) and 5 million yen (April 2014 to 2017), respectively. • Tr ansfer losses accompanying the disposal or replacement of residential property deducted from income and carried forward for 3 years. Recognized as deductions carried forward for 3 years according to calculations of profits and losses during the year the transfer was made as well as income tax and residential tax. This covers transfers through the end of December 2013.

❍ Real estate acquisition tax (municipal tax): 3% of real property tax assessment amount on housing or land purchasers (limited measure through March 2015) and extension prolonging of special measure on residential land taxation standard (1/2; limited measure through the end of March 2015) (*There are special reductions for the acquisition of certain houses and lots). *Refer to 10.

❍ Stamp tax (national tax): Taxation in accordance with contract amount on the preparation of sales contracts, etc.

❍ Registration and license tax (national tax): Taxed when having real estate registered (*Special reduction measures exist for certain houses).

(Inheritance) ❍ Inheritance tax (national tax): Taxation of 10-50% depending on the inheritance tax assessment amount.

(Gift) ❍ Gift tax (national tax): There are special tax exemption cases if gift funds for purchasing a home are received from a lineal ascendant (temporary measure until December 2014)

Ownership ❍ Fixed asset tax (local tax): Annual tax of 1.4% of the real property tax assessment amount levied on owners of land and buildings (there are certain measures for adjusting the burden).

❍ City planning tax (local tax): Annual tax of 0.3% of the valuation amount of fixed asset tax that is levied on land and building owners in city districts (same as above).

❍ Land value tax (national tax): Annual tax of 0.15% on valuation amount under inheritance tax law levied on landowners and leaseholders *Application has been suspended for the time being (from 1998).

Transfer ❍ Income tax (national tax and capital gains) ❍ Corporation tax (national tax): Only corporation tax regardless of possession ❍ Personal residential tax (local tax and capital gains): period 1) General transfer after long-term ownership: *Special measure through the end of December 2013 Uniform tax rate of 20% on capital gains of land owned for more than 5 years ❍ Corporate inhabitant tax (municipal tax) (income tax 15% + residential tax 5%). ❍ Corporate enterprise tax (municipal tax) 2) Superior transfer after long-term ownership:  The following applies to capital gains on specific land owned for more than 5 years. 14% on the portion 20 million yen or less (income tax 10% + residential tax 4%) 20% on the portion more than 20 million yen (income tax 15% + residential tax 5%). 4) Short-term transfer: *Special measure through the end of December 2013 39% of capital gains on capital gains from 3) Transfer of residential property: land owned for 5 years or less (income tax After subtracting the special deduction of 30 million yen on capital gains from 30% + residential tax 9%). However, 20% for residential land and buildings owned for more than 10 years; 14% on the transfers to the State, etc. (income tax 15% + portion 60 million yen or less (income tax 10% + residential tax 4%); 20% on residential tax 5%). the portion more than 60 million yen (income tax 15% + residential tax 5%).

* Item for which an extension of the applicable period is expected based on 2014 tax system revisions.

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The following revisions are anticipated regarding the land and housing tax system in the 2014 revisions:

■ Growth strategy-related tax policy ■ City/land tax policy 1. Creation of special exceptions for National Strategic Special Zones 1. Creation of special measures for the purpose of developing urban 2. Two-year extension of special exceptions for International Strategy functions aimed at urban renewal Comprehensive Zones 2. Three-year extension of specified reduced tax rate for favorable 3. Creation of special exceptions to encourage investment in upgrades long-term capital gains for individuals to existing buildings 3. Three-year extension of tax suspension period for land transfer 4. Creation of special tax measures to encourage investment in revenue for corporations equipment leading to improved productivity (tax incentives to promote capital expenditure on productivity-enhancing equipment) 5. Broadening of scope and streamlining of process for items covered by consumption tax exemptions aimed at foreign tourists 6. Revision of fixed asset valuation for hotels and traditional Japanese inns

■ Housing tax policy OVERVIEW OF PRESENT LAND AND HOUSING TAXATION 1. Two-year extension of special tax relief cases for fixed asset tax on newly constructed housing 2. Creation and extension of special exceptions relating to promotion of rebuilding of aging condominiums 3. Two-year extension of special cases accompanying replacement/ sale of residential property 4. Two-year extension of special exceptions for certified low-carbon housing 5. Two-year extension of special exceptions for long-life quality housing 6. Two-year extension of special exceptions for real estate acquisition tax related to buying housing and residential land 7. Creation of special exceptions aimed at expanding and vitalizing the existing home transaction/renovation market.

54 Real Estate in Japan 2014 Real Estate in Japan 2014

REAL ESTATE-RELATED DATA

Land Use

History and Status of Land Use in Japan (unit: 10,000ha; %)

Land 1975 1985 1995 2005 2010 2011 Category Three Major Local Three Major Local Three Major Local Three Major Local Three Major Local Three Major Local National Metropolitan National Metropolitan National Metropolitan National Metropolitan National Metropolitan National Metropolitan Areas Areas Areas Areas Areas Areas Areas Areas Areas Areas Areas Areas Category REAL ESTATE-RELATED DATA

1. Farmland 557 80 477 538 72 466 504 66 438 470 61 409 459 58 401 456 58 398 (14.8) (15.0) (14.7) (14.2) (13.4) (14.4) (13.3) (12.3) (13.5) (12.4) (11.4) (12.6) (12.1) (10.8) (12.4) (12.1) (10.8) (12.3) 2. Forest 2,529 324 2,205 2,530 323 2,207 2,514 318 2,196 2,510 316 2,194 2,507 315 2,192 2,506 315 2,191 (67.0) (60.7) (68.0) (67.0) (60.3) (68.1) (66.5) (59.2) (67.7) (66.4) (58.8) (67.7) (66.3) (58.7) (67.6) (66.3) (58.7) (67.6) 3. Wild fields 62 2 60 41 1 40 35 0 34 36 1 35 36 1 35 34 1 33 (1.6) (0.4) (1.9) (1.1) (0.2) (1.2) (0.9) (0.0) (1.0) (1.0) (0.2) (1.1) (1.0) (0.1) (1.1) (0.9) (0.2) (1.0) 4. Bodies of 128 18 110 130 18 112 132 19 113 134 19 115 133 19 114 134 19 115 water (3.4) (3.4) (3.4) (3.4) (3.4) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) (3.5) 5. Roads 89 19 70 107 23 84 121 25 95 132 27 105 136 28 108 136 28 108 (2.4) (3.6) (2.2) (2.8) (4.3) (2.6) (3.2) (4.7) (2.9) (3.5) (5.0) (3.2) (3.6) (5.2) (3.3) (3.6) (5.2) (3.3) 6. Residential 124 43 81 150 51 99 170 57 113 185 61 124 190 62 128 190 63 127 land (3.3) (8.1) (2.5) (4.0) (9.5) (3.1) (4.5) (10.6) (3.5) (4.9) (11.4) (3.8) (5.0) (11.5) (3.9) (5.0) (11.7) (3.9) Housing lots 79 26 53 92 31 61 102 34 68 112 37 74 115 39 76 116 39 77 (2.1) (4.9) (1.6) (2.4) (5.8) (1.9) (2.7) (6.3) (2.1) (3.0) (6.9) (2.3) (3.0) (7.3) (2.3) (3.1) (7.3) (2.4) Industrial sites 14 6 8 15 6 9 17 6 11 16 5 10 16 5 11 15 5 10 (0.4) (1.1) (0.2) (0.4) (1.1) (0.3) (0.4) (1.1) (0.3) (0.4) (0.9) (0.3) (0.4) (0.9) (0.3) (0.4) (0.9) (0.3) Other 31 11 20 44 15 29 51 17 35 57 18 39 59 18 41 59 18 41 residential land (0.8) (2.1) (0.6) (1.2) (2.8) (0.9) (1.3) (3.2) (1.1) (1.5) (3.4) (1.2) (1.6) (3.4) (1.3) (1.6) (3.4) (1.3) 286 48 238 282 47 234 302 52 252 312 52 261 319 54 265 322 54 268 7. O t h e r (7.6) (9.0) (7.3) (7.5) (8.8) (7.2) (8.0) (9.7) (7.8) (8.3) (9.7) (8.1) (8.4) (10.1) (8.2) (8.5) (10.1) (8.3) 3,775 534 3,241 3,778 536 3,242 3,778 537 3,242 3,779 537 3,242 3,779 537 3,242 3,779 537 3,242 Total (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0)

Source: “Land Use Fact Finding Study” issued by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT). Notes: 1. Roads include ordinary roads, agricultural roads and forest roads. 2. The numbers were calculated by MLIT based on various existing statistics. 3. Due to rounding, the figures listed in the table may not match the totals. 4. The‌ figures in parentheses indicate the percentage of total area for the entire nation, the three major metropolitan areas, and local areas.The three major metropolitan areas include the following 11 prefectures: Saitama, Chiba, Tokyo, Kanagawa, Gifu, Aichi, Mie, Kyoto, Osaka, Hyogo, and Nara.Local areas cover all regions except for the three major metropolitan areas. 5. The previous “Pasture and mowing” and “Wild fields” categories have been combined into “Wild fields, etc.” 6. For some prefectures, the data for 2011 includes data for 2010 due to the impact of the Great East Japan Earthquake.

54 55 Real Estate in Japan 2014 Real Estate in Japan 2014 Land Prices

Standard Land Prices (Prefectural Land Price Study) vs. Year-on-Year Change (unit: %)

Study Year 1985 1990 1995 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Usage, etc. Tokyo metropolitan area 1.7 6.6 -3.3 -2.9 -4.4 -7.3 -6.7 -5.8 -6.1 -5.6 -4.3 -2.4 0.7 4.8 1.6 -6.5 -3.0 -1.9 -1.0 -0.1

Osaka metropolitan area 3.0 56.1 -3.0 -1.5 -2.7 -6.2 -6.5 -7.5 -8.9 -8.9 -6.8 -3.7 0.0 2.9 1.0 -4.5 -3.6 -1.8 -1.0 -0.4

Nagoya metropolitan area 1.6 20.2 -3.4 -1.0 -1.1 -3.4 -1.6 -2.4 -5.3 -5.6 -3.9 -2.5 -0.1 2.4 1.5 -4.2 -1.3 -0.7 -0.2 0.7

3 major metropolis average 2.0 22.0 -3.2 -2.2 -3.4 -6.4 -6.0 -5.9 -6.8 -6.6 -5.0 -2.8 0.4 4.0 1.4 -5.6 -2.9 -1.7 -0.9 -0.1

Residential Local average 2.4 11.4 -0.1 -0.2 -0.8 -1.5 -1.8 -2.5 -3.4 -4.3 -4.4 -4.1 -3.1 -2.3 -2.1 -3.4 -3.6 -3.7 -3.2 -2.5

National average 2.2 17.0 -0.9 -0.7 -1.4 -2.7 -2.9 -3.3 -4.3 -4.8 -4.6 -3.8 -2.3 -0.7 -1.2 -4.0 -3.4 -3.2 -2.5 -1.8

Tokyo metropolitan area 7.2 4.8 -16.9 -10.6 -8.4 -10.3 -9.0 -7.6 -6.9 -5.8 -3.9 -1.5 3.9 12.1 4.0 -8.9 -4.1 -2.3 -0.9 0.6

Osaka metropolitan area 5.0 46.3 -16.4 -7.8 -7.3 -10.6 -11.3 -11.0 -10.8 -10.3 -7.6 -3.3 3.6 8.0 2.8 -7.1 -5.3 -2.6 -1.0 0.4

Nagoya metropolitan area 2.7 22.4 -11.6 -7.3 -6.9 -11.4 -6.5 -6.1 -8.8 -7.6 -5.2 -2.1 2.4 7.2 1.9 -7.3 -2.9 -1.1 -0.5 0.7

3 major metropolis average 5.8 18.6 -16.0 -9.4 -7.9 -10.6 -9.2 -8.2 -8.2 -7.3 -5.0 -2.1 3.6 10.4 3.3 -8.2 -4.2 -2.2 -0.8 0.6

Commercial Local average 2.6 15.4 -3.3 -3.4 -4.2 -5.2 -5.2 -5.9 -6.8 -7.4 -7.1 -6.1 -4.3 -2.6 -2.5 -4.9 -4.8 -4.8 -4.1 -3.1

National average 3.8 16.7 -6.9 -5.1 -5.2 -6.6 -6.3 -6.6 -7.2 -7.4 -6.5 -5.0 -2.1 1.0 -0.8 -5.9 -4.6 -4.0 -3.1 -2.1

Tokyo metropolitan area 2.4 7.2 -6.6 -4.8 -5.3 -8.1 -7.4 -6.5 -6.6 -6.0 -4.5 -2.5 1.3 6.3 2.1 -6.9 -3.3 -2.1 -1.0 0.1

Osaka metropolitan area 3.2 53.9 -5.6 -2.7 -3.5 -6.9 -7.4 -8.1 -9.2 -9.3 -7.2 -3.9 0.4 3.5 1.2 -5.0 -4.0 -2.1 -1.1 -0.3

Nagoya metropolitan area 1.7 19.9 -4.9 -2.3 -2.4 -5.2 -2.8 -3.6 -6.1 -6.1 -4.4 -2.6 0.1 3.1 1.4 -4.9 -1.8 -0.9 -0.9 0.7

3 major metropolis average 2.5 22.1 -6.0 -3.8 -4.4 -7.3 -6.7 -6.6 -7.3 -7.0 -5.3 -2.9 0.9 5.1 1.7 -6.1 -3.2 -1.9 -1.0 0.1 All usage All Local average 2.3 11.7 -0.8 -0.9 -1.5 -2.3 -2.6 -3.3 -4.3 -5.1 -5.2 -4.7 -3.5 -2.4 -2.3 -3.8 -3.9 -4.0 -3.4 -2.6

National average 2.4 16.6 -2.1 -1.6 -2.2 -3.6 -3.6 -4.1 -5.0 -5.6 -5.2 -4.2 -2.4 -0.5 -1.2 -4.4 -3.7 -3.4 -2.7 -1.9

Source: Prefectural Land Price Survey issued by MLIT. Notes: 1. The fluctuation rate is the land price change of each year between July 1 of one year and July 1 of the next year. 2. Land areas are divided as follows: Tokyo metropolitan area: All existing city areas and suburban improved areas according to the Tokyo Metropolitan Area Improvement Law. Osaka metropolitan area: All existing city areas and suburban improved areas according to the Kinki Metropolitan Area Adjustment Law. Nagoya metropolitan area: All city improvement areas according to the Chubu Metropolitan Area Adjustment Law.

History of Standard Land Price and Nominal GDP When 1983 Stands at 100

240

220 National All commercial areas All usage and areas All residential areas Nominal GDP 200

180 164.3 160

140

120

100 93.9 80 83.3 60

50 58.5 1983 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 (year) 350 Tokyo Metropolitan Area Tokyo commercial areas Tokyo usage and areas

300 Tokyo residential areas Nominal GDP

250

200 178.2

150

100 98.6 93.0

50 73.2 1983 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 (year)

Source: Public Notice of Land Prices by the Ministry of Land, Infrastructure, Transport and Tourism; Annual Report on National Accounts, Annual Report on Prefectural Accounts and Quarterly Estimates of GDP by the Cabinet Office. Notes: 1. The Tokyo Metropolitan Area GDP represents the sum of nominal prefectural GDP of Tokyo, Kanagawa, Saitama and Chiba Prefectures. 2. The nominal GDP and the Tokyo Metropolitan Area GDP represent figures for fiscal years, respectively. 3. The nominal GDP figures were calculated based on 93SNA (fixed-base method) until 1993 and based on 93SNA (chain-linking method) for 1994 and after.

56 Real Estate in Japan 2014 Real Estate in Japan 2014

Housing and Housing Lots History of Housing Starts

2,000 (thousand units)

Rental house Issued house 1,665 Ready-built homes for sale 〈-0.4〉 1,630 〈9.8〉 767 Owned house （46.1） 1,485 616 1,500 〈-4.9〉 （37.8） 564 1,341 （38.0） 〈-17.7〉 1,285 1,251 1,226 1,249 〈 〉 516 1,213 2.9 〈3.6〉 1,180 〈4.0〉 〈- 〉 1,173 1,174 1,193 〈4.7〉 （ ） 1.1 1,146 〈 〉 538 544 38.5 〈-12.0〉 〈-3.3〉 〈2.5〉 1.7 518 426 418 〈-2.4〉 （41.8） （43.5） 467 （41.5）

） （ ） 444 34.7 （34.5） 442 455 459 1,036 1,039 （37.6） （37.7） （39.1） （39.2） 〈-19.4〉 〈0.3〉 1,000 1.6 （39.7） 843

（ 431 445 〈6.2〉 352 26 （41.6） （41.6） 819 841 （21.6） 775 〈 〉 〈2.7〉

（ 1.7 ） 5.6 （ 2.2 ） 345 （ 1.8 ） （ 0.9 ）

26 〈- 〉 （ 1.0 ） 25.4 37 387 24 290 320 （ ） 11 292 23.2 12

351 （ 0.7 ） 9 （ 1.3 ） （ 0.8 ） （ ） （ ） （ 1.6 ） ） 312 346 34.4 35.9 23.2 （ 0.7 ）

（ 0.8 ） 311 9 9 （ ） （ 0.7 ） 35.6 16 （ 0.8 ） 8 10 20 （26.1） （ ） （ ） 383 282 25.5 28.5 344 10 334 349 370 （40.2） 227 316 （ ） （23.9） （29.3） （28.4） （29.3） （29.6） 29.8 （ 1.0 ） （ 1.1 ） （18.1） 636 （27.6） 10 11 （ 0.9 ） （ 0.7 ） 283 8 6 （ 0.8 ） 500 273 7 （39.0） （ ） 239 250 551 27.3 （26.2） （ 1.7 ） 212

13 （ ） （ ） 474 （37.1） 476 （ ） 28.4 28.0 460 451 438 438 164 25.9 （ ） （28.5） （38.8） 36.8 （33.6） （37.1） （36.1） 377 （21.1） 366 373 367 353 356 REAL ESTATE-RELATED DATA （32.1） （31.9） （31.8） （30.8） （28.3） （ ） 312 311 309 305 317 27.7 （ ） 287 30.1 （29.9） （37.0） （37.7） （36.2） （35.4）

0 1985 90 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 (fiscal year)

Source: Statistics on Construction-started Dwelling Houses issued by MLIT. Notes: 1. There are parts where the total doesn't match due to rounding. 2. The figures in the parentheses represent the breakdown by usage (%). The figures on the graph in the parentheses are the year-on-year variation (%).

History of Housing investment

29.3 Nominal housing investment (left scale) 10 (%)

Nominal housing investment/nominal GDP (right scale) 9 25 (trillion yen) 26.0 25.7 8 24.3 7 21.7 20 21.4 5.8 5.8 21.2 6 19.5 19.3 18.8 18.7 19.0 19.0 5 5.2 4.8 4.3 4.2 4.7 4.0 3.8 3.8 3.8 3.8 3.8 17.1 16.9 4 15 4.2 15.6 3.1 2.9 2.9 3 3.3 3.4 2.7 13.4 13.9 14.5 12.9 2 10 1 85 90 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 (fiscal year)

Source: Prepared from the Annual Report on National Accounts 2012.

History of Housing Construction Permits and Area of Approved Land Readjustment Projects

Area of approved land readjustment projects Area of housing construction permits 8,000（ha）

6,000 6,046 5,575 5,071 4,642 4,848 4,778 4,463 5,215 4,387 4,000 4,761 4,381 3,887 3,805 4,200 3,437 3,312 3,448 3,849 3,182 3,091 3,035 3,098 3,682 2,759 2,815 2,290 2,000 1,735 1,870 1,759 1,510 797 914 882 721 772 593

1985 90 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 (fiscal year)

Source: Prepared from the White Paper on Land, Infrastructure and Transport in Japan (2012) issued by MLIT. Notes: 1. The construction permit is the approval granted primarily for the objective of building a house based on the City Planning Law. 2. The area of approved land readjustment projects represents the total for individuals, joint projects, associations, public bodies, government agencies, the Urban Development Corporation (present Urban Renaissance Agency), Japan Regional Development Corporation (present Organization for Small & Medium Enterprises and Regional Innovation, JAPAN and Urban Renaissance Agency) and the Local Housing Supply Corporation.

57 Real Estate in Japan 2014 History of New Condominium Sales

100,000 (units) Tokyo metropolitan area Kinki metropolitan area

95,635 89,256 88,516 80,000 86,297 85,429 84,885 82,795 83,183 84,243 74,463 70,543 60,000 66,308 61,021 56,476

40,000 44,430 43,733 44,535 44,494 45,602 40,709 39,548 38,611 39,737 39,087 35,625 36,673 36,376 33,147 33,064 29,452 31,258 31,857 30,146 30,219 20,000 24,841 27,299 24,684 22,744 21,716 23,266 19,784 20,219

1985 90 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 (year) History of New Condominium Annual Contracted Rates

100 (%) Tokyo metropolitan area Kinki metropolitan area

93.5 92.5 91.7 90.0 90.8 91.3 90.3 90.1 91.4 89.7 90.9 89.4 88.0 88.0 91.9 89.6 91.0 86.0 89.9 84.1 88.8 86.8 86.0 89.3 90.0 83.8 84.6 88.1 81.4 86.3 87.4 80 84.7 84.4 85.0 83.8 79.5 78.3 80.2 79.6 78.0 74.1 72.6

1985 90 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 (year)

History of Average Price for New Condominium Units

7,000 (10,000 yen) Tokyo metropolitan area Kinki metropolitan area

6,000 6,123

5,000 5,279 4,929 4,775 4,716 4,644 4,535 4,578 4,540 4,374 4,000 4,238 4,148 4,168 4,138 4,034 4,026 4,003 4,069 4,014 4,107 4,200 3,687 3,581 3,562 3,513 3,496 3,000 3,447 3,419 3,478 3,411 3,452 3,490 3,438 3,243 3,237 3,380 2,683 3,188 3,165 3,177 3,164

2,000 2,101 1985 90 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 (year)

Source: Prepared using Condominium Market Trends for the Tokyo Metropolitan Area and Condominium Market Trends for the Kinki Metropolitan Area issued by the Real Estate Economic Institute Co., Ltd. Note: Tokyo metropolitan area: Tokyo, Kanagawa, Chiba and Saitama; Kinki metropolitan area: Osaka, Hyogo, Kyoto, Nara, Shiga and Wakayama.

Offices History of Floor Space for Launched Office Construction

2,500（ha） 2,452 National 2,000 1,929 Tokyo metropolitan area Osaka metropolitan area

1,500 1,510 1,097 1,180 1,119 1,000 907 859 880 817 832 858 755 808 776 793 739 731 683 706 555 583 612 500 488 392 355 308 335 289 358 318 388 367 245281 291 276 275 236 227 267 264 250 259 240 201 177 170 142 121 90 113 97 119 0 90 91 85 73 75 86 63 60 65 1985 90 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 (fiscal year)

Source: Prepared using Annual Statistical Report on Building Construction by Ministry of Land, Infrastructure, Transport and Tourism. Notes: 1. This is a compilation of offices by usage that have filed construction reports based on Article 15-1 of the Building Standards Law. 2. Lump presentation of the scheduled construction start month in the filed construction report. 3. Tokyo metropolitan area: Tokyo, Kanagawa, Chiba and Saitama; Osaka metropolitan area: Osaka, Kyoto and Hyogo.

58 Real Estate in Japan 2014 Real Estate in Japan 2014

History of Office Building Vacancy Rates

（％） 18.5 18 Metropolitan areas 16.8 16 Tokyo Nagoya Osaka Kanagawa 14 13.3 13.0 13.2 12 12.2 10.9 12.2 11.0 10.0 10.4 10.4 10.4 10 9.8 9.6 9.3 8.7 10.4 9.0 8.7 10.3 8 7.9 7.3 9.2 8.2 9.4 7.4 6.9 6.7 8.2 7.0 6.6 6.4 7.9 6.2 6 4.9 7.0 6.8 5.7 5.4 6.5 4.8 6.3 6.7 4.9 4.7 4.7 5.9 4.6 6.2 4 4.0 4.1 4.7 3.7 5.1 4.0 4.2 3.4 3.7 3.7 3.7 3.7 3.2 3.5 2.3 3.7 2 3.3 2.8 3.6 2.8 0.5 2.2 1.9 0 0.2 1990 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 (fiscal year) 16.6 16（％）

Local city areas and nationally Hokkaido Chugoku 14.7 14.7 14 Sendai Kyushu 13.5 13.5 13.4 13.1 National average REAL ESTATE-RELATED DATA 12.4 12 11.3 11.2 11.9 10.9 10.6 11.4 10.5 10.6 10 9.5 9.9 9.7 10.8 9.6 9.5 9.4 9.2 9.6 8.9 8.6 9.9 8.8 9.2 8 8.0 8.4 9.2 8.1 9.2 9.0 9.1 9.1 8.0 8.5 7.5 8.0 7.5 7.3 8.0 8.3 7.3 7.4 7.3 7.3 7.1 7.4 6.8 7.2 7.4 6.6 6.6 7.4 6 5.9 7.2 7.2 7.2 6.8 6.5 5.1 5.3 5.2 6.6 5.9 6.0 6.3 4.7 5.7 5.2 5.4 5.3 4 4.9 5.2 5.3 4.0 4.5 4.6 4.5 3.6 3.3 3.4 2 2.3 3.1 3.2 1.9 1.7 2.1 0.6 0 0.2 1990 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 (fiscal year)

Source: Prepared using the Compilation of Building Fact-Finding Studies of the Japan Building Owners and Managers Association and the Compilation of Building Fact-Finding Studies (Tokyo) issued by the Tokyo Building Owners and Managers Association. Note: The studies are as of April 1 of each year; 1998-2000 of the Tokyo Building Owners and Managers Association are not reflected in the national averages as these studies were separate from the Japan Building Owners and Mangers Association. They merged again in 2001.

History of New Real Rents of Offices in Three Major Metropolitan Areas

40,000 (yen/tsubo)

Tokyo (23 wards) 30,000 Osaka Nagoya

20,000

13,220 10,000 9,990 9,230 5,000 1990 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 (year) History of New Real Rents of Offices in Tokyo

40,000 (yen/tsubo)

35,000 Tokyo (23 wards) Main 5 wards 30,000

25,000

20,000

15,000 13,620

13,220 10,000 1990 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 (year)

Source: Prepared using the Real Estate White Papers 2013 and CREIS Japan by CBRE K.K. Notes: 1. Main 5 wards are Chiyoda, Chuo, Minato, Shinjuku and Shibuya. 2. Real rents: This was calculated to make a uniform comparison of rental conditions for rents for one net tsubo including gains on investment from deposits (gains on investment were calculated as 6%) Real rent = [Deposit x return rate (6% annually) x 1/12 months + rent]/(100% - common expense rate) *Common expense rate is the ratio of common expense area in the contracted area.

59 Real Estate in Japan 2014 Others

Valuation of Real Estate in Gross National Assets (unit: trillion yen)

Year 1985 1986 1987 1988 1989 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Category Gross national assets 3,936 4,536 5,341 5,994 6,858 8,509 8,430 8,483 8,575 8,979 8,996 8,913 8,508 8,457 8,488 8,448 8,685

Valuation of real estate 1,320 1,578 2,014 2,203 2,538 2,036 1,945 1,871 1,824 1,808 1,839 1,880 1,870 1,786 1,750 1,713 1,691

(34) (35) (38) (37) (37) (24) (23) (22) (21) (20) (20) (21) (22) (21) (21) (20) (19)

Housing 159 161 173 182 201 338 337 340 345 347 356 361 365 350 349 344 340

Non-housing buildings 156 160 169 181 201 213 211 212 212 212 214 216 218 209 209 210 208

Land 1,004 1,257 1,673 1,840 2,136 1,485 1,397 1,319 1,267 1,249 1,269 1,303 1,287 1,227 1,192 1,159 1,143

Financial assets 2,132 2,455 2,800 3,231 3,706 5,551 5,567 5,683 5,807 6,203 6,167 6,006 5,590 5,651 5,724 5,715 5,981

Source: The Cabinet Office’s National Economic Statistics Report (2000) was used for 1985 – 1989 and the same for 1996 and after (2012 version). Notes: 1. Revisions to the counts were done by tracing back the data from 1992 and on and so the premise of these figures differs from that of 1989 and earlier. 2. The figures in the parentheses show the percent of gross national product. (unit: billion yen)

Production by Industry and Gross Domestic Product (unit: billion yen)

Year 1980 1985 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Real estate 22,654 32,358 53,964 53,517 53,576 53,788 54,042 55,365 55,721 56,013 56,879 56,890 56,726 56,871

Construction 22,506 25,381 34,005 32,331 31,667 31,200 29,018 29,547 29,385 28,091 26,948 26,198 26,461 26,653

Manufacturing 70,232 94,672 101,799 98,222 98,914 100,915 99,699 100,268 103,565 98,666 83,351 94,333 87,284 85,637

Service 28,063 46,390 101,765 101,155 100,853 100,656 88,433 90,731 94,012 94,580 91,541 91,266 91,183 93,789

Finance/Insurance 12,440 16,971 28,275 29,834 30,799 30,383 30,789 30,215 30,808 25,082 23,742 23,766 22,430 21,559

Total for all industries 249,050 333,678 500,387 495,207 494,519 499,252 500,608 503,291 509,559 496,705 467,336 478,775 468,964 471,354

(Reference) GDP 240,175 320,418 505,543 499,147 498,855 503,725 503,903 506,687 512,975 501,209 471,139 482,384 471,311 473,777

Source: The Cabinet Office's National Economic Statistics Report (2000) was used for 1980 and 1985 and the same (2012 version) for 1996 and after. Notes: 1. The price indicated by producers is used for the production amounts of each industry. Therefore, they include indirect taxes, imputed interest, etc. and so the totals do not match the gross national product. 2. The total value also includes government service producers outside of each industry and non-profit private service producers for households. 3. The production amount for the real estate industry also includes imputed rents (imputed rents are the recording of amounts equivalent to rent as the production amount of an individual proprietorship to the gross production amount based on the judgment that the homeowner is involved in the home leasing business). 4. Revisions to the counts were done by tracing back the data from 1993 and after, and so the premise of these figures differs from that of 1985 and earlier.

History of Sales Share by Industry

12（％） 11.8 11.7 11.0 10.9 10.4 10.1 10.4 10.2 10 9.8 9.5 8.8 8.8 8.5 8.6 8.5 8.4 8.3 8 8.0 8.0 7.7 6 Construction Land transport Real estate Steel 4 2.9 2.8 3.0 2.8 3.0 2.3 2.5 2.3 2.5 2.3 2.3 2.5 2.5 2.5 2.3 2.7 2.5 2.6 2.6 2 2.0 2.1 2.6 2.4 1.7 2.3 2.4 2.3 2.4 2.2 2.1 2.4 2.5 2.5 2.3 2.3 2.2 2.3 2.4 2.3 2.3 1.6 1.3 1.1 1.1 1.2 1.3 1.4 1.5 1.1 1.3 1.3 1.2 0 1.1 0.9 1.0 0.9 0.9 0.9 1.0 1.1 1985 90 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 (fiscal year) (unit: 10 billion yen)

Fiscal Year 1985 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

All 105,907 142,818 148,469 144,838 146,742 138,134 138,346 143,503 133,821 132,680 133,467 142,036 150,812 156,643 158,017 150,820 136,802 138,574 138,104 137,541 industries (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0)

Real 2,153 4,150 3,402 3,546 3,367 3,309 3,237 2,991 3,186 3,348 3,363 3,325 3,450 3,386 3,709 3,867 4,098 3,663 3,571 3,268 estate (2.0) (2.9) (2.3) (2.4) (2.3) (2.4) (2.3) (2.1) (2.4) (2.5) (2.5) (2.3) (2.3) (2.2) (2.3) (2.6) (3.0) (2.6) (2.6) (2.4)

8,205 14,022 17,0 03 16,988 16,019 15,192 14,437 14,455 13,935 13,545 12,746 12,480 12,886 13,499 13,502 12,628 12,070 11,130 10,945 11,499 Construction (7.7) (9.8) (11.8) (11.7) (10.9) (11.0) (10.4) (10.1) (10.4) (10.2) (9.5) (8.8) (8.5) (8.6) (8.5) (8.4) (8.8) (8.0) (8.0) (8.3)

1,689 1,895 1,574 1,538 1,556 1,297 1,330 1,246 1,222 1,251 1,294 1,560 1,841 1,986 2,191 2,252 1,572 1,821 1,806 1,627 Steel (1.6) (1.3) (1.1) (1.1) (1.1) (0.9) (1.0) (0.9) (0.9) (0.9) (1.0) (1.1) (1.2) (1.3) (1.4) (1.5) (1.1) (1.3) (1.3) (1.2)

Land 1,804 3,009 3,352 3,663 3,346 3,447 3,049 3,303 3,334 3,703 3,399 3,530 3,514 4,222 3,980 3,603 3,212 3,302 3,857 4,116 transport (1.7) (2.1) (2.3) (2.5) (2.3) (2.5) (2.2) (2.3) (2.5) (2.8) (2.5) (2.5) (2.3) (2.7) (2.5) (2.4) (2.3) (2.3) (2.8) (3.0)

Source: Prepared using the Monthly Finance Review: Annual Special on For-Profit Corporation Statistics issued by the Ministry of Finance. Notes: The figures in the parentheses represent the share (%) versus the sales of all industries.

60 Real Estate in Japan 2014 Real Estate in Japan 2014

History of Administrative Indices by Industry Type

Year 1985 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

All industries 4.3 4.6 2.7 2.7 2.5 1.9 2.3 2.9 2.4 2.6 3.0 3.4 3.6 3.6 3.7 2.1 1.9 2.7 2.7 2.8 Ratio of operating profit to total Real estate 3.9 4.2 1.6 1.2 1.2 1.3 1.9 2.1 2.5 2.6 2.0 2.3 2.7 3.0 3.4 2.3 2.3 2.7 2.4 2.6 capital (%) Construction 3.1 5.3 2.7 2.7 2.1 1.9 1.7 1.8 1.6 1.5 1.8 2.2 2.0 2.2 2.0 1.3 1.4 1.7 1.7 2.5

Operating profit/ Steel 3.5 7.3 2.7 2.6 3.0 0.8 1.6 3.0 1.0 2.4 4.5 9.1 10.7 9.6 8.7 5.9 -0.5 2.3 1.1 -0.1 Total capital Land transport 4.4 4.7 3.1 3.1 2.8 2.4 2.6 2.8 2.2 3.1 2.9 3.1 3.3 3.4 3.3 2.5 2.4 2.7 2.8 3.2

All industries 3.1 3.5 2.0 2.1 2.1 1.6 2.1 2.8 2.3 2.5 2.9 3.5 3.9 4.0 4.0 2.5 2.2 3.0 3.1 3.4 Ratio of ordinary profit to total Real estate 1.4 1.1 -0.1 -0.5 -0.1 0.2 0.8 1.3 1.6 2.0 1.4 1.8 2.0 2.8 2.8 2.0 1.9 2.0 1.9 2.5 capital (%) Construction 2.3 4.6 2.5 2.5 2.1 2.0 1.8 1.9 1.6 1.6 2.0 2.3 2.1 2.4 2.2 1.7 1.7 2.0 1.9 3.1

Ordinary profit/ Steel 1.1 5.6 1.1 1.4 1.7 -0.3 0.6 2.0 0.2 1.6 3.7 8.5 10.2 9.7 8.6 5.7 -0.4 2.4 1.5 0.7 Total capital Land transport 2.4 3.5 1.4 1.6 1.3 1.2 1.4 1.6 1.1 2.1 2.1 2.2 2.7 2.9 2.9 2.0 1.9 2.3 2.5 3.0

All industries 2.8 3.5 2.4 2.4 2.3 1.8 2.1 2.6 2.2 2.4 2.8 3.1 3.2 3.1 3.1 1.9 2.0 2.8 2.8 2.9

Ratio of operating Real estate 9.4 11.5 7.5 5.1 6.2 7.0 7.9 8.6 9.7 9.6 7.5 8.1 9.1 11.0 11.0 8.8 9.3 12.1 11.7 9.9 profit to sales (%) Construction 2.1 3.9 2.2 2.1 1.7 1.5 1.4 1.6 1.4 1.3 1.4 1.7 1.5 1.7 1.6 1.0 1.1 1.4 1.4 2.0 Operating profit/ Sales Steel 3.9 8.1 3.6 3.6 4.0 1.3 2.3 4.3 1.4 3.4 5.9 10.2 11.1 9.9 8.6 5.7 -0.7 2.8 1.3 -0.1

Land transport 3.8 5.1 4.5 4.3 4.1 3.6 4.3 4.2 3.3 4.6 4.4 4.8 5.4 5.5 4.5 3.7 4.0 4.4 4.1 4.4 REAL ESTATE-RELATED DATA

All industries 2.0 2.7 1.8 1.9 1.9 1.5 1.9 2.5 2.1 2.3 2.7 3.1 3.4 3.5 3.4 2.4 2.3 3.2 3.3 3.5

Ratio of ordinary Real estate 3.3 3.1 -0.3 -2.2 -0.4 1.3 3.4 5.3 6.1 7.1 5.2 6.5 6.8 10.2 9.2 7.6 7.5 9.1 9.3 9.5 profit to sales (%) Construction 1.6 3.4 2.1 2.0 1.7 1.6 1.5 1.6 1.4 1.3 1.6 1.8 1.7 1.8 1.7 1.3 1.3 1.6 1.6 2.4 Ordinary profit/ Sales Steel 1.3 6.1 1.5 1.9 2.3 -0.5 0.9 2.9 0.2 2.3 4.9 9.6 10.6 10.0 8.6 5.5 -0.6 2.9 1.7 0.8 Land transport 2.1 3.8 2.0 2.2 1.8 1.9 2.3 2.4 1.7 3.0 3.3 3.4 4.4 4.6 3.9 3.0 3.1 3.8 3.7 4.1

All industries 1.54 1.31 1.12 1.12 1.12 1.04 1.08 1.11 1.07 1.06 1.09 1.11 1.14 1.14 1.17 1.06 0.95 0.96 0.95 0.96

Turnover of total Real estate 0.42 0.37 0.22 0.23 0.20 0.18 0.25 0.24 0.26 0.27 0.27 0.28 0.29 0.27 0.30 0.26 0.25 0.22 0.21 0.26 capital (times) Construction 1.44 1.35 1.23 1.27 1.25 1.22 1.17 1.16 1.19 1.20 1.27 1.27 1.27 1.28 1.28 1.27 1.28 1.22 1.22 1.28

Sales/Total capital Steel 0.88 0.90 0.74 0.73 0.75 0.64 0.69 0.69 0.67 0.69 0.76 0.89 0.97 0.97 1.01 1.04 0.71 0.83 0.85 0.82

Land transport 1.16 0.92 0.69 0.73 0.69 0.67 0.62 0.66 0.66 0.68 0.66 0.66 0.61 0.63 0.73 0.67 0.61 0.61 0.68 0.72

All industries 17.7 19.1 18.9 19.9 19.9 19.2 22.3 25.7 25.2 27.4 28.3 29.8 30.1 32.8 33.5 33.9 34.5 35.6 34.9 37.4

Ratio of net worth Real estate 8.0 8.1 3.5 6.0 -1.8 -8.4 5.7 14.6 7.2 14.3 11.0 20.7 17.5 32.1 27.0 24.6 13.0 25.4 27.4 28.5 to total capital (%) Construction 15.4 15.6 18.4 18.4 20.3 21.4 22.6 21.2 22.0 24.8 27.1 28.9 26.4 29.4 29.3 29.0 30.6 30.0 29.6 32.9 Net worth/Total capital Steel 16.1 26.1 26.1 27.7 27.8 27.4 28.3 29.9 27.9 30.2 32.5 36.1 38.7 38.8 38.1 37.5 37.5 37.0 35.3 35.7 Land transport 14.9 23.9 18.9 19.3 20.1 17.7 20.8 20.7 19.8 22.4 22.5 22.9 27.1 24.3 25.0 26.2 26.4 27.1 26.9 30.2

Source: Prepared using the Monthly Finance Review: Annual Special on For-Profit Corporation Statistics issued by the Ministry of Finance. Notes: 1. Total capital is the total of liabilities indicated in the credit side of the balance sheet (notes payable, accounts payable, accrued payments, corporate bonds, borrowings, allowances, reserves, etc.) and capital (paid-in capital, capital surplus and profit surplus) until 2006. From 2007, it is liabilities indicated on the credit side of the balance sheet and net assets (total of paid-in capital, capital surplus, profit surplus, etc.). 2. Net worth is the total amount for the capital section on the credit side of the balance sheet. 3. Operating profit is sales – (sales cost + sales expenses and general administrative expenses) 4. Ordinary profit is operating profit + (non-operating revenues – non-operating expenses) *Non-operating revenues are interest received, discounts, investment security interest, received dividends, capital gains from investment securities, etc. *Non-operating expenses are interest paid, discounts, corporate bond interest, amortization of bond issue discount, capital losses from investment securities, etc.

History of Number of Real Estate Companies

Percentage of total companies for all industries (right scale) (thousand companies) 321,182 12 (％) 300 297,586 299,818 301,005 302,939 288,638 293,330 11.7 10.5 10.6 10.4 10.4 10.4 10.4 10.5 281,046 284,693 10.1 10.4 10.9 11.0 10.6 10.7 10.8 10 260,985 261,128 265,166 277,143 10.4 10.4 10.6 257,358 257,052 270,555 273,202 10 million yen 250 to less than 8.9 100 million yen 122,010 8 204,700 200 （38）

162,208 6 150

Less than 1 billion yen or more 10 million yen 100 422（0.1） 195,821 （ ） 61 100 million yen to less than 50 1 billion yen 2,929（0.9）

0 1985 90 95 96 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 (fiscal year)

Source: Monthly Finance Review: Annual Special on For-Profit Corporation Statistics issued by the Ministry of Finance. Notes: 1. Corporations are unlimited partnerships (gomei kaisha), limited partnerships (goshi kaisha), joint stock corporations (kabushiki kaisha) and limited corporations (yugen kaisha) with head offices in Japan. 2. The figure for fiscal 2012 is the breakdown by paid-in capital amount. The figures in the parentheses show the percentage of the total (unit: %).

61 Real Estate in Japan 2014

12 (fiscal year) Real Estate in Japan 2014

List of Figures

Number of For-sale Condominiums in Stock Nationwide 11 Breakdown of Housing Stock and Energy Consumption in Household Sector 43 Number of Condominiums over 30, 40 or 50 Years Old 12 Report of the Committee for the Study of the Role of Real Estate in Flow Chart of Condominium Business 12 Reinforcing Disaster Prevention Functions of Cities (Summary) 44

Primary Systems for Promoting Urban Redevelopment 16 Overview of Present Land and Housing Taxation 53

History of Building Vacancy and Floor Area (Stock) 16 History and Status of Land Use in Japan 55

Flow of an Urban District Redevelopment Project 17 Standard Land Price (Prefectural Land Price Study) vs. Year-on-Year Change 56 Major Private City Redevelopment Projects 18 History of Standard Land Price and History of Supply Volume of Major Office Buildings in 23 Wards of Tokyo 20 Nominal GDP When1983 Stands at 100 56

History of Office Floor Space in the Wards of Tokyo 24 History of Housing Starts 57 History of Building Lot and Building Transaction Firms 27 REAL ESTATE-RELATED DATA History of Housing Investment 57

Flow of Real Estate Brokerage Work 27 History of Housing Construction Permits and Area of Approved Land Readjustment Projects 57 Market Trends for Existing Housing 28 History of New Condominium Sales 58 Number of Contracted Stand-Alone Houses in the Tokyo Metropolitan Area, their Average Contracted Price and Building Age 29 History of New Condominium Annual Contracted Rates 58

Number of Contracted Existing Condominiums in the Tokyo Metropolitan Area, History of Average Price for New Condominium Units 58 their Average Contracted Price and Building Age 29 History of Floor Space for Launched Office Construction 58 History of Real Estate Securitization 30 History of Office Building Vacancy Rates 59 J-REIT Structure 31 History of New Real Rents of Offices in Three Major Metropolitan Areas 59 Real Estate Investment Trust (Company Type) Structure 32 History of New Real Rents of Offices in Tokyo 59 Tokumei Kumiai Structure Using Real Estate Syndication 32 Valuation of Real Estate in Gross National Assets 60 Breakdown of Securitized Real Estate Assets by Usage 33 Production by Industry and Gross Domestic Product 60 Major International Projects Announced in Recent Years (Implemented and Planned) 37 History of Sales Share by Industry 60

Major Resort Projects of Japan 41 History of Administrative Indices by Industry Type 61

History of Energy Consumption by Usage in the Business Sector 43 History of Number of Real Estate Companies 61

62 Real Estate in Japan 2014 Real Estate in Japan 2014 ●Published: May 15, 2014 (Japanese version: February 25, 2014) ●Publisher: The Real Estate Companies Association of Japan Head office: Kasumigaseki Building 17th floor, 3-2-5 Kasumigaseki, Chiyoda Ward, Tokyo 100-6017 Tel. 03-3581-9421 Fax. 03-3581-7530 Osaka office: Sumitomo Nakanoshima Building 2nd floor, 3-2-18 Nakanoshima, Kita Ward, Osaka City 530-0005 Tel. 06-6448-7460 Fax. 06-6448-3507 Nagoya office: Nagoya Sanko Building 11th floor, 3-21-7 Meieki, Nakamura Ward, Nagoya City 450-0002 Tel. 052-571-8050 Fax. 052-561-5872 Website: http://www.fdk.or.jp ●Translation and editing: Transpacific Enterprises Any duplication without receiving express permission from the Real Estate Companies Association of Japan is expressly forbidden. ●Photo Sources (alphabetical order): Daikyo Incorporated, Kintetsu Real Estate Co., Ltd., Mitsubishi Estate Co., Ltd., Mitsui Fudosan Co., Ltd., Nomura Real Estate Development Co., Ltd., Sumitomo Realty & Development Co., Ltd., Tokyo Tatemono Co., Ltd., Tokyu Land Corporation

Real Estate in Japan 2014