Iidabashi Station West Exit Area Redevelopment Project Case Study

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 the list of Member Companies: http://www.fdk.or.jp/en/member.html REAL ESTATE IN JAPAN 2015 CONTENTS 7 8 9 4 15 24 28 32 41 44 45 46 47 53 55

Overview of National Strategic Special Zones OVERVIEW OF PRESENT LAND AND HOUSING TAXATION REAL ESTATE‑RELATED DATA THE ROLE OF THE REAL ESTATE INDUSTRY THE REAL ESTATE THE ROLE OF Measures Environmental POLITICAL, SOCIAL AND ECONOMIC EVENTS; REAL ESTATE-RELATED POLICY CONTENTS INTRODUCTION TODAY INDUSTRY THE REAL ESTATE 6 Development Transactions For-Sale Leasing Transactions SECTORS MAJOR REAL ESTATE OF OVERVIEW 10 Housing (Urban Renewal) Urban Redevelopment 26 Leasing Real Transactions Estate Securitization Real Estate 35 Internationalization Resorts39 Addressing Population Decline and the Aging of Society Take Industry Should Roles the Real Estate against Major Disasters Initiatives to Eliminate Organized Crime Groups and Other Anti-Social Forces from Real Estate Transactions and Money Laundering 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 of people’s lives and corporate activities. The real INTRODUCTION 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 through real estate securitization and other businesses.

According to the Annual Report on National Accounts, the real estate industry represents more than 10% of Japan’s gross domestic product (GDP). In addition, according to the 2012 Financial Statistics of Corporations, the real estate industry is characterized by high productivity per capita compared to other industries, with the added value per real estate industry employee (productivity) being

RealReal EstateEstate inin JapanJapan 20152015

Real Estate in Japan 2015 ¥17.58 million compared to an average of With regard to housing, which plays a vital role Environmental initiatives are another key topic. ¥6.66 million for all industries, which indicates as a pillar of domestic demand, it is necessary It is important to further contribute to achieving that the real estate industry plays an essential to accommodate housing needs which are a sustainable, eco-friendly society by improving role in the national economy. diversifying due to demographic and lifestyle the environmental performance of cities and changes as well as form quality housing stock housing while aiming to balance environmen- In order to foster the growth of Japan as a whole aimed at achieving a high standard of home tal and economic needs. and achieve a high standard of living for its living while also upgrading or replacing aging citizens, it is indispensable to have economic With globalization advancing and the speed of condominiums. vitality driven by the private sector, including social and economic change becoming ever enhancing the international competitiveness At the same time, moving forward with urban faster, the role of the real estate industry in of major cities, invigorating cities and regions, planning and housing planning that appropriately society is growing ever larger. and forming quality housing stock. addresses changing socio-economic circum- stances, such as the declining population, falling In order to enhance the international competi- birthrate, and aging society, is also a major issue. tiveness of major cities as well as in light of the 2020 Tokyo Olympics/Paralympics, it is nec- In addition, further strengthening cities’ disas- essary to move forward with attractive urban ter-prevention capabilities in preparation for planning that will establish international busi- major earthquakes and weather damage has ness hubs bringing together talent, capital and become an important issue, and it is necessary information from around the world through the to work on safe, stable urban planning in terms promotion of urban renewal. of both facilities and services.

Real Estate in Japan 2015 THE REAL ESTATE INDUSTRY TODAY

■ Development Work The flow of the development process begins with studying and under- standing 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 Planning Law, Urban Redevelopment Law, Land Rezoning Law, Building Standard Law and other laws related to the development, construction and design of cities. The Act on Special Measures Concerning Urban Reconstruction was enacted in 2002, creating a new framework for special urban planning cases, financial support, etc. In addition, in 2011, the government designated Urban Renaissance Urgent Redevelopment Areas and selected International Strategic Comprehensive Special Zones with the aim of enhancing cities’ international competitiveness and promoting urban renewal. Furthermore, the National Strategic Special Zones Act was enacted in DEVELOPMENT 2013, based on the objective of promoting the development of international economic activity hubs, and in 2014, six zones (Tokyo area, Kansai area, Niigata City, Yabu City in Hyogo Prefecture, Fukuoka Prefecture, and 開Okinawa Prefecture) and zone policies were 発 determined. ■ 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 loans 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.

Real Estate in Japan 2015 分譲

What is for-sale property?

For-sale property requires work involving the development and sale of land, stand-alone housing, condominiums and other housing.

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 FOR–SALE sold to meet the diversification of needs related to lifestyle and housing TRANSACTIONS 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 the like, 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 ensure that parties such as the sellers of residences can effectively implement defect warranty.

Real Estate in Japan 2015 賃貸

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, retail properties, hotels and logistics facilities.

■ Leasing Work LEASING 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. In addition to the ongoing separation of real estate ownership and management based on development of real estate securitization and the like, as operation becomes increasingly complex, there are more and more cases of tasks being outsourced to companies that perform asset management and operation on behalf of real estate investors, property management and operation on behalf of real estate owners, and so forth. ■ Changes in Supply of Buildings and the Sophistication of Needs Floor space for launched office construction has been trending down- wards 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.

Real Estate in Japan 2015 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 deliv- ering 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 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, there have been many problems involving the leaking of customer information and the buying/selling of personal information. In order to protect the pri- vacy 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 engaging in 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 housing. When the Basic Act for Housing was enacted in 2006, it was decided that the focus of the Japanese hous- TRANSACTIONS ing policy would transition from quantity to quality. The Japan Revitalization Strategy formulated in June 2013 also includes measures to promote the sale of existing housing. 流通

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.

Real Estate in Japan 2015 Danchi to Condominiums The era of large supply that started in the 1950s OVERVIEW OF MAJOR lasted until the oil shock of 1973. While the Japan Housing Corporation initially dominated REAL ESTATE SECTORS the market, an increasing number 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. HOUSING The majority of these were located in downtown areas and featured elevators as well as Following the war, there was a severe lack of housing due parking lots, administrative offices, lobbies and to the mass burning of cities. As a result, housing supply restaurants on the first floor. In order to create a was deficient by 4.2 million units at the end of the war. luxurious impression, fancy titles were given to In the mid-1950s, an explosive growth in the population the properties such as “mansion,” “residence,” concentrated in major cities began to occur alongside “villa,” “heights” and “heim.” Japan’s rapid economic growth. The ensuing increase in Beginning in the mid-1960s, major real estate land demand sent land prices soaring, making the situ- companies, trading companies and others entered ation for housing even more severe. The Japan Housing the field and expanded the condominium market Corporation (presently the Urban Renaissance Agency) from a luxury product to a product targeting the was launched in 1955 as the trump card for eliminating general public. This developed a broad demand this housing problem and it began to supply “danchi” or segment for condominiums. The Government Housing Loan Corporation (presently the Japan apartment complexes en masse. These danchi spawned Housing Finance Agency) began financing con- residential districts and led to the construction of so-called dominiums in 1970 and as they became easier “new towns” and the development of new city areas. to purchase, condominiums very quickly became Today, the most prominent condominium complex is the widely accepted. “mansion” and many varieties — such as those targeting However, as the supply of for-sale condominiums families, single persons, DINKs and seniors — have become increased, the problem of how to manage and available in response to Japan’s changing society. The operate the common areas of condominiums earthquake resistance and energy saving capabilities of emerged. In 1962, the Sectional Ownership Law stand-alone houses have also been improved as security was established. The law was revised in 1983 and disaster prevention measures play a greater role in as rights and management-related problems had emerged that were not initially anticipated. urban development. “Excellent communities” and “smart The sudden massive increase in condominiums cities” that are environmentally friendly and contribute to also saw disputes over the right to sunlight sur- a low-carbon society are also being advanced. face among community residents. The Building 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 “remodel” Japan also caused land prices to soar and a condition

Real Estate in Japan 2015 OVERVIEW OF REAL ESTATE IN JAPAN 2015 MAJOR REAL ESTATE SECTORS HOUSING 0 50 600 550 500 450 400 350 300 250 200 150 100 e and et 13 11.6 601.2 (year) (10,000 units) (10,000 12 10.2 589.7 ced concr 8.2 11 or 579.6 einf ourism. 9.2 10 571.3 t and T amed r 09 17.0 562.1 eel-fr 08 16.7 anspor 545.1 r st , T

e , e et 07 22.7 528.4 06 20.5 505.7 astructur ced concr or Infr 05 19.3 485.0 that massive supply continued (at the 200,000 that massive supply unit level) in the Tokyo metropolitan area from 1995 to 2007 due to the post-bubble decline in prices, the resulting locational return to central condomini- of popularity revived the and Tokyo, ums due to low interest rates, preferential tax breaks for purchasers of residential houses, etc. However, due to factors such as the sub- sequent increase in prices and the impact of the financial crisis triggered by the subprime loan problem, supply fell to 167,000 units in was supply the 2013, through 2010 In 2008. 100,000 units. Meanwhile, the nationwide units million 6 approximately already is stock (end of 2013), of which approximately 1 million units are more than 30 years old. A major issue for the real estate industry is how to that so appropriately these update or maintain they can be kept or improved as high-quality housing stock. Not only do these older condominiums have inferiorearthquake resistance, but inmany cases earthquake-resistance upgrading is difficult because the buildings also have infrastructure theyhave no problems (e.g., elevators or renovating the piping system is difficult). There is no solution other than to rebuild them. einf 04 18.6 465.7 eel-r y of Land, - - st 03 19.9 447.1 y built, 02 20.9 427.2

y the Ministr jointl 01 20.3 b 406.3 17.3 386.0 2000 . 99 16.9 368.7 etc er subdivision, 98 18.4 351.9 ock Nationwide)” 11 sold aft 97 18.2 and based on completion. . 333.6 etc , 96 20.0 315.5 w units supplied, 95 19.0 atistics 295.7 or ne ories in height, Real Estate in Japan 2015 t st es f ar 94 13.6 277.2 ee st -sale Condominiums in St e ﬁgur 93 11.7 or 263.6 Old Condominiums as being Rebuilt Increases Stock An analysis of the supply of new condominiums in recent years (based on completions) reveals miniums emerging fromcompanies selling off factories and corporate housing as a means restructureto businesses, their the redevel opment of areas in front of stations and other factors. wards 23 However, many of Tokyo’s have in recent years established restrictions on absolute height. Kintetsu Real Estate and Obayashi Corporation) Condominiums exceedingin 1992. 50 stories also with emerged the Lions in 1998 Square floors; 55 (55 Tower Elza Kawaguchi City, Saitama; Daikyo) and the Century Park Tower floors;(54 Tokyo; Chuo Ward,Mitsui Fudosan) Even in Kansai the trend isin to March 1999. build ultra-skyscraper condominiums such as City Osaka, a 50-floor Tower condominium that opened in December 2003 in Chuo Ward, developed Realty City, Sumitomo Osaka by substantial been has There Development. & supply ever since. Lately there has been a conspicuous trend of movingback to thecenter of Tokyo reflected in the recent boom of ultra-skyscraper condo ulativ 92 17.3 252.0 - - 91 18.6 234.7 om construction st left scale) 90 16.4 ed fr 216.1 ual, osu (Number of F e buildings at least thr e ar 89 14.8 199.7 okku K right scale) ed based on the cum 88 12.3 184.9 . -end, 87 10.7 ear 172.7 e estimat 86 w units supplied (ann 10.8 162.0 w units supplied is deriv ed housing e units (y 85 e units ar 11.2 151.2 ulativ ulativ 84 11.3 140.0 oku no Bunjo Manshon Sut eel structur Number of ne Cum Cum Condominiums as described her Number of ne 83 10.2 128.7 2. 3. st “Zenk 1.

82 ce: 12.4 (10,000 units) 118.5 Notes: 0 5 10 15 20

Sour tock Nationwide in S Condominiums of For-sale Number The history of condominiumsalso correlates with the history of building Following higher. the completion of Mita Tsunamachi Park floors;Tokyo; MinatoMansion Ward, (19 stringa of high- MitsuiFudosan) in1971, rise condominiums were released including floors; House Yono Saitama (21 City, Saitama Realty Sumitomo Prefecture; Development)& Bell Park City floors; (36 Miyakojima in 1977; OsakaWard, City; Mitsui Fudosan and Kanebo and Sakuranomiya River in 1987; Real Estate) floors; MiyakojimaWard, CityOsaka City; (41 Development, and Investment Matsushita Condominiums Grow Taller developed in which land for developing hous ing was consistently priced high. As a result of these developments, it became very difficult for developers secureto prof itability. the After supply peaking in 1972, to continued development housing of area slide given the economic downturn resulting oil shock and otherfrom factors. the 1973 In recent years supply from private developers has dropped to about 20% of the peak level, centering on small-scale developments and large- than city rather in areas redevelopments areas. housing of development scale REAL ESTATEREAL JAPAN IN 2015 THE PARKHOUSE NISHI SHINJUKU TOWER 60 CASE STUDY However, not much progress is being made Number of Condominiums over 30, 40 or 50 Years Old in rebuilding aging condominiums. Reasons

include difficulties in forming a consensus and (10,000 units) deciding who will bear the rebuilding costs. 500 Over 30 years old and less than 40 years old With regard to the former, the Ministry of Land, 450 400 Over 40 years old and less than 50 years old Infrastructure, Transport and Tourism formu- Over 50 years old 350 183 lated the Act on Facilitation of Reconstruction 300 of Condominiums, which has made it possible 250 Over 30 years old = built in or 200 to proceed with condominium rebuilding with before 1983 135 135 150 1,290,000 units Over 40 years old = built in or a majority vote, provided that at least four-fifths 112 100 Over 40 years old before 1993 97 97 2,640,000 units of those voting on the resolution are in favor. 50 Over 40 years old = built in or 129 = built in or 68 before 1983 Based on changes in the law since they were 0 1 31 before 1973 5 32 1,290,000 units 320,000 units constructed, however, many aging condomini- 2013 2018 2023 2033 (year) ums have become “existing non-conforming Source: “Concerning Promotion of Reconstruction and Other Measures for Aged Condominiums” announced by Ministry of buildings” that do not conform to current size Land, Infrastructure, Transport and Tourism (MLIT) on November 28, 2013. requirements, which makes it even more diffi-

MAJOR REAL ESTATE REAL MAJOR SECTORS OVERVIEW OF cult to form a consensus to rebuild them. With regard to the latter, condominium unit condominiums that have been recognized as for condominiums. The need for various kinds owners cannot usually afford the costs required insufficiently earthquake resistant, and going of senior accommodation, such as serviced to tear down existing buildings and the costs forward their management will be entrusted to housing for elderly people, is also becoming required to construct new condominiums. special administrative authorities’ integrated apparent. design programs and the like. With a view to Most condominiums that have been rebuilt to In response to this diversification of needs, con- prevent disasters in the event of an earthquake date have adopted the method of constructing dominiums in various size ranges are being

(i.e., save lives), these new programs would be a larger condominium than the existing one by supplied and various options are offered such applied to the most urgent cases of condomini- making use of unused areas and bearing the as condominiums with commercial facilities ums with “structure resistance deficiency,” and it costs by selling the additional portion to devel- being developed on large-scale sites, large- is expected that rebuilding will be encouraged for opers and the like, but this approach cannot be scale condominiums equipped with communal deteriorating condominiums with outdated earth- used for condominiums with no extra area. facilities such as party rooms and guest rooms, quake resistance. green condominiums that focus on energy con- Therefore, as a new option for renewing aging servation and environmental harmony, and condominiums, a Condominium Lot Selling Diversifying Household Supply condominiums developed in collaboration with System was implemented in December 2014 for With the advent of a serious decline in the famous designers or other industries. selling off land by removing it from the condo- birthrate and the super-aging of society, the minium based on an 80% majority vote, and it is Efforts regarding disaster prevention measures

HOUSING segment of the population buying condomini- such as the deployment of long-term ground expected that there will be more and more cases ums has expanded from the traditional family motion countermeasures and seismically isolated of sold lots being used for retail facilities and other segment to include DINKs, singles and retired structures for high-rise condominiums, securing purposes, not just for condominiums. Moreover, individuals seeking to change their residences of emergency power supply, setting up ware- national technical guidelines have been pro- from standalone houses in the suburbs to loca- houses with stockpiles in the event of a disaster, duced for relaxing volume regulations in special tions downtown. These trends and changes in etc. have also become of greater concern since cases, which may be used when reconstructing lifestyles and tastes are diversifying the needs the Great East Japan Earthquake of 2011.

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

Real Estate in Japan 2015 THE PARKHOUSE NISHI SHINJUKU TOWER 60 CASE STUDY

Mitsubishi Jisho Residence Co., Ltd. be planned, organized, and delivered in Property Overview (a Mitsubishi Estate Group company), collaboration with external experts. Name: along with Sotetsu Real Estate Co., Ltd. The project also aims to be a pioneer The Park House Nishi Shinjuku Tower 60 and Marubeni Corporation, is devel- in the Nishi Shinjuku residential area oping The Parkhouse Nishi Shinjuku Location: 5-700 Nishi Shinjuku, by improving disaster preparedness Shinjuku-ku, Tokyo Tower 60, with construction scheduled through promoting the redevelopment for completion in July 2017. Site area: 7,530.65m² project and providing a high-quality, No. of floors: B2/60F The Nishi Shinjuku 5-chome area where convenient residential environment. Total units: 954 units the property is located is being devel- Following the start of planning in 2006, (Single room–3LDK) oped with the intention of promoting the tower project was interrupted due Completion: July 2017 (scheduled) fire resistance and improving disaster to the global financial crisis triggered prevention through the redevelopment by the collapse of Lehman Brothers, of neighborhoods with high concentra- after which the project was revamped tions of wooden housing. The Parkhouse by revising the costs, design details, and Nishi Shinjuku Tower 60 is the core so forth. At the same time, based on the of the Nishi Shinjuku 5-chome Center size of the tower (over 900 units) and North District Redevelopment Project, the nature of the redevelopment proj- which, centering on local stakehold- ect, new proposals were made for the ers, has been under consideration since building plan to develop facilities and 1992. The 60-storey high-rise will have services aimed at promoting interaction the most floors of any residential tower among people of all ages with a view to in Japan and will be the tallest such integrate local property owners and con- building in Tokyo at 208.97m with a dominium residents. These proposals total of 954 units. notably included the creation of public spaces using domestic timber. Inspired by the key idea of making Nishi Shinjuku a “hometown,” the The basic mission of Mitsubishi Estate property is based on the concept of “a Group is to contribute to society through future-oriented forested tower.” Its urban planning, and Mitsubishi Jisho distinguishing features include: 1) pro- Residence provides lifetime value to moting biodiversity by providing ample customers through residential projects. greenery and open spaces, 2) employing The Nishi Shinjuku 5-chome area that seismic-dampening devices and serv- includes this property has been desig- ing as a local disaster-response base by nated a Fireproofing Promotion District, housing disaster prevention warehouses with the redevelopment project being a and emergency supply warehouses for core initiative. This project is therefore the community, 3) offering public spaces a model example of conducting devel- made using domestic timber for use by opment in neighborhoods with high people of all ages, 4) introducing com- concentrations of wooden housing as a munity programs that will bring tower means of addressing disaster-preven- residents and locals together, which will tion issues in the Tokyo capital area. Furthermore, bearing in mind long-term issues such as population decline, the aging society, diversity, urban/regional planning, etc., it is pursuing cross-gener- ational urban planning and educational initiatives by not just providing facilities but also introducing forward-looking community programs that will cover various themes.

Real Estate in Japan 2015 CASE STUDY PROUD SEASON FUNABASHI KOMURO

Property Overview Nomura Real Estate Development has a neighborhood with a unified feel developed Proud Season Funabashi through the construction of built- Name: Komuro—the largest development in for-sale housing, and enhanced the Proud Season Funabashi Komuro the Proud Season series with a total of value of the replotted land within the Location: 5476 Komurocho, 331 plots—on a land readjustment dis- land readjustment district by sell- Funabashi City, Chiba trict in Komuro, Funabashi City, Chiba ing it at the upper limit of the market. Total development site area: Prefecture. Construction was completed Although there were major changes in 132,824.72m² in June 2014. the economic environment during the No. of units: 331 units project’s development (e.g. the finan- Conveniently located a four-min- (3LDK–5LDK) cial crisis triggered by the collapse of ute walk from Komuro Station on Site area: 136.17m²–146.61m² Lehman Brothers), Nomura Real Estate the Hokuso Line, the neighborhood Floor area: 93.52m²–109.72m² Development steadily promoted the has little through traffic, is adjacent project through measures such as dis- Completion: June 2014 to Komuro Park, and offers plenty of cussions with associations and business natural features, making it an ideal agents to complete the land readjust- environment for raising children. With ment project and creation of added the aim of leveraging these characteris- value by, for example, inviting super- tics, the main target of the development markets to the station-front to improve is young homebuyers who plan to start convenience for local residents. a families in the future or already have small children. Beyond simple urban planning, Nomura Real Estate Development is also The buildings are mainly 4LDK homes helping to nurture a high-quality com- of 100 m² or more which are laid out munity among the people who live in the in order to facilitate child-rearing. In development. It constructed an inde- most cases, the wet areas are located pendent community hall and, in July on the first floor while the LDK, includ- 2014, a month after the first residents ing an open kitchen, is integrated with moved in, it established a commu- an adjoining Japanese-style room; the nity association and has supported its second floor is amply furnished with administration since then. Moreover, three rooms and extra space, along with the development is used as a base for an attic storage area. In terms of spec- holding seasonal events, practical life- ifications, they are designed to provide style-related seminars, etc. that provide convenience and high efficiency as well venues for residents to interact in differ- as enhanced security. Homes are attrac- ent ways. As a result, a new community tively priced around ¥30 to 40 million is taking shape through the formation of with ample space and high-grade spec- hobby groups and the like that residents ifications, capitalizing on economies of are starting on their own initiative. scale as a large project when ordering equipment. With contracts for around 100 units being agreed within a year, representing This project is a land readjustment half of the annual supply of units along project, which could be called the DNA the adjacent railway track, Nomura Real of Nomura Real Estate Development’s Estate Development recognizes that housing business. Nomura Real Estate this project has market support and will Development held discussion with a continue to promote it. local landowners’ association regarding consolidation of the reserved land, rapidly completed work on the reserved land, established

Real Estate in Japan 2015 OVERVIEW OF ( ) REAL ESTATE IN JAPAN 2015 MAJOR REAL ESTATE SECTORS URBAN REDEVELOPMENT URBAN RENEWAL - - - - of 2 of 1961 and the FAR Regulations of 1961 1 Private Companies Take Active Role in Redevelopment primar- is Japan in redevelopment of history The ily the history of local governments aiming to renew low quality city streets formed with little or no order and to recover from the destruction of earthquakes, wars and fires. Although private companies played a certain role in building and supplying buildings and stores in the mid-1950s, they were rarely proactively involved in broader redevelopment projects. After major the cities war, readjusted their zonings to promote recovery from the disasters of the war. This led to a certain degree of order on downtown city streets. However, the construction of buildings by private companies and early in the late 1940s was still infantile due1950s to a conspicuous lack of funds and materials. Uponentering the first the late building1950s, boom occurred with the Jinmu Economy that followed the end of the Although Korean War. banksstill assessed the real estate industry dif funds of procurement the made and poorly ficult, the system of Construction Cooperation Funds spread. This system provided funds to facil itate construction of buildings that companies expectedto enter as tenants and the building business took off. In the some early of the buildings 1950s whose construction had begun during the war but had been suspended or that had been started after the war were completed. Throughout the late Mitsubishi and early Estate 1960s, 1950s com pleted a number ofbuildings and company institutions financial of and newspapersbuildings on national land they had been granted(land grant) one after the As other. a result, the Tokyo business district from Yurakucho to Otemachi was basically completed. there was and a In early the late 1970s, 1960s building dramatic relaxing regulations of limiting heights as a result of the System of Special Urban Block Area From Post–War Recovery to Building Boom to Building Recovery Post–War From 1963. In 1964, the Tokiwabashi Redevelopment Redevelopment Tokiwabashi the 1964, In 1963. (Nippon and Kasumigaseki Building, etc.) Building of Tokyo were simultaneously designated as the first special urban block. Both of these were com At the time, they were respectively pleted in 1968. the largest building and first skyscraper 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. 15 Real Estate in Japan 2015 ) REAL ESTATE SECTORS OVERVIEW OF MAJOR OF MAJOR OVERVIEW URBAN RENEWAL URBAN ( renew to is projects urban redevelopment The objective of promote advanced use of land, improve urban functions, environment, urban the and properties prevention disaster It is and activate the local economy. create public space arrangement of build- the integrated and comprehensive facilities along with ings, retail properties and other urban rationally by infrastructure urban other and plazas streets, using land and rebuilding aged buildings. system block urban special the of creation the by Spurred height limits between in 1961, the easing of absolute fixed companies also began 1965 and 1975, and so forth, private projects. undertaking ambitious redevelopment measures have been In recent years, Urban Regeneration to heighten the appeal hammered out by the government and the of cities and their international competitiveness, are sector private the of projects development urban receiving proactive support. URBAN REDEVELOPMENT URBAN PROUD SEASONPROUD FUNABASHI KOMURO CASE STUDY CASE Primary Systems for Promoting Urban Redevelopment

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

History of Building Vacancy and Floor Area (Stock)

90,000（ha） Office floor area (national, left scale) 15（%） 87,115 Office floor area (Tokyo area, left scale) 85,227 85,233 86.023 86,144 86,730 81,442 82,557 80,000 80,277 Office vacancy (national, right scale) 78,150 79,158 13.07 76,434 77,303 12.60 74,815 73,363 Office vacancy (Tokyo area, right scale) 71,614 11.78 70,000 69,509 11.00 10.72 64,341 10.53 62,375 60,000 59,670 9.50 10 56,637 53,770 8.91 9.01 8.64 8.67 9.60 50,000 8.09 48,456 8.08 7.81 8.12 7.69 8.69 8.84 7.36 6.42 7.95 6.91 6.84 7.68 40,000 6.14 6.10 7.34 37,037 5.67 6.57 6.33 5.09 5.17 30,000 5.04 5 29,130 5.52 4.22

4.24 4.72 21,123 20,000 4.11 3.77 4.03 3.17 2.89 13,444 2.65 10,000

0.48 5,895 7,900 10,118 15,041 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 24,936 0 0.39 0 1975 80 85 90 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 (year)

Source: Miki Shoji Co., Ltd., “Office Data,” Summary of Investigation on Fixed Asset Price, etc. Issued by the Ministry of Internal Affairs and Communications. Notes: 1. Figures as of December each year. National averages calculated by the editors. 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.

Between the early and mid-1960s, various cities along with the building boom calming From Development Boom to Sudden systems were established for securing a good down. On the other hand, high quality develop- Building Slump city environment and attracting superior archi- ments worthy of being called “town creation” Between the late 1980s and the early 1990s tecture and developments. These included projects began to be conducted utilizing a new there was an unprecedented development creating the system of special urban blocks, business system. One project representative boom backed by the spread of information transferring regulations with absolute fixed of this is the Ark Hills project in Minato Ward, technology and the emergence of Tokyo as an height limits to regulations based on FARs, and Tokyo, that was completed in 1986. This was international finance center. The announce- the establishment of the New City Planning the first city redevelopment project primarily ments of very strong demand forecasts made Law and City Redevelopment Law. Private com- conducted by a private developer based on the into the mid-1980s by the National Land panies took advantage of the opportunities City Redevelopment Law established in 1969. Agency (today’s Ministry of Land, Infrastructure, presented by these developments to embark The developer diligently obtained the under- Transport and Tourism) and by multiple think on large redevelopment projects requiring the standing of multiple land rights owners and tanks led to a building construction rush that coordination of multiple landholders’ rights and completed the new town after a period of 17 was so great that ten years’ worth of estimated the preparation of public infrastructure. years. In addition, Hibiya City was completed floor space demand was built in only three in 1981 on two special urban blocks that were years. Companies not traditionally involved in Era of Planar Redevelopment the former site of NHK. This project comprised development entered the building business and of four buildings is well known as a project in Upon entering the mid-1970s, the oil shocks triggered the soaring land prices that became which air rights3 were sold within the special had ended and led to a slowdown in the con- known as the bubble. On the other hand, during centration of industries and people in major urban blocks.

Real Estate in Japan 2015 OVERVIEW OF ( ) REAL ESTATE IN JAPAN 2015 MAJOR REAL ESTATE SECTORS URBAN REDEVELOPMENT URBAN RENEWAL Settlement Urban Renaissance Agency, Urban Renaissance Housing Supply Corporation, etc. Corporation, Housing Supply construction completion Minister of Land, Infrastructure, Infrastructure, of Land, Minister Public announcement of public facility Transport and Tourism or governor approval of approval or governor Tourism and Transport implementation regulations and business plan regulations implementation Promoting Residences in City Centers One of the housing policies of recent years involves promoting residences in city centers. city in functions work of concentration The centers causes a conspicuous outflow of the residential population from city centers. The construction rush of office buildings during the Since there is no legal force behind the execution of the project, it requires the approval of all the land right owners, but at the same time there are no strict requirements such as the need for there to be at least a certain percentage of old buildings within the district. from for redevelopment need Furthermore, the the perspective of disaster prevention grew as Hanshin Great the of occurrence the of result a Awaji Earthquake. The resulting measures included enforcement of the law concerning the promotion of disaster prevention district concentrated infrastructures within heavily city areas in 1997. These measures sought to effectively promote redevelopment in city areas that were recognized as risky with regard to disaster prevention. Execution of construction Execution - - (Category 2 Urban District Redevelopment Project) 2 Urban District Redevelopment (Category Preparation of managed disposal plan of managed Preparation Application for transfer request and lease request request transfer Application for Acquisition, etc. of land (1) Payment of compensation or of of land (1) Payment etc. Acquisition, Approval by Minister or governor of managed disposal plan of or governor Minister by Approval (2) Acquisition of right to be transferred building facility portion building facility be transferred Acquisition of right to (2) , tax measures Registration of building facility portion, etc. portion, of building facility Registration 5 construction completion Decide city plan for project Decide city plan for approval of business plan approval Public announcement of building [Local public body] [Local Minister of Land, Infrastructure, Infrastructure, of Land, Minister Transport and Tourism or governor or governor Tourism and Transport 17 company Selection of sophisticated use district, etc. use district, Selection of sophisticated Real Estate in Japan 2015 Redevelopment Governor approval for approval Governor project implementation project bilities of buildings in cities, renew city functions and achieve sophisticatedland use. Due to the enforcement laws, of there strict are requirements for this type of redevelopment including main taining a certain ratio of old or wooden buildings within the set district. Since this type of project characteristic, strong (government) has a public varioustax incentives and support systems are in place for these projects. Voluntary redevelopment is generally the uni- fication of divided lots, conversion of land use (former factory sites, etc.) to redevelop areas including the construction of public facilities. In its broadest meaning, these projects include the simple rebuilding of buildings. It is the general term used for projects that use methods other than urban redevelopment projects. These projects comprehensively apply city planning systems such as special urban blocks and special building regulations including the comprehensive design system planning projects. Urban redevelopment projects areimplemented with the enforcement of laws and seekto improve the disaster prevention capa and subsidy measures. - Association implementation association launch Governor approval for approval Governor Registration of facility structure of facility Registration Execution of construction Execution Payment of compensation Payment Registration of right conversion Registration Preparation of right conversion plan of right conversion Preparation Conversion of rights on right conversion date of rights on right conversion Conversion Public announcement of construction completion Registration of start to right conversion procedure right conversion to of start Registration Approval of right conversion plan by Minister or governor Minister plan by of right conversion Approval including application indicating no desire for right conversion for no desire including application indicating (Category 1 Urban District Redevelopment Project) 1 Urban District Redevelopment (Category redevelopment promotion district promotion redevelopment Decide city plan for urban district for Decide city plan Individual Settlement Governor approval for approval Governor implementation project implementation project and these projects are executed as city 4 Flow of an Urban District Redevelopment Project Redevelopment Urban District of an Flow There two are typescity of redevelopment projects: legal redevelopment and voluntary redevelopment. Legal redevelopment projects urban are redevel Legal Redevelopment and Voluntary Redevelopment City the projects based on Redevelopment opment Law this ten-year period many mega projects that had been conducted over a prolonged period such as the development of waterfront areas in major cities began to appear. Examples of these include Makuhari in Chiba Prefecture, Minato Mirai 21 in Yokohama, Osaka Business Park (OBP) and Yokohama Business Park (YBP). All of these projects drew attention as unprecedented multi‑use developments in Japan. However, with the headlong rush into the Heisei recession (starting in the late 1980s) emerged unprecedentedly high vacancy rates, remarkable decreases in rents and other 180-degree transformations in the building market. This forced some projects such as the Tokyo water- revisions. to undergo significant subcenter front 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 Yokohama Landmark Tower Yokohama City 3.8 Jun. 1993 Mitsubishi Estate Office, hotel, retail Shipyard Urban Renaissance Urgent Redevelopment Area 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 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 cen- Roppongi Hills Minato Ward 11.0 Apr. 2003 Partnership, Mori Building Office, retail, housing, broadcast center Category 1 urban district redevelopment project ter, 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. Abeno Harukas Osaka City 2.8 Mar. 2014 Kintetsu Corporation Department store, office, hotel Department store Special district for urban development Otemachi, Marunouchi, and Yurakucho District Plan, Tokyo Urban Otemachi Tower Chiyoda Ward 1.1 Apr. 2014 Tokyo Tatemono Office, hotel, retail Bank, office, etc. Planning Special District for Urban Renaissance Loop Line No. 2 Shimbashi/Toranomon Redevelopment Project Toranomon Hills Minato Ward 1.7 May 2014 Mori Building Office, housing, hotel, retail, conference, etc. Low-rise housing, etc. Building III Iidabashi Grand Bloom Chiyoda Ward 2.5 Jun. 2014 Mitsui Fudosan, Maeda Corporation, Kajima Corporation Office, retail facility, housing, church Hospital Redevelopment Promotion Area Nihonbashi/Muromachi East Mitsui Fudosan, Chiba Bank, Sobu, Wakamoto, Isetan Mitsukoshi, Kiya Chuo Ward 1.0 Oct. 2014 Office, retail, apartment housing, other Office, etc. Special district for urban development District Development Project Building, Furukawa, Ninben, others

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

Real Estate in Japan 2015 OVERVIEW OF ( ) REAL ESTATE IN JAPAN 2015 MAJOR REAL ESTATE SECTORS URBAN REDEVELOPMENT URBAN RENEWAL Remarks Redevelopment Promotion Area Promotion Redevelopment urbanSpecial development district for Private urbanPrivate redevelopment business plan project redevelopment district urban Category 1 project redevelopment district urban Category 1 urbanSpecial development district for urbanSpecial development district for Otemachi, Marunouchi, and Yurakucho District Plan, Tokyo Urban Special District Urban Renaissance for Planning Loop Line No. 2 Shimbashi/Toranomon Redevelopment Project Building III Specified housing land improvement projectimprovement Specified land housing project redevelopment district urban Category 1 plan district Redevelopment project redevelopment district urban Category 1 Specifieddistrict CategoryDistrict plan, urban redevelopment project 1 project redevelopment district urban Category 1 Specifieddistrict project adjustment zoning Land plan district redevelopment project, adjustment zoning Land project redevelopment district urban Category 1 design development Comprehensive Specifieddistrict plan district Redevelopment plan district Redevelopment Special District urbanPrivate redevelopment for business plan, Redevelopment district Special FAR urbanSpecial redevelopment, district for urbanSpecial redevelopment district for Specifieddistrict Specifieddistrict project redevelopment district urban Category 1 project adjustment zoning Land Specifieddistrict project promotion development city base Emergency District plan system design development Comprehensive projectimprovement Specified land housing Area Redevelopment Urgent Renaissance Urban District plan Specifieddistrict 19 PreviousUse Real Estate in Japan 2015 Hospital Office, etc. National Police AcademyNational Police Forestry staff agency quarters auditoriumBuilding, Station Department store Bank, office, etc. Low-rise housing, etc. Station, cargo stationStation, Office,plant retail, broadcast center housing, Office,retail, Office, retail hotel, Plant Agency) Defense (former State-owned land etc. theater, Office, broadcast center, offices public Joint Office, retail Cultural hall Brewery Plant Railyard apartment, etc. Plant, Industry test yard center logistics warehouse, Housing, housing Auditorium, Office, retail Auditorium Jail church, etc. Housing, retail, depot) army (former Warehouse center purification Water Glass factory housing Warehouse, warehouse plant, Automobile Shipyard Shipyard depot Train Hospital - Primary Facilities Office, retail facility, housing, church other apartment housing, Office,retail, Office, retail hotel, conference,Office, etc. retail, housing, hotel, Office, retail, medical institution, etc. Office,knowledge retail, etc. housing, capital, hotel office, Department store, Office, retail housing, Office,housing retail, Office, retail, Office,museum retail, Office, retail, cultural facility Office, retail, theater, broadcast center, housing, etc. housing, broadcast center, theater, Office,retail, Office, retail conference hall, ter, housing ter, Office,housing retail, Office, retail housing, hotel, Office, hotel, retail, theater, museum, broadcasting broadcasting cen museum, theater, retail, Office, hotel, Office, retail hotel, Office, housing, hotel, retail, broadcasting center, etc. housing Office, retail, hotel, Office, retail, Office, housing, hall retail, Office, retail, hotel, housing, museum, etc. Office, retail Office, retail, multi-purpose hall plant Office, housing, cleaning center, retail, retail office, Theater, Office, retail, hotel, housing, hall, museum Retail, hotel, cultural facility, amusement facility Office, retail hotel, Office, retail office housing, Hospital, Office, hotel, retail, housing Office, retail, hotel, Office, hotel, retail, aerial park Housing, retail Office, retail, Office,hotel retail, Office,R&D facility, retail Office, hotel, TV studio, housing Office, hotel, retail, multi-purpose hall Office, retail Office, hotel, exhibit hall Main Developer, ParticipatingMain Developer, Companies, etc. Kowa Real Estate, Sumitomo Life Insurance, Obayashi Corporation Osaka City, (former) Housing and Urban Development, Matsushita Investment Investment Matsushita Development, Urban and Housing (former) City, Osaka and Development, Tokio Marine & Fire Insurance, etc. Shinjuku Fuku-toshin Construction Corporation, Sumitomo Realty & Development, Tokyo Tatemono, Nomura Real Estate Development, Mitsui Fudosan, Keio Teito Electric Railway, etc. Corporation Tokyu and Land Tokyu Development Urban Promoting for Organization Jisho, Fukuoka Nippon Life Insurance, NTT Urban Development, Odakyu Department Store, etc. Corporation, Keio Building Mori Development, & Realty Sumitomo Partnership, Client Council for Promotion of the Shibuya New Cultural District Development Project, Tokyu Corporation, Tokyo Metro, etc. etc. Tochi-Tatemono, Nippon Shouei, Corporation, Kajima Tatemono, Tokyo Mori Building Mitsubishi Estate, NTT Urban Development, Obayashi Corporation, ORIX Real etc. City Produce, Steel Nippon Fudosan, Kanden Estate, Tatemono Tokyo Mori Building Corporation Kajima Corporation, Maeda Fudosan, Mitsui JA-ZENCHU (Central Union of Agricultural Co-operatives), Nippon Keidanren (Japan Business Federation), Nikkei Inc., Mitsubishi Estate, NTT Urban Development, Tokyo Tatemono, The Sankei Building, etc. Mitsubishi Estate Urban Renaissance Agency, Mitsubishi Estate, NTT Urban Development, Tokyo Building Sankei The Tatemono, Corporation Kintetsu Mitsui Fudosan, Chiba Bank, Sobu, Wakamoto, Isetan Mitsukoshi, Kiya others Ninben, Furukawa, Building, Mitsui Fudosan Mitsui Building Mori Partnership, Mitsubishi Estate Breweries Sapporo Mitsui Fudosan, JA Kyosai, Meiji Yasuda Life Insurance, Sekisui House, Fukoku Insurance Life Daido Insurance, Life Mutual New City Development Center City Development New Development Estate Real Nomura Landowners, Corporation,Mitsubishi Council of Industries, Ube etc. Voluntary Sekisui House, AOKI Construction, Toshiba, etc. Tokyo, (former) Housing and Urban Development, Mitsui Fudosan InternationalSt. Luke’s Hospital, Seiwa Real Estate, Tokyu Land, Real Towa Insurance, Development, NipponEstate Life Matsushita Investment and Fudosan Mitsui Development, Partnership, TEPCO, Osaki Land and Building, Mitsui Fudosan, Fuji Life, etc. Corporation Sumitomo Corporation, Development Urban (Former) Mitsubishi Estate Works, Electric Matsushita Network Corporation, Television Nippon Dentsu, etc. Mitsubishi Corporation, Mitsubishi Heavy Industries, Mitsubishi Motors, Daito Trust Construction, Taiyo Life Insurance, Cannon Sales, Tokyo Tatemono, Kintetsu Real Estate, Nippon Tochi-Tatemono Hanbai, Housing Total Partnership, Mori Building Fudosan Chuo Marunouchi Insurance, Hotel, Life Nippon Estate, Mitsubishi Tokyo Tatemono, Mitsui Shoei & Co., Fudosan Mitsui Television, System Broadcasting Tokyo Apr. 2012 Apr. 2014 Jul. 2002 Jul. Apr. 1996 Apr. 1968 Apr. Oct. 2014 Oct. 2012 Oct. 1994 May 1978 May 2012 May 2014 Apr. 2009 Apr. 2009 Apr. 2003 Jun. 2014 Mar. 2013 Mar. 2014 Feb. 1999 Feb. Mar. 1991 Jun. 1993 Mar. 1993 Aug. 2012 Mar. 1986 Mar. Nov. 1993 Mar. 1999 Mar. Jan. 2007 Dec. 1998 Mar. 2003 Mar. 2006 Mar. 2008 May 1994* May 1993* Sept. 2001 Jun. 1992* Sept. 2002 Jun. 1990* Jun. Sept. 2004 Mar. 1990* Mar. Jan. 2003* Completed Construction Construction 1.1 1.7 2.1 6.1 1.5 1.4 1.6 1.0 1.0 1.2 5.9 6.9 0.9 3.9 2.7 2.5 2.4 2.0 2.8 4.4 5.6 4.0 5.3 8.3 3.3 3.8 3.8 4.2 4.2 3.2 17.0 11.0 16.8 14.2 13.2 26.0 30.7 20.0 56.0 Area(ha) Development Development Address Chiyoda Ward Chiyoda Ward Ward Shibuya Ward Nakano Ward Minato Chiyoda Ward City Osaka City Osaka Chiyoda Ward Ward Minato Chiyoda Ward Ward Chuo Chiyoda Ward Ward Toshima Ward Minato City Osaka Ward Shinjuku City Yokohama Shinagawa Ward City Osaka Ward Chuo City Yokohama Setagaya Ward Ward Chuo Meguro and Shibuya Wards City Fukuoka Ward Minato Shinagawa Ward Ward Shinjuku Ward Chuo Ward Minato Chiyoda Ward Ward Minato and Minato Shinagawa Wards Ward Minato Chiyoda Ward Ward Sumida Ward Minato Ward Minato Name Construction Completed indicates the month and year of the completion of entire project or the grand opening. opening. grand the or project entire of completion the of year and month the indicates Completed Construction structure. main the of completion of year and month the indicate (*) asterisk an with marked those However, Otemachi 1-chome Area Project Redevelopment Marunouchi Building, Park Ichigokan Mitsubishi Hikarie Shibuya Nakano Central Park Ark Hills Sengokuyama Mori Tower City Financial Otemachi Osaka Front Grand Harukas Abeno Otemachi Tower Hills Toranomon BloomGrand Iidabashi Nihonbashi/Muromachi East District Development Project Kasumigaseki Building Kasumigaseki CitySunshine Ark Roppongi and Akasaka Hills Osaka Business Park Shinjuku Fukutoshin Yokohama Business Park Isle Tennozu Shin Umeda City Okawabata River City 21 Tower Landmark Yokohama Setagaya Business Square International Luke’s St. Redevelopment Hospital Garden Place Yebisu City Hakata Canal City Inter Shinagawa City Osaki Gate Tokyo Opera City Square Triton Island Harumi Garden Izumi Marunouchi Building Shiodome Sio-Site Commons Grand Shinagawa Hills Roppongi Marunouchi oazo Olinas Tokyo Midtown Akasaka Sacas Note: Note: History of Supply Volume of Major Ofﬁce Buildings in 23 Wards of Tokyo

240 (10,000m²)

Incomplete (2014 also includes completed constructions) 210 216 Construction completed

180 183 175

150 154

120 125 124 118 119 121 117 119 111 110 90 100 99 96 92 91 86 85 88 74 77 60 72 65 58

30 36

45 0 1989 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 (year) Source: Prepared using the Major Office Building Market Trends Study for Tokyo (October 2014 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.

period in which land prices soared remarkably The primary measures introduced include the to economic recovery through an expansion of accelerated this phenomenon. For example, creation of a district program for heightening the domestic demand. The proactive promotion of the nighttime population of the three central appeal of town areas in 19956, creation of areas urban redevelopment projects by private com- wards of Tokyo fell from 550,000 people in permitted to have tower residences7, a system for panies as measures to invigorate the country’s 1960 to 240,000 people in 1995, a halving of comprehensive development design by lot size8 economy, which was mired in a continuing the population in just 35 years. and rationalization of FAR limits on condomini- slump, had large expectations placed on it. ums and other apartments9. Furthermore, the This led to the problem of communities dete- Due to these expectations, the government Metropolitan Government of Tokyo established a riorating in city centers, the integration and came up with a number of measures between headquarters for promoting residences in down- closure of public elementary and junior high 1997 and 1998 to promote redevelopment town Tokyo as a means to reliably implement schools due to the decrease in students and projects within its economic measures and these measures. In addition, a drastic revision of children, and to slumping performance among improve the business environment. These the Building Standards Law was passed in 1998 local stores in these areas. On the other hand, included application of the Urban Development and the Consecutive Building Design System10 many of those working in these city centers Corporation (presently the Urban Renaissance was created. This system was established from reside over a broad range of suburbs in sur- Agency) and Organization for Promoting the perspective of promoting efficient land use rounding prefectures and are forced to endure Urban Development to prepare a support infra- while securing desirable city environments and long commutes. Thus, it is difficult for these structure along with the creation of a system arranged for the unified application of regulations people to have a leisurely, satisfying lifestyle. of approved redevelopment projects and a on FARs and building height restrictions by rec- specific project participants system and estab- The promotion of residence in city centers not ognizing a group of sites (even including existing lishment of measures to speed up and support only leads to a regeneration of the commu- structures) as a single lot. nity in the city but also relieves those working redevelopment projects. These various deregulation measures and the fall in city centers from prolonged commutes and In 2001, the Urban Renaissance Headquarters in land and construction prices of recent years gives them the ability to enjoy sufficient lei- was established in the Cabinet with then Prime has increased the nighttime populations of the sure time. In part because the collapse of Minister Junichiro Koizumi as its head, with the three central wards to 370,000 people in 2010. land prices in city centers made it possible to objective of promoting the fluidization of land supply housing downtown, the government has and revitalization of Japan by developing the Implementation of Urban Regeneration established various measures to promote the necessary urban renaissance platform and Measures and Progress of supply of good apartments and condominiums revitalizing cities. The headquarters reviewed Development Projects in downtown areas through the efficient and systems without sanctuary. In 2002, through sophisticated use of land. Redevelopment projects have a very high ripple the establishment of the Urban Renaissance effect on the economy and greatly contribute Special Measures Law, urgent city regeneration

Real Estate in Japan 2015 OVERVIEW OF ( ) REAL ESTATE IN JAPAN 2015 MAJOR REAL ESTATE SECTORS URBAN REDEVELOPMENT URBAN RENEWAL

Comprehensive Development Design System by Lot Size Rationalization of FAR Limits for Condominiums and Other Apartments Furthermore, the National Strategic Special Special National Strategic the Furthermore, based on was enacted in 2013, Zones Act of of promoting the development the objective The fol- economic activity hubs. international area, six zones (Tokyo area, Kansai lowing year, Prefecture, Yabu City in Hyogo Niigata City, Prefecture) and Okinawa Fukuoka Prefecture, Since then, and zone policies were determined. approving the plan for work has progressed on special a as area, Tokyo the in and zone, each Measures Act for Urban case under the Special approval of private-sec- Renaissance relating to plans, in the Hibiya tor urban renewal project to implement district, efforts are underway through collabo- disaster-prevention measures others, to promote ration with Hibiya Park and collaboration with arts and culture through local theaters and others and to develop a base for enhancing the area’s capacity to collabo- to nurture venture order in businesses with rate companies. 8. A comprehensive development design system in which the increase in FAR becomes greater the larger the lot size. This provides the developer with an incentive for combining lots by increasing the FAR in accordance with the size and was created of of promoting the construction with the objective good structures that contribute to improving city environments. 9. This heightened the usable FAR by removing hallways and stair common areas of condominiums and other apartments from the calculations for FAR limits. As a result, it became possible to use FAR about 1.2 times than if hallways, etc. are included in the floor area (Article 52-5 of the Building Standards Law). 10. Consecutive Building Design System This system admits exceptions to the rule of one building for one lot. When buildings are constructed according to a rational design based on on remaining building existing the of premise the lots, several of comprised site land integrated an special measure exceptions are applied that rec- ognize several buildings as existing on the same site when the specified government agency recognizes that the location and structures of each building presents no safety, fire prevention or sanitation problem. Specifically, FAR and building coverage ratios are applied with the multiple buildings recognized as a single unit, and sunlight restrictions and neighboring lot setback restrictions related to each building in that district are judged individually. This system is expected to pro- FARs unused enabling by use sophisticated mote of neighboring lots to be used and overcoming of FAR restrictions using road widths when the neighboring lot borders a wide road. 21 Real Estate in Japan 2015 Comprehensive Development Design System Town Environment Promotion District Plan Skyscraper Residence Promotion District International Competitiveness of Cities Competitiveness International the economic globalization, Because of has of cities competitiveness global industrial focus. In order become a national development major world cities to compete effectively with and other Asian such as New York, London been remarkable, it cities, whose progress has cities look ahead and is necessary for Japan’s that will attract interna- build appealing districts information. tional talent, capital, and Act for Urban In 2011, the Special Measures revised, designating Renaissance was partially global compet- regions where strengthening effective as itiveness would be particularly “specific urban redevelopment emergency development areas,” and a Comprehensive Special Zone system was set up via the Comprehensive Special Zone Act. with a total of about 6,810 hectares (designated 6,810 hectares total of about with a levels) had been designated. as 1st to 6th (rights conversion), then disposing of remaining floor and site rights (reserved floor) and applying those funds to project costs. The developer partic- ipates in the project as an individual implementer of agent the as or association, the of member or an individual implementer or the scheduled purchaser of the reserved floor. Category 2 involves paying compensation to the rights holders in the the for rights entire the purchasing and district land and building. The implementing party is a Agency Renaissance Urban or body public local and they can also expropriate the land. 5. A system in which approval by the specific admin- a has secured which a lot area agency for istrative certain ratio or more of empty land for a building on exception special a recognizes size certain a of the absolute height in a dedicated Category 1 or Category 2 exclusively low-rise residential district of 59-2 (Article restrictions setback or FAR for or the Building Standards Law). 6. When in an existing city area the building height, arrangement and form are designated as a unified district plan in accordance with the district characteristics and necessary regulations are restric- of FAR application the then implemented, tions and setback restrictions based on the width of the road to the front are excluded. This was created to promote the city environment through individual building activity, rational, healthy and efficient use of land and formation of a good environment (Article 12-5 of the City Planning Law). 7. Community districts designated as districts for promoting the building of residential skyscrapers. This districts, Category 1 residential is set for Category 2 residential districts, quasi-residential districts, neighboring commercial districts and quasi-industrial districts. City Redevelopment Law (Categories 1 and 2) districts began. These are critical and important and important are critical began. These districts by the central government districts designated lots that city regeneration for city as bases for way for This paved the should be developed. by the JNR Settlement Corporation sale of land enormous an and developments other and supplied office buildings were amount of large Shinagawa and to areas such as Shiodome, Roppongi from 2002. built have areas these in buildings the of Many office just not are that developments multi-use functions such as buildings but also include in 2007 and onwards, hotels and theaters. Even completion of the the areas have seen the Midtown, Akasaka Shinmaru Building, Tokyo Building, Mitsubishi Sacas, Marunouchi Park Ichigokan and many more. In addition, subject areas of urgent city regen- completethe with expanded eration districts revision of the basic policies of city regeneration in 2011 and, as of the end of the year, 65 districts In Category 1, landowners in the district (individual implementers) and an association of all landowners (an association can be formed when there are at least five landowners or leaseholders) along with the local public body become the implement- transferring involves structure basic The party. ing the rights of landowners before the project is implemented to the new building’s floor area and common interest in the site after construction 1. Special Urban Block Area preserving for plans city in designated Districts and forming superior city spaces. Within these designated blocks, regulations concerning FARs, building coverage ratio, height restrictions and sunlight regulations under the Building Standards Law are not applied and unique FARs, height restrictions and wall plane locations are desig- Planning the City (Article 8 of for said blocks nated Law and Article 60 of the Building Standards Law). 2. FAR Regulations FAR refers to the ratio of the total building floor area to lot area that is designated according to the use zone. Prior to introduction of FAR, there in meters 20 of restrictions height absolute were residential areas and 31 meters in other areas. Creation of this system enabled the construction of tall buildings (Article 52 of the Building Standards Law). 3. Air Rights (1) Right to use space above the land (air right) and (2) Right to receive transferred FARs from neighboring lots (transferable development right). surface sectional as same the is former The rights designated in the Civil Code. Both can be transferred through a sale and an example of the Nippon FAR for the The excess Hibiya City. latter is Hibiya to the was transferred Press Center Building Kokusai Building and other spaces. 4. [Endnotes] IIDABASHI STATION WEST EXIT AREA CASE STUDY TORANOMON HILLS REDEVELOPMENT PROJECT CASE STUDY

Property Overview Toranomon Hills is a skyscraper tower instant building damage assessment integrated with the development of system and a wireless system linking Name: Toranomon Hills Loop Road No. 2 as part of an urban it with nearby Mori Building-related Location: 1-4, 1-23 Toranomon, redevelopment project being carried out facilities have also been introduced. As Minato-ku, Tokyo by the Tokyo Metropolitan Government. a disaster prevention center for the local Site area: 17,069m² To construct it, designated builder Mori area, these enhance its capacity to serve Total floor area: 244,360m² Building Co., Ltd. leveraged the Multi- as a refuge able to accommodate thou- No. of floors: B5/52F Level Road System, a groundbreaking sands of stranded commuters. method of constructing buildings above Use: Office, residence, hotel, retail, Furthermore, the project also features roads. It was completed in June 2014. conference hall, parking biodiversity-friendly green spaces and Completion: May 29, 2014 The building, based on Mori Building’s facilities equipped with state-of-the- “Vertical Garden City” concept of urban art energy-saving technology. From an planning, is a distinctive development energy-saving perspective in particular that combines a road, whose construc- it is proactively undertaking initiatives tion gestated for a long time following to reduce energy and resource use such approval of the city’s original plan in as solar power generation facilities 1946, with a multi-use tower whose and efficient water utilization, leading functions—including offices, resi- to certification as a CO₂-Reduction dences, a hotel, and an international Leadership Project by the Ministry of convention facility—are distributed in Land, Infrastructure, Transport and a tiered manner. Tourism. A mixed-use high-rise tower with 52 The Toranomon area also serves as a floors above ground and a height of venue for cultural promotion. Public 247 m, Toranomon Hills is located in art—primarily focusing on works by a Special Zone for Asian Headquarters Asian artists—has been installed in designed to attract foreign companies various locations, which will become to Tokyo. The building is comprised of symbols of the area. Andaz Tokyo, the first Japanese branch Mori Building is making full use of its of an international boutique hotel chain, accumulated urban planning expertise offices equipped with best-in-class spec- to pursue further area development and ifications, high-class residences which management. With Toranomon Hills also have access to the hotel’s services, serving as a catalyst and the National international-caliber conference facili- Strategic Special Zone initiative and ties and a variety of retail facilities. forthcoming Olympics providing added It is also equipped with superior momentum, going forward it will take vibration-damping capabilities and advantage of this ideal opportunity to disaster-prevention func- further promote urban planning by pur- tions that facilitate business suing around ten projects in the area continuity and enable it to over the coming decade in order to estab- serve as a place of refuge. lish an international city center that will A unique post-earthquake make Tokyo the world’s leading city.

Real Estate in Japan 2015 IIDABASHI STATION WEST EXIT AREA CASE STUDY TORANOMON HILLS REDEVELOPMENT PROJECT CASE STUDY

As a member of the Iidabashi West Exit for this gateway to the Fujimi area next Summary of Area Urban Redevelopment Association, to Iidabashi Station’s west exit. Overall Project Mitsui Fudosan, along with Mitsui The church building (United Church Developer: Fudosan Residential, acquired part of a of Christ in Japan Fujimi Church) was Iidabashi West Exit Area Urban business/commercial building and res- completed in August 2013 while the Redevelopment Association idential building for a redevelopment office/commercial building (Iidabashi Construction: project and is conducting office/retail Grand Bloom) and residential building Joint venture of Maeda Corporation leasing and residential condominium (Park Court Chiyoda Fujimi The Tower) and Kajima Corporation business there. were completed in June 2014. Retailers Site area: 16,711m² The redevelopment project consists of have even been selected to occupy the (entire area) three sections: a residential building, Iidabashi Sakura Terrace commercial office/commercial building, and church zone inside Iidabashi Grand Bloom, building. General urban planning mea- and the grand opening was held on Summary of sures are being undertaken to help October 10. Office/Commercial establish this mixed-use station-front Building This development project first began development as a new hub of activ- Location: 2-10-2 Fujimi, to be considered when the decision ity. New construction of the business/ Chiyoda-ku, Tokyo was made to relocate the former Tokyo commercial building and residential Site area: 11,062m² Metropolitan Police Hospital in 2001, building was carried out as a joint ven- Total floor area: 124,003m² and the work was carried out with ture of Maeda Corporation and Kajima No. of floors: B2/30F four key points in mind: creating an Corporation. Grand opening: October 10, 2014 appropriate multi‑use station-front The area immediately to the south of development to form a new hub of Iidabashi Station’s west exit had var- activity, combining office, retail and Summary of ious problems, buildings were aging, housing functions to enhance capac- Park Court Chiyoda too much of the land was being used ity to attract customers, implementing Fujimi The Tower for offices, Sotobori Park was cut off safe, stable urban planning measures (Residential building) from the outlying streets, there was no and reducing its environmental foot- connection between the station’s west print. With the goal of creating a safe, Location: 2-10-3 Fujimi, Chiyoda-ku, Tokyo exit and the shopping arcades along stable, comfortable, lively and appeal- Waseda-dori Street and Daijingu‑dori ing multi-use urban district in keeping Site area: 4,649m² Street, the area’s streets were narrow, with its location next to a city center Total floor area: 68,524m² there was a lack of proper sidewalks station while also leveraging the envi- No. of floors: B2/40F and so on. However, the area – a cen- ronment’s abundant natural features Grand opening: June 2014 tral location easily accessible by public and rich history, the developer under- transport – had much potential, so in took new urban planning designed to addition to developing the multi-use harmoniously integrate the project with Summary of business/retail/housing complex, it its surroundings. United Church of was decided to con- Christ in Japan Fujimi duct redevelopment Church such as widening the (Church building) streets, establishing Location: 2-10-1 Fujimi, plazas and pedestrian Chiyoda-ku, Tokyo spaces, etc., thereby Site area: 1,000m² creating a fitting Total floor area: 1,673m² urban environment No. of floors: 3F Completion: August 2013

Real Estate in Japan 2015 TAKESHIBA DISTRICT DEVELOPMENT PROJECT CASE STUDY OverviewOverview ofof NationalNational StrategicStrategic SpecialSpecial ZonesZones The purpose of the National Strategic Special Zone system is to City, and Okinawa Prefecture). Within Tokyo specifically, nine enhance Japan’s industrial competitiveness, establish global wards were designated (Chiyoda Ward, Chuo Ward, Minato Ward, economic activity hubs and vitalize regional areas by focusing on Shinjuku Ward, Bunkyo Ward, Koto Ward, Shinagawa Ward, Ota promoting structural socio-economic changes via bold regulatory Ward, and Shibuya Ward), and expanding the scope of the Tokyo and institutional reforms. The law establishing the system went Special Zone is currently being considered. into effect in December 2013. In the field of urban renewal/planning, measures have been taken In terms of targets, efforts are underway with the Tokyo Olympics such as special exceptions to the City Planning Act (enhancing and Paralympics in mind and by opening up a way through transportation capacity as an international city, exchanging inter- Japan’s so-called “bedrock regulations,” in particular through a national business, establishing a hub to support entrepreneurship period of intensive effort ending in 2015, the aim is to estab- and developing the living environment for foreigners with, for lish the world’s most business-friendly environment, which will example, initiatives aiming to form an international business enable private-sector companies to make full use of their capa- hub), special exceptions to the Road Act relating to area man- bilities and lead to economic growth. agement (promoting urban MICE and urban tourism) and special In the Special Zones, it is possible to implement projects aligned exceptions to the Inns and Hotels Act (operating accommodations with the area’s characteristics that leverage regulatory reforms in targeting overseas tourists and business travelers participating in fields such as urban renewal/urban planning, education, recruit- MICE, etc.). In October 2014, the Tokyo Area National Strategic ment, medicine, and agriculture. Furthermore, in the future, Special Zone Council presented projects in 10 districts and these based on requests from Zone Councils and proposals from across are expected to enhance Tokyo’s international business environ- the country, additional regulatory reforms will be carried out. ment and transform it into a global business city open to the world. In May 2014, as the first step, six zones across Japan were authorized (Tokyo area, Kansai area, Fukuoka City, Yabu City, Niigata

Development of international Development of MICE capacityAdachi-ku to Development of various business business hub combined with Itabashi-ku accommodate increase in foreign exchange sites for international enhanced transport hub capacity visitors finance industry, content industry, etc. Kita-ku A: Large-scale underground bus D: Otemachi 1-chome G: Otemachi (Tokiwabashi) area terminal in front of Tokyo Station Nerima-ku E: Roppongi area Katsushika-kuH: Hibiya area B: New station construction around F: Tokyo Waterfront City Ariake area I : Takeshiba area Shinagawa Station Arakawa-ku J : Vacant site formerly used by C: New Toranomon area station on Toshima-ku Haneda airport Tokyo Metro Hibiya Line

Nakano-ku Bunkyo-ku Taito-ku

Sumida-ku C: Toranomon Suginami-kuarea D: Otemachi area — 1-chome area Shinjuku-ku Chiyoda-ku 1) 1-chome, Atago, Azabudai EnterprisingEdogawa-ku body: Mitsui Fudosan Co., Ltd. Enterprising body: Mori Building Co., Ltd. Projected approval*: Early in fiscal 2015 Projected approval*: Koto-ku Beginning of fiscal 2015 and duringShibuya-ku fiscal 2015 Chuo-ku 2) 4-chome G: Otemachi area — Tokiwabashi area Enterprising body: Mori Trust Co., Ltd. Enterprising body: Mitsubishi Estate Co., Ltd. Projected approval*: End of fiscal 2014 Minato-ku Projected approval*: During fiscal 2015 Setagaya-ku

E: Roppongi area A: Yaesu Area Enterprising body: Meguro-ku 1) 1-chome Enterprising body: Tokyo Tatemono Co., Ltd. Mori Building Co., Ltd. Shinagawa-ku Sumitomo Realty & Development Co., Ltd. 2) 2-chome Enterprising body: Mitsui Fudosan Co., Ltd. Projected approval*: During fiscal 2015 Projected approval*: During fiscal 2015

B: Around Shinagawa Station area F: Tokyo Waterfront City Ariake area Enterprising body: East Japan Railway Company Ota-ku Enterprising body: Sumitomo Realty & Development Co., Ltd. Projected approval*: During fiscal 2015 Projected approval*: During fiscal 2015

I : Takeshiba area J: Vacant site formerly used by Haneda airport H: Hibiya area Enterprising body: Tokyu Land Corporation Enterprising body: Ota-ku, etc. Enterprising body: Mitsui Fudosan Co., Ltd. Kajima Corporation (public-private partnership) Projected authorization of private urban Projected approval: Early in fiscal 2015 Projected approval*: During fiscal 2015 renewal project: During the fiscal year 2014

* Projected approval of urban planning-related Special Zone plan. Source: Prepared based on materials submitted by the Tokyo Prefectural Government at the first Tokyo Area National Strategic Special Zone Council on October 1, 2014.

Real Estate in Japan 2015 TAKESHIBA DISTRICT DEVELOPMENT PROJECT CASE STUDY

Tokyu Land Corporation, along with the Shuto Expressway that links Summary of Kajima Corporation, is moving forward the commercial building directly to Overall Project with a development project located in Hamamatsucho Station will connect to Developer: Albero Grande Co., Ltd. Kaigan 1-chome, Minato Ward, Tokyo Takeshiba Pier and Takeshiba Station on Location: 1-20-9 Kaigan, (Takeshiba district). This develop- the Yurikamome Line via the residential Minato-ku, Tokyo ment has been authorized by the Prime building. This will enhance the pedes- and others Minister as a National Strategic Special trian network covering the Takeshiba Site area: Approx. 15,600m² Zone project (City Planning Act special district, which is divided by Kaigan- Total floor area: Approx. 200,000m² case). Having received this authoriza- dori Street and the Shuto Expressway, Construction period: tion, development work will begin in thereby making the area more lively. FY2015–FY2019 (planned) earnest with the aim of completing con- The project revolves around four struction in FY2019. development principles: 1) promoting For this project, Albero Grande Co., industry and creating activity through Summary of A District Ltd. (the developer established by public-private complex building and col- (Commercial building) Tokyu Land Corporation and Kajima laboration, 2) developing a pedestrian Use: Office, retail, Corporation in order to develop the network connecting Hamamatsucho content industry-related facilities, complex) has borrowed land located Station, Takeshiba Station, Takeshiba new Industrial Trade Center, in the Takeshiba district owned by the Pier, and dynamic spaces, 3) enhancing etc. Tokyo Metropolitan Government via a disaster response capacity and develop- Site area: Approx. 12,200m² 70-year fixed-term leasehold. It will use ing an energy network, and 4) forming a Total floor area: Approx. 180,000m² this land to develop a business hub that center for environmental education and No. of floors: B2/39F is highly competitive internationally implementing measures to reduce the Height: Approx. 210m and that blends in with the abundant site’s ecological footprint. greenery of Hama Rikyu Onshi Teien Urban planning will be pursued by inte- and Kyu Shiba Rikyu Onshi Teien gar- Summary of B District grating the trade center, private-sector dens and the scenery of Tokyo Bay. (Residential building) facilities, and education facilities The development consists of District serving R&D, HR development, and Use: Residence, service apartment, childcare-support facilities A (commercial building with offices, business exchange functions for the Site area: Approx. 3,400m² shops, content industry-related facili- content industry and by conducting Total floor area: Approx. 20,000m² ties, new Industrial Trade Center, etc.) area management along with local prop- and District B (residential building with erty owners and related government No. of floors: 21F housing, serviced apartments, childcare agencies. In addition, gas cogenera- Height: Approx. 100m support facilities, etc.). The lower levels tion will be introduced, the emergency of the commercial building will house infrastructure will be enhanced, the Tokyo Metropolitan Industrial and a district energy network will be Trade Center, an exhibition site for constructed. Furthermore, the develop- promoting small- and medium-sized ment will leverage the location, which is businesses, which will generate activity surrounded by natural features despite through public-private partnerships. In being in the city center, and form a addition, the pedestrian deck straddling center for environmental education through the preservation of biodiversity. The commercial building is also aiming to obtain a CASBEE class S assessment.

Real Estate in Japan 2015 History of Office Buildings

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

Overcoming Post-Bubble Market Decline and the “2003 Problem”

After the collapse of the bubble economy, the leasing office building market faced severe conditions for a long time due to lowered rents stemming from economic stagnation and an increasing rate of vacancy. However, 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 and large-scale buildings that satisfied the so-called conditions of ‘close, new and large’ to meet the needs of IT-related companies and foreign-affiliated financial institutions to expand rented areas 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 (large supply of office buildings). In tandem with business recovery in major companies, however, 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 from autumn 2008 and the vacancy rate in office buildings increased to 6-8% in 2009. In 2010 to 2012, the figure was around 9%, but it has since recovered, reaching the 5% level in 2014.

Real Estate in Japan 2015 OVERVIEW OF REAL ESTATE IN JAPAN 2015 MAJOR REAL ESTATE SECTORS LEASING 8 6 4 2 0 -2 16 14 12 10 ear) 13 (y 12 11 10 09 Year-on-year rate of increase (%) Year-on-year rate 08 07 06 Growing Needs of Retail and Distribution Facilities distributionand retail many years, recent In facilities have been developed and have also real estate investors. As forbecome a target for retail facilities, with the abolition of the Large- large-scale2000, in Law Store Retail Scale after one up sprung have centers shopping another in suburban areas. In order to main- ofdegree high a competitiveness, their tain specialization is required in areas such as devel- operation/management,leasing, tenant opment, and renovation, and major real estate companies are moving in to address these needs. As for distribution facilities, foreign-based companies have been developing large-scale, state-of-the-art facilities since 2002, with domestic real estate companies following suit beginning around 2005, which has increased supply. Demand for distribution facilities has increased in tandem with the growth of the online retail market due to the spread of the financial2008 global Internet. Following the crisis, development halted temporarily, but since the Great East Japan Earthquake, major real estate companies have moved back into this area and supply is recovering. playersmust create products adapted to the and among companies needs of diversification consumers. general Adaptive measures that will become more renovations and remodeling include important that raise market competitiveness as a means to raise asset values or conversions to form new markets. 05 04 - - - ds 03 ar e] ds ds al w ar ar 02 al w al w ease Rat 01 ds ar [Incr 18 peripher W 5 centr 3 centr 2000 99 27 98 ds ar W 97 a ds ar 96 ds al w ar 95 Real Estate in Japan 2015 al w 94 ea] 18 peripher 3 centr y Shinjuku and Shibu [Ar 93 ing corporations to good quality rental housing housing rental quality good to corporations ing the particular, In provided the private sector. by entrenched has market housing luxury rental itself as a strong market in central Tokyo. Froma long-term perspective, the however, rental market is facing a number of concerns. There are concerns over the shrinkage of demand for offices triggered by a decrease in for demand in decrease and population worker rental housing itself due to even fewer children being born, etc. Moreover, the total number of houses in Japan already surpasses the present number of vacancy the in increase an but households rate caused by the successive provision of new properties has become a growing concern. with along housing rental and offices While latest facilities the with properties competitive not are that buildings older popular, prove competitive are suffering from greater vacancy in evident also polarization, this and periods other markets, has become conspicuous. Playersinthe rental market must develop an ability to flexibly adapt to the market and dis cernsupply-demand the balance accurately by watching the market to monitor the impact of population, older huge num an children, fewer other boomers and baby of retirements bers of The environment. business the changes in Polarization in Rental HousingPolarization Markets The rental housing market is shifting from publicrental housing provided by public hous and sale of investment real estate but alsoin to rent of setting the including operations other determine the profitability of real estate and the selection tenants. of o 92 y - - - ok T 91 ds of 90 ar W 89 88 87 86 85 ﬁce Floor Space in the Space in ﬁce Floor 1983 Tokyo Land 2013 (Land Data) 0

ce: ory of Of ory of 60,000 50,000 40,000 30,000 20,000 10,000 90,000 80,000 70,000 Floor space (thousand m²) Floor space (thousand

Sour Hist The rental housing market boasts an increas boasts an market housing rental The ing number of high quality stock centering on strong the enjoys and areas metropolitan major support of users. The support for the supply of these high quality appetite investment voracious properties the is amongfunds, J-REITs.especially Therefore, property management asset and management have entrenched, centering recently become on buildings and rental housing owned by funds. Property management is a business which maintains and manages real estate based on commissiona received. The business content can be roughly divided into two categories. The first includes the creation of a management plan,setting of solicitation tenants of and levels, comrent pletion of rental contracts. The second is the maintenance of real estate facilities as well as management of the budget and balance ofpayments. It isconsidered to beof utmost importance to integrate both businesses mentioned above to optimize profits realized through real estate. formation, the represents Asset management managementand maintenance of real estate andother assets based on commission a received, which means controlling risks and returns. In addition to appraisal of the value of portfoliosinvestment of diversification assets, setting the as well as targets investment and These required. also are periods investment of businesses cover a lot of ground. For exam ple, asset management that incorporates real estate is involved not only in the selection Spread of AssetManagement and Property Management 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 established REAL ESTATE TRANSACTIONS in 1952 with the establishment of the Building Lots and Buildings Transaction Business Law1. The The real estate transaction (brokering) business involves number of companies rose dramatically through the brokering of land and buildings through buying, selling the early 1970s with the concentration of industry and leasing. The capital requirement is small and there are and the population in major cities and growth in strong local characteristics and elements. As a result, this housing demand. There are a number of factors field used to be dominated by small local players until major behind this, including: (1) increase in housing real estate firms entered in the mid-1960s. There are roughly stock including owner occupied homes used for 122,000 companies with licenses based on the Building Lots a long period, (2) steep increase in the supply of condominiums from the early 1970s and (3) and Buildings Transaction Business Law, but most of these reinforcement of the attitude that a person seeks are small and medium-sized companies specialized in bro- to change residences in line with life stages. This kering. Most of their work involves acting as intermediaries was right around when major companies began for the buying and selling of existing homes and renting of entering the industry. Along with modernizing apartments and other housing. However, large brokers are the real estate transaction business, this served also involved in brokering the sale of large buildings and to bring the business under the eye of society, acting as sales agents for new stand-alone housing and including the coordination of roles and respon- condominium projects built by developers. sibilities among major as well as small and medium-sized players.

Establishment of the Real Estate Modernization Center Foundation

In 1978, a study group formed by the Ministry of Construction (presently the Ministry of Land, Infrastructure, Transport and Tourism) and private companies issued a report entitled, “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.

Legal System for Broker Contracting System

Real estate transaction intermediation, or brokering, involves a party taking a position between the two parties to the sale or lease transaction and acting to bring the contract to conclusion. The broker contract sought to clarify

Real Estate in Japan 2015 OVERVIEW OF REAL ESTATE IN JAPAN 2015 MAJOR REAL ESTATE SECTORS REAL ESTATE TRANSACTIONS - fee 13 Receive (84.7) (15.3) 122,127 brokerage 12 (84.2) (15.8) 122,510 (ﬁscal year) 11 (83.7) (16.3) 123,922 10 (83.1) (16.9) 125,855 09 (82.6) (17.4) 126,582 Deliver properties Deliver Apply for payment payment for Apply Establish mortgage Establish removal of mortgage removal Apply for registration for Apply Settle remaining funds Settle remaining of remaining debt and of remaining Settle remaining funds Settle remaining 08 (82.3) (17.7) 127,702 Apply for removal of mortgage removal for Apply 07 (81.9) (18.1) 129,991 Apply for loan for 06 (81.1) (18.9) 130,647 Status of Transaction Market for Existing Houses the in Tokyo Metropolitan Area stand-alone12,123 there were Infiscal 2013, houses contracted, theaverage contract million (average landprice area: was ¥29.20 m²; average m²) and building148 area: 105 the average years. building age was 20.17 Forcondominiums, there units were 36,762 brokercontracts to be registered with certified addition in network organizations information to the dedicated exclusive broker contracts. It isclearly regulated that certifieda information network organization must be a public interest network information new the and corporation reorganized were eventually organizations network organi certified information 37 from four nationwide organizationszations in four to newdistricts. registrations In 1998, at certified exceeded networkorganizations information 600,000 and this figure increased greatly, million from 2003doubling to to around 1.24 2008.Another jump 2013 and 2011 between million suchsaw contracts around 1.42 being registered at certified information network of whichorganizations around in 2013, ended160,000 up being signed. 05 (80.3) (19.7) 131,251 04 (79.7) (20.3) - - - 130,819 03 (79.1) (20.9) 130,298 02 agreement (78.6) (21.4) 132,440 Conclude purchase Conclude purchase receive deposit) (send/receive 01 (21.7) (78.3) . In correlation 135,283 3 (Receive brokerage commission) brokerage (Receive (22.0) (78.0) 2000 138,816 29 99 (22.4) (77.6) 139,288 items Explain 98 important (22.8) (77.2) 138,752 97 (23.0) (77.0) 141,547 Real Estate in Japan 2015 96 (76.6) (23.4) 142,094 delivery delivery period and other terms 95

(24.3) (75.7) Confirm price, Confirm price, 141,816 actionsbased on these contracts required the broker to register with an information network organization designated by the then Minister of Construction Development and of REINS Reorganization of the Organizations theFor Ministry this reason, in 1986, of Construction (presentlyMinistry the of Land, Infrastructure, Transport and Tourism) established the Real Estate Information Network System (REINS) with the RealEstate ModernizationTransaction Center Foundation to foster cooperation between information hand, other the On networkorganizations. withthe implementation of dedicated exclusive broker contracts trans from 1990, with this, it became necessary to prepare an information system and to organize and network organi information the integrate network information REINS, Using zations. supply/demand organizations by integrated region were newly designated by the Ministry responsi the assumed Construction and of bilities of the “certified information network organizations." Furthermore, the BuildingLots and Buildings Transaction Business Law was revised in April so that it became 1997 necessary for exclusive 94 (24.4) (75.6) 142,134 - - 93 (24.9) (75.1) 141,493 buyers discover discover properties Search and Search Search and Search 92 (25.1) (74.9) 142,896 REINS registration 91 (25.6) (74.4) 144,064 90 (26.5) (73.5) 142,008 contract contract Conclude Conclude intermediary intermediary 85 (30.8) (69.2) 126,676 80 (57.9) (41.1) 107,331 75 Individual Company (53.9) (46.1) 88,122 study desired desired and other Property conditions appraisal and price Confirm price . The figures in the parentheses indicate the breakdown (unit: %)

Figures represent those as of the end of each ﬁscal year. (36.5) (63.5) 63,814 2. . Website of the Ministry of Land, Infrastructure, Transport and Tourism 1. 1970

0 ce: Notes:

Sour Sale 30,000 60,000 90,000 Purchase 120,000 150,000 (ﬁrms) Flow of Real Estate Brokerage Work Brokerage of Real Estate Flow History of Building Lot and Building Transaction Firms Building Transaction Lot and of Building History a situation apt to causetrouble due to the traditionally being relationship contractual revision unclear.The tothe 1980 law sought to overcome thissituation by requiring doc umentation for certain items concerning the contents of the broker contract and to clarify the contract addition, In relationship. with regard to the exclusive broker contract in which the contracting party cannot ask multiple companies to act as its broker or agent, the law called for parties to register as much information as possible on the network orga information an in purchases that so information disclose to and nization conclusion of contract a could be promoted. Eightindustry bodies, including the Real Estate Companies Association support Japan, of this result, a As network organization. information thereare now certified over 100 information to working nationwide network organizations move the real estate transaction system one step closer to thesharing of information and networking of companies. However, the initial objectives have not been adequately attained because of the negativity shown in exchanging and between organizations the information also many cases where this is impossible due to differences in the systems. Market Trends for Existing Housing (Properties for sale that are registered with designated transaction organizations)

1,415,071 1,400,000 (units) 1,396,662 1,370,163 395,503 406,192 420,830 1,300,000

1,237,061 1,213,804 1,200,000 Condominiums 305,881 346,871 Stand-alone housing 1,144,924 1,100,000 Land 1,112,158 288,500 Other 280,197 1,000,000 Reported contracts 455,652 430,512 900,000 898,232 396,452 384,036 855,192 231,531 345,127 800,000 218,395 325,595 366,462 759,464 198,326 700,000 685,887 638,619 188,064 614,245 623,943 308,131 600,000 607,185 610,399 587,844 167,439 174,626 300,335 559,856 167,665 171,920 169,314 167,354 162,276 475,403 488,837 500,000 257,686 465,792 484,257 453,145 445,743 232,651 217,796 391,585 400,000 221,585 210,921 220,564 232,334 231,728 217,275 301,696 300,000 289,310 262,843 229,668 200,000 205,378 212,906 189,162 199,468 176,497 150,540 162,848 150,800 157,743 123,823 130,354 136,110 103,317 108,642 115,413 114,440 114,895 100,000 93,661 100,586 83,588 78,097 79,591 83,509 88,590 88,124 73,914 81,352 77,684 76,063 77,478 75,701 75,079 56,874 0 29,505 30,413 31,295 31,578 30,696 30,562 33,291 35,504 40,609 47,152 1996 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 01 03 (ﬁscal year) Source: Utilization Status of Designated Transaction Organizations report by the Real Estate Transaction Modernization Center (Public Interest Incorporated Foundation). Notes: 1. This is a compilation of registration and contract information of designated transaction organizations. 2. This includes duplicated registrations of general intermediaries. contracted, the average contract price was of websites demonstrate the uniqueness Vitalization of the Transaction Market ¥26.14 million (average unit price per m²: and industry strength of the bodies behind for Existing Homes 405,800 yen; average area: 64 m²) and the them such as the Real Estate Japan website In 2011, a new Basic Program for Housing average building age was 19.4 years. launched in October 2003, or those created (National Plan) based on the Basic Act for Housing by newer real estate firms presenting more Looking at changes in recent years, the was approved by the Cabinet, which included specific information on local areas. The Ministry number of contracted units has increased for actions such as developing a market that of Land, Infrastructure, Transport and Tourism both stand-alone houses and condominiums, facilitates transactions involving existing homes. reflecting the increase in stock. The average price also provides information on transaction prices In addition, initiatives are being undertaken to of stand-alone houses decreased until 2003, through a general land information system. vitalize the transaction market: for example, reflecting a decline in land prices, increased This service is based on transaction price the Japan Revitalization Strategy formulated in 2006 and 2007, dropped again, and has information voluntarily provided by parties in June 2013 includes measures to promote remained stable since 2009. Average con- to land transactions and is supposed to help transactions involving existing homes. dominium prices, on the other hand, increased general consumers understand real estate to ¥25.45 million in 2007 from their low point transaction market prices. As an example, With regard to the vitalization of the transaction in 2001 and have remained stable since then. REINS contract information was first published market for existing homes, the hope is that Reflecting the increase in high-quality stock, online in the spring of 2007 and the general first, plenty of information will be provided to the average building age increased by around public can now easily access information on consumers who are concerned about the quality 6 years for stand-alone houses and around 3.5 real estate online. and capacity of existing homes and that, as a years for condominiums during the 17-year Despite this, however, those thinking of premise, processes such as home inspections period from 1996 to 2013. acquiring a specific property require spe- and home deficit insurance and warranty will cialized knowledge about real estate become more widespread; secondly, coop- Utilization of the Internet transactions and more detailed information eration between involved businesses will be strengthened in order to promote reforms for Trends to use the internet in the real estate than what is available on the Internet. As such, the transaction of residences; and thirdly, the transaction sector have taken root due to the it is imperative for real estate companies to increase in the quality of homes by way of permeation and spread of such technology acquire even greater expertise so that they appropriate management and reforms will be within society. may properly serve their customers. recognized in the asset value of residences and As well as information provided by real that this will be reflected in prices. estate companies working online, a number

Real Estate in Japan 2015 OVERVIEW OF REAL ESTATE IN JAPAN 2015 MAJOR REAL ESTATE SECTORS REAL ESTATE TRANSACTIONS (years) 20 18 16 14 12 10 8 (years) 20 18 16 14 12 10 8

3,500 3,000 2,500 2,000 1,500 1,000 4,500 4,000 3,500 3,000 2,500 2,000 (10,000 yen) 4,000 (10,000 yen) 5,000 19.4 20.17 2,920 2,614 2013 2013 12,123 36,762 (ﬁscal year) (ﬁscal year) 2012 2012 2011 2011 2010 2010 2009 2009 2008 2008 2007 2007 2006 2006 31 2005 2005 2004 2004 Real Estate in Japan 2015 2003 2003 2002 2002 2001 2001 2000 2000 1999 1999 1998 1998 1997 1997 Number of contracted properties Average contracted price Building age Number of contracted properties Number of contracted price Average contracted Building age Based on “Trends in the Tokyo Metropolitan Area’s Real Estate Transaction Market (Fiscal 2013)” by the Real Estate Information Network for East Japan (Public Interest Incorporated Based on “Trends in the Tokyo Metropolitan Area’s Real Estate Transaction Market (Fiscal 2013)” by the Real Estate Information Based on “Trends in the Tokyo Metropolitan Area’s Real Estate Transaction Market (Fiscal 2013)” by the Real Estate Information Network for East Japan (Public Interest Incorporated Based on “Trends in the Tokyo Metropolitan Area’s Real Estate The Tokyo metropolitan area is Tokyo, Kanagawa, Saitama and Chiba prefectures. The Tokyo metropolitan area is Tokyo, Kanagawa, Saitama and Chiba prefectures. The Tokyo metropolitan area is Tokyo, Kanagawa, Saitama and Foundation). Foundation). 1996 1996

(cases) (cases) 0

ce: ce: 0 5,000 5,000 Note: Sour Note: Sour 10,000 15,000 40,000 10,000 30,000 35,000 15,000 20,000 25,000 Number of Contracted Stand-Alone Houses in the Tokyo Metropolitan Area, Average Contracted Price and Building Age Building Price and Contracted Average Area, Tokyo Metropolitan in the Houses Stand-Alone of Contracted Number Number of Contracted Existing Condominiums in the Tokyo Metropolitan Area, Average Contracted Price and Building Age Number of Contracted Existing Condominiums Real Estate Securitization (1) Real Estate Investment Trusts OVERVIEW OF MAJOR Investment trusts are a financial vehicle in which funds are gathered from many investors and REAL ESTATE SECTORS managed by investment professionals and earnings are distributed to investors. Traditionally, the primary vehicle managed in this structure was limited to investment securities.

REAL ESTATE SECURITIZATION However, based on a partial amendment of the Act on Investment Trusts and Investment Corporations The history of real estate securitization is quite long and in 2000, real estate was recognized as a vehicle goes back to the mortgage securities system founded in that could be managed by an investment trust, 1931. Beginning around 1985, real estate small lot products and in September 2001, the first two real estate began being sold primarily by real estate firms. In recent investment trusts (J-REITs) were listed on the years, real estate securitization activities have taken off with Tokyo Stock Exchange. As this shows, it is possible the opportunities presented by the 1994 establishment of for J-REITs to raise funds from investors by means the Real Estate Syndication Act and the 1998 establishment of listing, which is the biggest difference between of the Law on Securitization of Specified Assets by Special them and other securitization methods. Purpose Companies (former SPC Law). For listed trusts alone, by the end of 2014 the Moreover, the revision to the Investment Trusts and J-REIT market consisted of 49 investment corpo- Investment Corporations Law in 2000 made real estate a rations with total assets exceeding ¥12 trillion. In possible management asset of investment trusts and this addition, by the end of November 2014, the total led to the launch of Japanese Real Estate Investment Trusts market value exceeded ¥10 trillion for the first time (J-REITs). The revision of the former SPC Law into the Law on since the market was established. Buffeted by the the Securitization of Assets (SPC Law) also led to an increase global financial crisis caused by the collapse of in securitization cases because it simplified the procedures Lehman Brothers and so on in October 2008, the for asset monetization type real estate securitization. market was sluggish for a time, with some J-REIT The progress of real estate securitization expanded invest- investment corporations going bankrupt for the ment opportunities by diversifying investment methods for first time ever, but since then, investment unit real estate investors, and a new opportunity formed for real prices (i.e., the equivalent of share prices) have estate companies as their business expanded from manage- recovered in tandem with the stabilization of ment and operation of real estate to the fee business market financial markets. where they could collect other forms of compensation. To support fundraising by investment corporations, in addition to the government-led creation of a Real Estate Market Stabilization Fund and system

History of Real Estate Securitization 1,800 (cases) 8,500 (billion yen) 1,700 8,273 8,884 8,000 1,582 1,600 1,523 7,500 Assets (billion yen) 1,642 1,500 7,000 Cases 1,400 6,500 6,930 1,300 6,000 1,200 5,500 1,119 1,100 5,000 991 1,000 4,500 5,335 900 4,000 3,984 4,394 800 3,500 685 700 3,000 2,838 576 600 3,345 2,500 518 500 2,778 620 2,541 2,000 2,341 400 456 1,798 2,195 1,500 1,867 269 300 1,167 343 1,000 161 275 200 500 316 74 100 0 62 9 26 0 1997 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 (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.

Real Estate in Japan 2015 OVERVIEW OF REAL ESTATE IN JAPAN 2015 MAJOR REAL ESTATE SECTORS REAL ESTATE SECURITIZATION - - - - Management Tenants Real estate Real estate market Real estate Asset custodian Asset management company General clerical affairs company clerical affairs General Lease Bulk sales Acquisition to submit an asset an indicat monetization plan submit to ing the method of securitization and so forth and to conduct activities in accordance with the details indicated in the plan. If the plan changes, the approval of concerned parties suchas investors is required. Thus, securitiza tion based on the SPC Law is often employed property target cases the where been in has specified. Real(3) Estate Syndication Realestate syndicationis when multiple inves tors jointly invest in real estate to own and manage the real estate and obtain earnings from In the it. past, there were cases in the real estate syndication business that resulted in harm to investors, the so in April 1995, Real Estate Specified JointEnterprise Act was enacted with the primary aim of protecting investors. to order in investment, of method this Under protect investors, licensed companies that meet the criteria with respect to capital and funds raise may qualifications personnel frominvestors. However, investors will also be securiti than other business any by influenced zation conducted by the company. As such, the difficulty of procuring funds from professional Lease - - - - - Lease Contract Outsourcing of clerical affairs of clerical Outsourcing Outsourcing of asset management Outsourcing Outsourcing of asset custodianship Outsourcing Audit 33 (fund) investors Business entity Board of ofﬁcers Board General meeting of General Accounting auditor Real estate syndicate Real estate Investment corporation Investment and business decisions) (Ownership, management (Ownership, Real Estate in Japan 2015 The SPC receives rent from the tenants as the new owner of the real estate; and A real estate company or other original real estate owner (originator) sells the real estate to an SPC at market price; tors that bought the specific bonds and pays any remaining profit to the investors in preferred equity securities in the form of dividends. The SPC pays agreed interest to the inves SPC issues preferred equity securities and specific bonds to procure funds from the market for purchasing real estate; ) Furthermore, a portion ofthe SPC Law was revised in May 2000. As a result of the revi The following illustrates the actual flow of funds and the relationship with real estate: 1) 2) 3) 4) sion, the assets subject to monetization by the SPC were expanded from designated mone tarydebts, real estate and their beneficiary interestsintrust to general property rights, and restrictions concerning the establishment and operation of SPCs were simplified and rational ized. Therefore, steps were taken to improve the convenience of the system. As for securi tization based on the SPC it is necessary Law, - - Payment of funds Payment [Tokumei Kumiai] [Tokumei Investment TK agreement Issuing securities and paying dividends backeddebt ‑ Interest payments and redemption Interest real estate syndication contract estate real Distribution of losses and proﬁts (

Purchase of investment corporation bonds corporation of investment Purchase

Investor Investor Investor Investor Sale of investment units Sale of investment Tokumei Kumiai Structure Using Real Estate Syndication Estate Using Real Structure Kumiai Tokumei Real Estate Investment Trust (Company Type) Structure Type) (Company Trust Investment Real Estate (2) Asset(2) Monetization Securitization The Law on Securitization of Qualified Assets by Special Purpose Companies (SPC Law) was implemented Since in September then, 1998. manycompanies have appeared that have tackled real estate securitization using SPCs, centering on apartments for foreigners, major shopping centers, etc.There are great expec reforms to enable mergers, in October 2010 the Bank of Japan created an asset purchase monetary comprehensive easing a as program measure, and since J-REITs were included in the acquisition targets, this boosted their price recovery. The amount purchased bythe Bank ofJapan, which was further increased based on monetary and October easing in April 2013 billion as of thehad endreached ¥178.2 2014, of 2014. tations for real estate securitization as a new formof business for the real estate industry transformation structural the with associated of the national economy. In this case, real estatesecuritization based on the SPCLaw is one of the methods for direct procurement of capital from the market by issuing investment securities backed by real estate or assets con sistingof real estate or real estate (housing loans, etc.). - - - Code(GK/TK Due schemes). to the existence various securitizationof possi is methods, it for real estate development for example, ble, companies to not just diversify their buyers; embarkingby securitization on themselves, theycan also seek to stabilize their profits management conducting after-sales through since securitizationand operation. However, securitizationis based on raisingfunds from investors, its operation is impacted by laws such as theFinancial Instruments and ExchangeAct. In the case of J-REITs inpartic management brokerage or companies ular, may be subject to insider trading regulations, so care must be taken with regardto informa management. tion - - - 34 Real Estate in Japan 2015 properties forgreater earthquake resistance, acquire and prop nursingestablish facilities erties sequentially. According to the Ministry of Land, Infrastructure, Transportand Tourism, this revision will lead to about ¥5 trillion of new investment in the years comingand 10 should also have ripple a effect of ¥8 trillion on pro ductionand employment ofabout 440,000 persons. Impact of Securitization(4) on the Real BusinessEstate Besidesthe above realestate securitization, another method that is employed is establish ing a limited company solely for the purpose of owning real estate and using silent partnership Commercial the by designated agreements - - sion was enacted that establishes SPCs that own only real estate and entrusts operations to real estate syndicates. In suchcases, since the risk of bankruptcies of businesses is sepa rated, it is thought that procurement of funds from professional investors will become easier. One reason for incorporating the same system as in the SPC Law into the act is that it is often difficult in other methods of securitization to anti-seismicimplement rebuild renovation, investors such as institutional investors that fear bankruptcies of businesses is pointed out as a disadvantage of the current system. In order to resolve this disadvantage, in 2013, similar to item 2 in SPC Law above, a legal revi

OVERVIEW OF REAL ESTATE IN JAPAN 2015 MAJOR REAL ESTATE SECTORS REAL ESTATE SECURITIZATION OVERVIEW OF REAL ESTATE IN JAPAN 2015 MAJOR REAL ESTATE SECTORS INTERNATIONALIZATION ------tion activities, housing development, etc. in the likesof New and York London. In recent years, besides Mitsui Fudosan and Mitsubishi Estate’s acquisition of business area office buildings in therethe U.K., are companies which have opened localaffiliates in andU.S. the are planning mixed-use office/commercialOutbound projects. Outbound Business Development the in development business outbound Regarding realestate industry, some major Japanese real estatecompanies had alreadybegun operations in Western countries After by the late that, 1960s. companies era, economy bubble the throughout construc building forward with moved gradually In 1973, Japan switched to a floatingIn 1973, exchange rate system, which triggered the development of economic globalization such as the movement of capitaland labor beyond the country’s borders. of strength ongoing the to thanks Subsequently, the yen, more and more companies have ven tured overseas and in recentyears there has also been an increase in corporate overseas real estate acquisition. Although there was a tempo raryreduction after the global financial crisis, these activities are now growing again. The fact that the domestic population has passed its peak and it is becoming hard to envision future market expansion has been mentioned as a reason for Japanese companies moving ahead real withoverseas this, of light In development. estate industry companies, in addition to pursuing development in major Western cities with large markets, have recently been developing business in Asia, where there continues to be population increase economic and growth. Government Initiatives In recent years the government has taken a pro active approach to pursuing business in other, fast-growing countries (especially that in Asia) are important continued to Japan’s growth. In April the Ministry of Land, Infrastructure,2013, Transport and created Tourism a new International Affairs Construction and Economy Land the in Division andEngineering Industry Bureau to supportthe overseas development of real estate and con struction companies. In August of the same year, itpublished the Global Business Strategy for the Real Estate Market.In terms ofits basic approach strat this development, (outbound) overseas to egy states the need to enhance competiveness through rapidly entering emerging markets and pursuingdiverse real estatebusiness models. It also states the need for collaborative initiatives etc. companies, trading contractors, general with The Development of Economic Globalization 35 Real Estate in Japan 2015 REAL ESTATE SECTORS OVERVIEW OF MAJOR OF MAJOR OVERVIEW INTERNATIONALIZATION real business development in the With regard to overseas compa- estate real Japanese major some industry, estate countries by in Western operations nies had already begun down- overseas operations were the late 1960s. Although 2010 of the bubble economy, since sized due to the collapse again estate companies have once major general real regions including been developing business in various - mar new of opening The Europe. and America, North Asia, managerial know-how kets by leveraging advances and growth-oriented cultivated in Japan, as well as ongoing development, is steadily continuing. development to attract In recent years, inbound business market estate real Japanese the to investors international more active. and foreign tourists has also become Major International Projects Announced in Recent Years (Implemented and Planned)

Site/ Project Operators Project Name Location 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 Washington D.C., USA 0.1 Mitsui Fudosan Land acquisition for office building development (provisional name) 160 Madison Project New York, USA 0.1 Mitsui Fudosan, J. D. Carlisle Development, and others Rental housing development 270 Brannan Development Project California, USA 0.3 Mitsui Fudosan, SKS Investments Land acquisition for office building development (tentative name) 28 State Street New York, USA 0.3 Mitsubishi Estate, Rockefeller Group Office building acquisition Multi-use complex comprised of offices, housing, Flushing Commons development project New York, USA 0.6 Mitsubishi Estate, Rockefeller Group retail facilities, etc. French Quarter project Florida, USA 0.5 Mitsubishi Estate, Rockefeller Group Rental housing development UTA Plaza California, USA 1.3 Mitsubishi Estate, Rockefeller Group International Office building acquisition The Ice House California, USA 4.2 Mitsubishi Estate, Rockefeller Group International Office building acquisition The Outlets at Tejon Ranch California, USA 16 Mitsubishi Estate, Rockefeller Group International Commercial facility development Redevelopment comprising office buildings, housing, Central Saint Giles London, England 0.7 Mitsubishi Estate, Legal & General and shops 150 Leadenhall Street London, England 0.09 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 development Clive House London, England 0.1 Mitsubishi Estate Office building acquisition 8-10 Moorgate Development Project (tentative name) London, England 0.2 Mitsui Fudosan Office building development 70 Mark Lane Development Project (tentative name) London, England 0.1 Mitsui Fudosan Office building development Tokyu Land Corporation, Shanghai Lujiazui Finance & Trade Towakogu Shanghai, China 3.3 Serviced apartment management business Zone Development Shifu Dalu, Shenhe District, Shenyang City Mixed-use development comprising housing, commercial Shenyang, China 2.7 Tokyu Land Corporation, Marubeni, Sun Wah Group (unofficial name) 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 Mitsui Fudosan Residential, Sino-Singapore Tianjin Mid- and high-rise housing, elementary school, kindergarten Tianjin Eco-city 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 2.4 Mitsui Fudosan Residential, Shui On Group China 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 Development, Mixed-use development comprising condominiums, offices, Chunhe Project, Shenyang (tentative name) Liaoning Province, China 8.1 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. Chengdu Longquanyi District condominium develop- Sichuan Province, China 7.5 Mitsubishi Estate, Surbana Housing development ment project 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, Taiwan 6.7 Mitsubishi Estate, Ruentex Development Taipei (unofficial name) facilities, and hotels Taiwan Linkou Outlet project (tentative name) New Taipei, Taiwan 6.7 Mitsui Fudosan, Farglory Construction Commercial facility development Ideo Q Chula-Samyan Bangkok, Thailand 0.9 Mitsui Fudosan Residential, Ananda Development High-rise condominium development Mitsubishi Estate, Mitsubishi Estate Asia, aaspire Ratchada-Wongsawang Bangkok, Thailand 0.9 Housing development Mitsubishi Jisho Residence, AP Mitsubishi Estate, Mitsubishi Estate Asia, RHYTHM Asoke2 Bangkok, Thailand 0.2 Housing development Mitsubishi Jisho Residence, AP Mitsubishi Estate, Mitsubishi Estate Asia, RHYTHM Sukhumvit 36-38 Bangkok, Thailand 0.4 Housing development Mitsubishi Jisho Residence, AP Mitsui Fudosan, Mitsui Fudosan Residential, Ashton Asoke Bangkok, Thailand 0.4 High-rise condominium development Mitsui Fudosan (Asia) Mitsui Fudosan, Mitsui Fudosan Residential, Ideo Q Siam-Ratchathewi Bangkok, Thailand 0.3 High-rise condominium development Mitsui Fudosan (Asia) Bishan Street 14, District 20, Singapore Bishan District, 1.1 Mitsubishi Estate, CapitaLand High-rise condominium development (unofficial name) Singapore The Mews Project (tentative name) Kuala Lumpur, Malaysia 0.5 Mitsui Fudosan Residential, Eastern & Oriental High-rise condominium development 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 Kuala Lumpur, Malaysia 18 Mitsui Fudosan Commercial facility development International Airport (KLIA) Geo Residences Selangor, Malaysia 2.7 Mitsui Fudosan (Asia), Sunway High-rise condominium development Toyota Tsusho, Toyota Home, Tokyu Land Corporation AXIA SOUTH CIKARANG Bekasi, Indonesia 0.7 Hotel development Group, PT. Tokyu Land Indonesia, others

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.

Real Estate in Japan 2015 OVERVIEW OF REAL ESTATE IN JAPAN 2015 MAJOR REAL ESTATE SECTORS INTERNATIONALIZATION - in fields such as medicine in order to attract global capital and talent. Some private-sector companies are also identifymoving to commercial opportunities relatedto overseas tourists and the entry of foreign companies into Japan.In state-of- the-art downtown office buildings, not only are disaster prevention and environmental features becoming moresophisticated, but multilingual clinics and the are like also being provided to help businesspeople of various comfort more feel there working nationalities able. In addition, in commercial facilities and other locations popular with foreign visitorsto Japan, efforts are being made to meet tourist demands from a variety of perspectives such as providing multilingual services within the facilities and holding trade shows aimed at travel agencies from Asian countries. - - - 37 Real Estate in Japan 2015 directinvestment indomestic realestate but also the entry of foreign companies due to the enhanced competitiveness major and of cities, increases in tourist numbers, etc. are import ant measuresant Japan. for There have been more active efforts aimed at making Japan a tourism-based country the Nation Tourism – for example, in 2007, Promotion Basic Law was enacted, and in2008, the Japan Agency Tourism was the numberlaunched. offoreign In2014, visitors to Japan reached a record level, sur million people.passing Meanwhile, 13 in December 2013, National Strategic Special Zoneswere created with thegoal of fostering economic international of development the activity hubs, and the government is making effortsto create special zones aimed at set ting up international business environments and forming international innovation centers - - - Inbound Business Development attractto inter development business Inbound national investors to the Japanese real estate market and bring in foreign tourists has also become more active in recent years. Inbound business initiatives to encourage not only business development has also become also has development business more vigorous in Asian countries in recent years. In China,the likes of Mitsui Fudosan, Mitsubishi Estate, andTokyu Land Corporation are involved in office buildings, commercial mixed-use develop and housing, facilities, ments that combine all of these. In southeast In these. of all combine that ments which undergoing Asia, growth, is remarkable Mitsubishi Estate is planning housing develop ment projects in Singapore and Vietnam, while Mitsui Fudosan is planning work on housing in facilities commercial and developments Malaysia. CASE STUDY TOKYO NIHONBASHI TOWER

Property Overview Sumitomo Realty & Development Co., for the area. The multi-purpose hall Ltd., is moving forward with a large- and station-front plaza can also be used Name: Tokyo Nihonbashi Tower scale multi-use development, the as spaces to accommodate stranded Location: 2-7-1 Nihonbashi, Nihonbashi 2-Chome Project (gross commuters. By ensuring a high level of Chuo-ku, Tokyo floor area of 138,000m²), scheduled disaster preparedness and safety in the and others for completion in 2017. It occupies event of an emergency, the Tower has Site area: 8,769.22m² a symbolic spot on the corner of the earned tenants’ appreciation and trust. (total for high-rise building and Nihonbashi intersection, a key trans- low-rise building) In addition, the Tower houses Bellesalle portation hub in central Tokyo. The Tokyo Nihonbashi, which serves as a Total floor area: 138,000m² heart of the project is Tokyo Nihonbashi venue for cultural exchange and pro- Use: Office, retail, Tower, which was completed in April motion. It is comprised of the largest multipurpose hall and conference room 2015. Standard office floors have multi-purpose hall (over 1,300m²) in Completion: around 2,700 m² of column-free space, the area with a capacity of 1,300 people April 2015 (high-rise building) / enabling exceptional layout efficiency. as well as a total of 23 rentable confer- 2017 for entire project In addition, it is equipped with cut- ence rooms. The multi-purpose hall, ting-edge specifications that enhance with a simultaneous interpreting func- its ability to meet business continuity tion, can also be used for international planning (BCP) needs and, in the event conferences. of a disaster, it will serve as a disaster-response base for the area adjacent The Tower is a six-minute walk from to Nihonbashi Station. Tokyo Station and is directly con- nected to Nihonbashi Station, which The Tower employs a base-isolating serves three subway lines and makes structure, rare for a high-rise building, direct access to both Narita and Haneda and a seismic-dampening structure for Airports possible. The retail build- lower floors which significantly reduce ing set for completion in 2017 is being vibration from earthquakes. It is out- developed with a view to accommo- fitted with a two-line power-receiving date foreign visitors to Nihonbashi—for system so that even if the the electricity example, it is intended to have a tourist supply from the main line should be cut information center providing services off due to an accident, it will be possi- in multiple languages. ble to receive power via a backup line. Furthermore, the emergency power From the Edo period onward, generator is able to use both medi- Nihonbashi has been an economic and um-pressure gas and heavy oil (for 72 cultural center and in recent years has hours) as fuel which supplies electricity successfully transformed itself into a not only to common areas but to leased global district representing Asia. In office spaces when there is a power keeping with this, Tokyo Nihonbashi failure. Tower will further enhance the area’s capacity to accommodate international In the event of a disaster, the building visitors and make it even more dynamic. will serve as a disaster-response base

Real Estate in Japan 2015 OVERVIEW OF REAL ESTATE IN JAPAN 2015 MAJOR REAL ESTATE SECTORS RESORTS ------prehensively developsites of tens ofthousands hectaresof through private-public collaborations overall the country with the aimof realizing a leisurely lifestyle for the Japanese people and pro moting local areas.41 By the end of March 1994, prefectures had established and approved basic become had concepts resort and development thecenterpiece in promotinglocal areas. The Government Housing Loan Corporation (presently the Japan Housing Finance Agency) also began Japanproviding loans for second homes in 1987. had finally entered an era where the national government actively was supporting the enhance ment of the leisure time of its citizens and helping them to realize multiple residences. Establishment of the Resort Law and End of Boom further were by spurred developments These the establishment of the Law for Development of ComprehensiveResort Areas, the so-called This Law sought to com“Resort Law” in 1987. From the the general early 1960s, public once again wasable to afford the luxury of leisure and steps were taken to develop tourist destinations business throughoutparticular, groups In Japan. centered on mass transit companies such as Tokyu and Seibu began development of compre vacation transport, included that projects hensive homes, hotels and sightseeing at famous resort areas such as Izu, Hakone and Karuizawa. In addition, large and small real estate companies in homes vacation selling businesses launched the respective resort areas starting with the Nasu area. Responding to Increasing Off Time and Diversifying Needs thepeople beganFrom the to havemid-1970s, more time off with the spread of the five-day workweek.This, combined with factors assuch diversifying needs and the switch to a domestic demand-driven economy resulted in the re-emer was It boom. resorta gence development of around this time that Japan witnessed numerous resorts multi-use ski large with of developments courses, golf marinas various and lodging hills, facilities expanding over spaces ranging from severalhundred to over thousanda hectares. Anothercharacteristic of this time was that par ticipants in the resort business were not limited to transport and real estate companies but also expanded to include steel, ship and chemical manufacturers, trading companies compa and nies from various other industries. In correlation structure, industrial the of transformation the with theme parks and seaside resorts began to be built on sites where large factories had once been. Investment in overseas resorts also took off, cen tering on Hawaii, Australia and other areas in the Pacificregion. Resort Development Takes Off Takes Resort Development 39 Real Estate in Japan 2015 REAL ESTATE SECTORS OVERVIEW OF MAJOR OF MAJOR OVERVIEW RESORTS to in Japan that was developed The first resort project and resort within the mountains, ocean serve as a health which area Prefecture) (Kanagawa Shonan the was nature Shonan from around 1877. began full-scale development fol- as a villa area and was has since then developed primarily other areas and Unzen Nasu, lowed by Karuizawa, the Showa era in developed by foreigners. Upon entering repeatedly developed the mid-1920s, resort hotels were and Hakone. From the in national parks including Nikko five-day workweek, the mid-1970s, with the spread of the for leisure and Japanese people had more time available including the emer- construction of resort facilities boomed seaside marinas, ski gence of large multi-use resorts with parks and oceanside resorts with lodging facilities, theme resorts. lowered the However, the Heisei recession drastically condominiums and volume of the formerly booming resort filed for bankruptcy. some facility management companies recent years have seen In response to these developments, business and new the emergence of the resort regeneration expansion including the resort business to rebuild the efforts of services focusing on facility management. TOKYO NIHONBASHI TOWER TOKYO CASE STUDY CASE - - - ) Acquisition, Takeover, Takeover, Acquisition, Support Companies, etc.Support Companies, presently RHJ International RHJ presently Ripplewood Holdings ( HIS Royal Pines Royal Kamori Kanko Sogo / Seibu FudosanMitsui Prince Hotel APA Group Osaki City, City, Osaki Valley Sun Hotel Kamori Kanko Kamori Kanko Resort Hoshino with other facilities, soliciting for members and providing services at inexpensive prices, along with companiescontracting to manage the idle resort facilities.There are also grow efforts of signs ing effectively to and efficiently operate and utilize facilities that were con structed during the resort era through a variety services. of There is a great need among the people of Japan to spend their leisure time amidst nature and there is large a number of baby boomers who areconsidering living in the country or havinga second home upon retirement. This requiresnot onlyan augmentation of the vacation system and enhanced measures on resort the busi rebuilding also but taxation, ness (facility operations, operating skills, etc.) enhancingand support. Primary Facilities Primary - - Hotel, international convention center, Ocean Ocean center, convention international Hotel, cottages, and condominiums courses, golf Dome, and tennis club Marina, hotel, condominium and Dutch Dutch and condominium hotel, Marina, streetscape Theme park, fishermen’s wharf, marina and and marina wharf, fishermen’s park, Theme condominiums Leisure facility with a space theme Vacation lots, lodging facilities, tennis courts, tennis facilities, lodging lots, Vacation pottery course golf and studio music studios, village Spanish Hotel, golf course, marina 2,400 vacation lots, golf course, tennis courts, ski hill and hotel course golf and hotel lots, Vacation Tennis court, jogging road, restaurant, craft hotel and pool homes, vacation rental center, 3,700 vacation lots, amusement parks, hotels courses golf and and aquariums parks, amusement Marinas, restaurants 5,200 vacation lots, hotels, golf course, tennis courts and, ski hill Hotel, golf course and ski hill Hotel, ski hill and tennis courts courts, artificial vacation pensions, homes, Tennis lake, automobile campsite, hot spring facilities and cottages Ski hill, golf course and hotel Ski hill, hotel and pensions Ski hill, golf course and hotel artificial lake, hill, ski course, Golf hotel and chapel water Marina, golf course and hotel

40 Developer/Operator (at time(at of development) Real Estate in Japan 2015 Phoenix Resort Phoenix Huis Bosch Ten (third sector) Space World (third sector) Wakayama Prefecture, Ministry Wakayama of Transport, Matsushita Investment and Marina Wakayama and Development City Kintetsu Corporation (JV) Corporation Kintetsu Seiyo Kankyo Kaihatsu Recreation Yamaha Mitsui FudosanMitsui Tokyu Land Kajima Resort Yokohama Hakkeijima Hakkeijima Yokohama Kokudo Towa Real Estate Development, Towa Nasu Resort Co., Ltd. Tokyu Group, Urabandai Deco Daira sector) (third Kaihatsu Tatemono Tokyo Myoko Pine Valley Onikoube Kogen Kaihatsu sector) (third Appi General Development Development General Appi sector) (third Seiyo Kankyo Kaihatsu (Sahoro Development Leisure SCM Resort, Development) Kogen Karikachi and Seibaku Sekihyo Tokyu Corporation Tokyu 24 65 197 140 135 470 104 252 690 The Association actively conducts fact-finding conducts fact-finding actively Association The operations and resort on development studies aswell as researching andproposing resort policies. These activities by over taken were theReal Estate CompaniesAssociation of Japan in 2007. second homes of acquisition the Support for has taken the form of an expanded financing system and also tax reduction measures such as reduction of the real estate acquisition tax and real property tax that went into effect in In addition,Aprilthe Law1998. promoting Superior of Suburban HousingtheBuilding was passed to promotethe constructionof natural good in housing standalone superior environments such agricultural as moun and tain villages and areasnear cities. On the other hand, resort services have begun to be provided in a variety of formats based orga include steps These memberships. on corporations and nizations concluding tie-ups 230 700 436 200 664 338 600 (ha) 4,780 1,000 1,000 2,500 2,200 Total Area - ‑investment Location Miyazaki City, PrefectureMiyazaki Kitakyushu City, PrefectureFukuoka Sasebo City, Nagasaki Prefecture Isobe Town, Town, Isobe PrefectureMie Hamajima Town, PrefectureMie Wakayama City, PrefectureWakayama Chino City, Nagano Prefecture Village, Minamimaki Nagano Prefecture Chino City, Nagano Prefecture Yokohama City, City, Yokohama Kanagawa Prefecture Karuizawa Town, Nagano Prefecture Chino City, Nagano Prefecture Kitashiobara Village, Kitashiobara Village, PrefectureFukushima Village, Tenei PrefectureFukushima Nasu Town, Prefecture Tochigi Myoko Village, PrefectureNiigata Naruko Town, PrefectureMiyagi Shimukappu Village, Village, Shimukappu Hokkaido Ashiro Village and Matsuo Village, PrefectureIwate Shimoji Town, Okinawa Prefecture Shintoku Town, Hokkaido Project Phoenix Seagaia Resort Seagaia Phoenix Space World Bosch Ten Huis Shima Spain Village Spain Shima Nemu no Sato Wakayama Marina City Tateshina Mitsui-no-mori Tateshina Uminoguchi Natural Villa Tokyu Resort-Town Tateshina Yokohama Hakkeijima Sea Sea Hakkeijima Yokohama Paradise Karuizawa Sengataki Certo Forest Tateshina Gran-Deco Ski Resort Hatoriko Highland Regina Forest Highland Nasu Towa Myoko Pine Valley Resort Onikoube Park Alpha Resort Tomamu Alpha Resort Kogen Appi Miyakojima Tokyu Resort Tokyu Miyakojima Sahoro Resort Sahoro Major Resort Projects of Japan try took steps to form an organization to nurture a healthy resort businessand launchedthe Japan Resort Enterprise Association in 1995. Within this environment, the real estate indus Rebuilding the ResortRebuilding Business However, this resortboom began to taper off with the start of the Heisei recession in Japan there were In 1990 at the beginning of 1991. this but sold, units resort condominium 16,000 a drastically units by dropped1993, to 1,900 precipitous the number 88% drop. Since 1995, of units sold per year has been 600 to 700 units at most. Also, due to the applicationof the Resort Law, many of the large resort facilities developed filed for bankruptcy from over caused by ill-conceived budget plansand Many prospects customers. for unfounded plans therefore were aborted before they could be carried out.

OVERVIEW OF REAL ESTATE IN JAPAN 2015 MAJOR REAL ESTATE SECTORS RESORTS 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 the 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 the Global and in 2015, and at COP20 held in Lima, Peru, in amended and enacted in 2013 with the aim Japanese Environments 2014, countries were stepping up their efforts of further energy and CO2 conservation. This to prepare proposed national targets based on amendment formulated new energy-conser- Global warming due to increases in atmos- a policy aimed at agreeing to a new interna- vation standards for housing and buildings, pheric greenhouse gases has caused various tional framework on climate change by COP21. and required that reports be made based on problems such as climate change and the In terms of domestic initiatives, there are four the new standards starting from April 2015 for accompanying impact on the ecosystem, housing and April 2014 for other buildings. making the reduction of greenhouse gases broad trends: 1) revising the Basic Energy Plan, 2) an important issue. Subsequently, the United formulating new energy-conservation standards, 3) Development of a peak demand counter- Nations Framework Convention on Climate 3) developing a rating system as a peak power measure rating system: After a power supply Change, which stipulated regulations, etc. demand countermeasure, and 4) introducing a crunch following the Great East Japan to stabilize atmospheric greenhouse gas Top Runner system for construction materials. Earthquake, efforts were made to set up a amounts and prevent various problems 1) Revision of the Basic Energy Plan: Based system when calculating targets in the reg- caused by climate change, was ratified at on the change of government in December ular reporting system based on the Energy Earth Summit, a United Nations conference 2012, the Innovative Energy and Environment Conservation Law that enables consumers relating to the environment and development Strategy formulated in September of that year to receive a positive evaluation if they try to in 1992. At the Conference of Parties III (COP3) was revised and consideration was given to reduce grid power usage during peak demand held in Kyoto in 1997, the Kyoto Protocol, which modifying the Basic Energy Plan. In April 2014, times through energy management such as imposed greenhouse gas emissions reduction the new Basic Energy Plan was approved by storage batteries and BEMS/HEMS or home targets, was adopted by advanced nations and the Cabinet. With regard to the civilian sector, power generation in addition to existing came into effect in 2005. details included the importance of demand energy conservation measures. The revised Energy Conservation Law introducing this peak Because the Kyoto Protocol covered the five- response to suppress demand-side consumption based on energy supply amounts and demand countermeasure rating system was to year period from 2008 to 2012, discussions be enacted in April 2014. were held at COPs with regard to a new inter- strengthening energy saving measures aimed national framework for 2013 onward, and in at the realization of zero-energy buildings/ 4) Introduction of a Top Runner system for con- 2011, at COP17 held in Durban, South Africa, houses (ZEB/ZEH). In addition, it was specified struction materials: The Top Runner system used it was decided to extend the Kyoto Protocol. that mandatory compliance with energy-saving to date covered only machinery and equipment Japan, however, declared it would not par- standards for new housing and buildings would consuming energy, but construction materials ticipate in the second commitment period of be introduced on a gradual basis between now that do not themselves consume energy (insu- the Kyoto Protocol, which not all major nations and 2020. lating material, sash, double-glazed glass) were a party to, and has proceeded with self-di- 2) Formulation of new energy-conservation have been added as products that help improve rected emissions reduction efforts. In addition, standards: With regard to housing and build- the energy-conservation performance of hous- at COP17, the Durban Climate Agreement ing energy-conservation standards stipulated ing and buildings. This change was enacted in undertook to approve a new legal framework in the Energy Conservation Law, a notice November 2014. for 2020 onward by COP21 to be held in Paris based on the Energy Conservation Law was

Real Estate in Japan 2015 REAL ESTATEREAL JAPAN IN 2015 OTEMACHI TOWER CASE STUDY Voluntary Action Plan on the Environment History of Energy Consumption by Usage in the Business Sector Energy consumption (1010 kcal) CO2 emission amounts have increased sub- 50,000 stantially as of late in the civilian sector, which 46,973 47,196 42,671 combines the business and residential sec- 40,000 39,976 tors. In the business sector, increases in the 36,467 25,289 25,660 floor space of office buildings, the lengthening 30,000 21,980 20,367 Other of working/opening hours, and the advance 19,457 20,000 3,633 3,457 Schools of office automation and IT due to the greater 3,299 3,184 3,564 refinement of business activities have been 9,120 9,405 8,399 10,000 7,852 Wholesale mentioned as key factors in this increase. In 6,455 8,931 6,991 8,674 8,993 8,573 the residential sector, increases in the number 0 Offices and buildings of households and changes in people’s life- 1990 2000 2005 2010 2012 (ﬁscal year) styles in pursuit of comfort and convenience Source: EDMC/Handbook of Energy & Economic Statistics in Japan: 2014 Edition issued by the Energy Conservation Center may be considered key factors. (General Incorporated Foundation). In light of this, RECAJ formulated a Voluntary Action Plan on the Environment for the Real Breakdown of Housing Stock and Energy Consumption in the Household Sector Estate Industry in 1997 and in 2008, it pub- INDUSTRY ESTATE REAL THE OF ROLE THE lished a revised 5th edition that sets numerical Distribution of Number of Dwelling Units Breakdown of Energy Consumption per Family by Residence Type (2013) by Usage (fiscal 2012) targets primarily for newly constructed office Cooling 2.2%

buildings. In addition, a Voluntary Action Plan Others 5.2% on the Environment for New Condominiums Stand-alone was formulated in 2009. Apartment (ownership) complex 50.5% Power, etc. Heating (renting) 35.2% 26.4% The target and target achievement status of 30.2% Total number of each voluntary action plan and its member dwelling units companies are shown below, demonstrating 52.1 million the effect of member companies’ ongoing Water heating Apartment complex efforts (performance figures are for member (ownership) Kitchen 28% 10.6% 8.2% companies who completed a questionnaire Stand-alone survey conducted in 2013). (renting) 3.5% ■ Voluntary Action Plan on the Environment Source: Fiscal 2013 Housing and Land Survey by the Ministry of Internal Affairs and Communications’ Bureau of Statistics and for the Real Estate Industry EDMC/Handbook of Energy & Economic Statistics in Japan: 2014 Edition issued by the Energy Conservation Center (General Incorporated Foundation). Target: When constructing a new office building, as a general rule the aim is a level at least 10% better than the Standards of Judgment for targets for 2020 and in March 2013 formu- condominium construction phase. Moreover, Construction Clients stipulated by the Energy lated the Real Estate Industry Environment in order to reduce office building and condo-

ENVIRONMENTAL MEASURES Conversation Law (i.e., an improvement of Implementation Plan. The new targets for minium energy consumption in the operation 10% or more for ERR, which indicates the pri- newly constructed office buildings and con- phase, collaboration with tenants or buyers mary energy consumption reduction rate for dominiums in this Implementation Plan are as is vital, and there is a need to cooperate with the overall facilities, and PAL, which indicates follows. both in undertaking energy-conservation efforts (e.g., increasing visibility for energy the building envelope performance). In addition, in December 2014, the 2020 tar- consumption amounts, providing energy-con- Target achievement status: For buildings gets for buildings where head office operations servation know-how). completed during the 2008 to 2012 period are located were revised and targets were for- covered by the plan, the target achievement mulated for 2030. In keeping with the idea of “integrating the rate improved from 59% to 100% for PAL and economy and environment” in past volun- ■ New Office Buildings from 77% to 100% for ERR. tary action plans, the Real Estate Industry ■ Voluntary Action Plan on the Environment Target: When constructing new office build- Environment Execution Plan does not view for New Condominiums ings, as a general rule the aim is achieve a environmental measures as restrictions on reduction rate of at least 15% for ERR and at Target: When constructing new condomini- economic activity but instead defines them least 10% for PAL (in the case of ERR, there ums, the aim is to construct buildings for which more proactively as aiming to promote green is a plan to convert to the government’s new lifecycle CO2 performance is superior to the growth (economic growth based on environ- energy-conservation standard indicator, BEI). standard reference values in CASBEE for New mental measures). In addition, based on the Construction: 2008 Edition. ■ New Condominiums experience of the energy supply crunch after Target achievement status: From 2009 to Target: When constructing new condomini- the Great East Japan Earthquake, increased 2012, 100% of member companies who sup- ums, the aim is to achieve a high level of awareness of business and living continuity plied new condominiums met the target in environmental performance, at least 5% better planning (BLCP) and the impact of real estate their standard construction specifications. than the operation phase reference value in development on the ecosystem, the plan stip- CASBEE for New Construction (bearing in mind ulates qualitative targets for efforts to improve Formulation of Real Estate Industry consistency with the government’s new ener- energy independence and preserve the natu- Environment Implementation Plan gy-conservation standards, consideration is ral environment and biodiversity (in addition to being given to a target using primary energy existing efforts to reduce energy consumption Based on the target achievement status for consumption as an indicator). and waste emission amounts) as well as pro- these voluntary action plans and the move pose specific details for such initiatives. toward new governmental energy-conser- In order to achieve these targets, active efforts vation standards, RECAJ considered new need to be undertaken in the office building and

Real Estate in Japan 2015 OTEMACHI TOWER CASE STUDY

Tokyo Tatemono, using a special pur- represent competition for survival. Property Overview pose company jointly financed with Tokyo Tatemono has overcome obstacles Name: Otemachi Tower Taisei Corporation as the developer, to complete this project and is confident built Otemachi Tower as a redevel- that there is no green space develop- Location: 1-5-5 Otemachi, opment of a zone formerly occupied ment project as thoroughly controlled as Chiyoda-ku, Tokyo and others by Mizuho Bank’s Otemachi head this one. Through trial and error a forest office building and the Otemachi was developed that corresponded to the Site area: 11,037.84m² Financial Center. It features an exten- image that had been established within Total floor area: 198,467.44m² sive green space called Otemachi the limited timeframe of the construc- Use: Office, hotel, retail, parking no Mori (“Otemachi Forest”) on the tion period. This “natural forest” has No. of floors: B6F/38F former Otemachi Financial Center site made a positive impression on many Completion: April 2014 on the development’s west side which people using the surrounding area who received a prestigious Ministry of Land, appreciate its soothing effect and the Infrastructure, Transport and Tourism improved access. Award in the 30th Urban Park Contest The forest’s soil retains rainwater for a (planning and creativity category). period of time which reduces the risk Otemachi no Mori was developed based of urban flooding. In addition, there is on the concept of creating a natural expected to be an energy-saving effect forest in Otemachi, the area with the based on the recycling of water, includ- highest office building density in Japan. ing wastewater from the building, while By establishing a block of green space the creation of a cool spot on account that people cannot enter, it has cre- of the forest is expected to mitigate the ated a bright, abundantly diverse forest heat island effect. including rolling land with plenty of Besides the forest, various types of ener- ground cover and various types of tall gy-saving technology will be employed trees that had previously been diffi- in Otemachi Tower as a whole such as cult to implement for management and heat-intercepting installations (low-e safety reasons. A unified concept has glass, vertical fins, etc.), facilities that been pursued by keeping potential nat- make smart use of energy (wastewater ural vegetation in mind when selecting recycling facilities, an ice thermal stor- tree species, providing trees found only age system, etc.), and facilities that make in the Kanto vicinity, etc. In developing use of natural resources (rainwater utili- the green space, in addition to hiring zation facilities, solar power, etc.). the designer, a comprehensive system was created to implement the unprec- Going forward, Tokyo Tatemono aims to edented plan which included selecting continue pursuing quality greening in a landscaping company based on tech- accordance with the needs of the loca- nical proposals, setting up specialized tion, create unprecedentedly high added meetings with experts, working on a value in its development projects and trial project/pre-forest and more. contribute to society through its real estate business. Tokyo Tatemono referred to various case studies to establish the image of a “natural forest” that would look attractive and provide people with a sense of tranquil- ity. It dared to select odd-shaped trees rather than simply choosing shapely ones with favorable growing conditions (meaning that Tokyo Tatemono itself not only selected trees for sale but also procured trees from natural moun- tain forests) and specified in detail the position and direction of each tree to

Real Estate in Japan 2015 50 (year) 45 40 35 30 25 20 Changes over time in aging rate Changes over National area Tokyo area Nagoya area Osaka Regional areas 15 2010 45 40 35 30 25 20 15 (%) in the context of population growth, with cities tending to expand. As a with cities tending to of population growth, in the context out of city sprawl and hollowing such as advancing urban result, issues centers have occurred. these issues, attention is turning to “compact As a means of addressing as compact as possible in accordance with the cities” that keep urban areas - of compact cities by redeveloping retail facil population size. The creation in city centers should, in addition to increasing ities, housing, and so forth reduced mobility such as the elderly through accessibility for people with to live closer to their workplace, upgrading measures that enable people reduce the financial burden help network, etc., of the public transportation urban infrastructure maintenance costs. on municipalities by cutting of the Location Optimization Plan System Moreover, with the inclusion Urban Reconstruction in the revised Act on Special Measures Concerning for municipalities aiming enacted in August 2014, it has become possible breaks, and so forth. By to be compact cities to receive subsidies, tax service promotion designating “housing promotion zones” and “urban facilities, retail facilities, zones” that bring together medical and welfare various facilities toward etc., it is possible to promote the relocation of city centers. of public real estate is Meanwhile, as the population declines, the use is now being given to also becoming a pressing issue. Consideration management costs have using public real estate whose maintenance and public services through become an issue by means of PPP (provision of of private-sector funds public-private partnerships) and PFI (application of public facilities) proj- and expertise to construction and management Revitalization Strategy ects. The 2014 revision of the government’s Japan increase around three-fold specifies that the size of the PPP/PFI market will is it forward, going and 2022, to 2012 from period 10-year the during real estate opera- expected that the expertise possessed by private-sector as well. tors will increasingly be applied to public real estate 44 50 (year) 45 Real Estate in Japan 2015 40 35 30 25 Elderly population (2010=100) 20 National area Tokyo area Nagoya area Osaka Regional areas 15

(Through 2040) Average calculations from the National Institute of Population and Social Security Research’s “Population Projections for Japan by Region” (calculated in March 2013); . The “elderly population” is the population aged 65 and over, and the “aging rate” is the proportion of the total population represented by the population aged 65 and over

ce:

2010

(2045 and 2050) provisional calculations by the Ministry of Land, Infrastructure, Transport and Tourism Policy Bureau. Note: Sour 100 120 140 160 180 Changes over Time in Elderly Population/Aging Rate Changes over Time in Elderly Population/Aging (10,000s of people)

Going forward, a major issue for Japan’s economy and society as well as economy and society a major issue for Japan’s Going forward, falling its declining population, industry will be addressing its real estate birthrate, and aging society. has been decreasing since reaching a peak The total population of Japan in 2010. By 2020, it is projected to drop by 3% of about 128.05 million projected to it is by 2040 million, and 124.1 over the 10 years to around households of number The total million. 107.27 around 17% to by drop - to reach a peak in 2019 (approx. 53.07 mil nationwide is also expected million in 2035. lion) then fall below 50 - population, the aging of society is accelerat In addition to the declining total population represented by the elderly (age ing. The proportion of the in 2013 and it is projected to increase to 29.1% 65+) reached 25.1% in areas, it is expected that 2020 and 36.1% in 2040. Even in metropolitan this aging of society will continue in the future. the real estate industry is Due to these demographic changes, the role of to housing, an abso- also beginning to change significantly. With regard the decline in population, lute decline in demand is anticipated based on be a need for housing and given changes in family structure, there will on future changes in planning that addresses diverse needs by focusing people and the elderly. household structure such as housing for single significant issue and Addressing the aging of society is a particularly such as the serviced there is a growing need for housing for older people, at providing residences elderly housing that first appeared in 2011. Aimed that, in addition to for seniors, serviced elderly housing is rental housing care as such services support to access offers facilities, barrier-free having for support institutional and treatment as needed. The state is providing as of the end of 2014 the the development of serviced elderly housing and supply had reached around 166,000 units. have a major impact on The declining population and falling birthrate will conducted been has Japan in planning urban date, To planning. urban Addressing Population Decline and the Aging of Society of Aging the and Decline Population Addressing

THE ROLE OF THE REAL ESTATE ADDRESSING POPULATION DECLINE AND REAL ESTATE IN JAPAN 2015 INDUSTRY THE AGING OF SOCIETY THE ROLE OF THE REAL ESTATE REAL ESTATE IN JAPAN 2015 ROLES THE REAL ESTATE INDUSTRY SHOULD TAKE AGAINST INDUSTRY MAJOR DISASTERS - - - resis ‑ Making sure people know to stay stay to people know (1) Making sure people prevent to patient and of with provision leaving at once (2) Cooperation from accommodation temporary people for (3) Securing stockpile facilities home returning having difﬁculty returning having difficulty disaster management measures disaster Comprehensive policy for promoting promoting policy for Comprehensive tant performance. However, there were some areas in which buildings tilted(primarily stand-alone houses) due to soil liquefaction. In addition, paralyzed transportation systems on the day of the earthquakeleft a massive number of people who found it difficult to return home, and sub sequent scheduled blackouts led to confusion as elevators, water supply and drainage equipment, railways, production facilities and other func tions stopped operating. Based on these occurrences, national and local governmentspromoting are thecreation strongof cities that resilient are to disasters. having difficulty returning home that codifies initiatives dealing with such people for government, businesses and citizens (announced in March enforced in April 2013). 2012; Enhance Building1. Quality and Construct Networks of Entire City Inthe Tokyo metropolitan area, high-rise building structures had only earthquake high their proving earthquake, the from damage slight 45 - - - under public-private sector of the private disaster disaster of cities with excellent

Initiatives that ought to be promoted by real estate for development of cities with excellent disaster prevention disaster of cities with excellent development for estate real by be promoted that ought to Initiatives 0) among involved of cooperation of the establishment Promotion Policy for advancing area-wide improvement area-wide advancing for Policy

disaster buildings with excellent

Soft Hard

prevention disaster that reinforces urban development of integral (1) Promotion etc. terminals, of transport performance prevention of disaster (2) Improvement of individual buildings performance prevention of disaster (3) Improvement Note: While some initiatives are both "hard" and "soft," the above and "soft," the above both "hard" are initiatives While some Note: to or "soft" according as either "hard" been classiﬁed have their main initiatives.

Report of the Committee for the Study of the Role of Real Estate in Reinforcing Disaster Prevention Functions of Cities (Summary) Prevention Disaster in Reinforcing the Study of the Role of Real Estate for Report of the Committee Major Disasters inflicted significant TheGreat East 2011, Japan Earthquake on March11, damage primarily to the Tohoku (northern and Japan) Kanto regions. The earthquake caused tsunamis (tidal which waves) inundated towns along thecoast, and many area residents who suffered the loss oftheir houses were forced to live in temporary dwellings. Rehabilitation of the suffer Roles the Real Estate Industry Should Take against against Take Should Industry Estate Real the Roles ers’ livelihoods and recovery of the affected areas are top priorities to be addressed by the entire country. Moreover, an important lesson was learned from the earthquake: to rein force disaster prevention functions and create safe and secure cities. As such, the Ministry of Land, Infrastructure, Transport and Tourism amended part of the Enforcement Ordinance of Construction Standard Law that specified the non vention and mitigation and that sections be set apart for private power generators, etc. in the floor The (enforcedarea ratio in September2012). TokyoMetropolitan Government also enacted an ordinance for people ------BolsterRecovery through SuchEndeavors as ReinforcingInter- national Competitiveness Cities of “Central Liaison Council between the Real Estate Industry and Police for Eliminating Organized (comprised Crime of Groups, the Association, Etc.” the four industry groups involved in real estate transaction, The Real Modernization Transaction Center Foundation,Estate the National Police Agency, the Ministry of Land, Infrastructure, Transport and The Tourism, National Center for the Elimination of Boryokudan, lawyers, was etc.) established for the purpose of strengthening coordination between rele of Japan establishedthe “Study Group on Disaster Prevention as Real Estate Industry” by (chaired Yasushi Aoyama, Professor, Meiji University GraduateSchool), which on reporta compiled such issues inApril 2012 cities “creationas of that have disaster excellent prevention capabili “enhancement ties,” of office buildings and for-sale condominiums” and “responses asreal estate industry to people having difficulty returning home upon disaster, etc.” 3. - the Japanese economy in order to sup It is also essential to revitalize it the affected areas recover. To achieve this, port the victims and help enhancing the global competitiveness of major is necessary to promote as their disaster prevention capability as well cities while further improving by such as forming a good stock of houses steadily implement measures earthquake resistance and energy-saving supplying houses with excellent low-carbon cities. qualities and planning eco-friendly, vant governmental agencies and the real estate industry and promoting elimination of organized crime groups and other anti-social forces from real estate transactions. The Council is working topromote popularization of provisions for eliminating anti-social forces, planning training and lec tures on the subject, information exchanges, etc. part as Meanwhile, the international of community’s anti-money laun deringmeasures, the Act on Prevention of Transfer of Criminal Proceeds was fully enforced in March 2008, requiring entities in the building lots confirmations, transaction make to business transaction buildings and preparation preservation and transaction of records report and suspi cious transactions when selling or buying buildings and when serving as a proxy or brokering transactions. In addition, with the enforcement of the partial revision of the Act on April there will be requirements 2013, such as addition 1, of items for confir category transactions, the high-risk of for addition transactions, in mation (effort for confirmations transaction accuracy of for measures of addition implementation of educational etc. training), *Four industry groups involved in real estate transactions: National Federation of Real Estate Transaction Associations, All Japan Real Estate Federation, The Association of Real Estate Agents of Japan and Japan Association Home Suppliers.of 46 - - -

Real Estate in Japan 2015

and Money Laundering Other Anti-Social Forces from Real Estate Transactions Transactions Estate Real from Forces Anti-Social Other Initiatives to Eliminate Organized Crime Groups and and Groups Crime Organized Eliminate to Initiatives With an aim to eliminate boryokudan (organized crime and groups) other anti-socialforces from corporate activities, the government compiled the Guidelines forHow Companies Prevent Damage from Anti-Social BasedForces on the Guidelines, in June 2007. a report titled “Initiatives to Eliminate Organized Crime Groups from Corporate Activities” was pub- Tokyo andlished inDecember Okinawa Prefectures 2010. also enforced organized with trading from companies prohibiting ordinances local which has led to furthercrime groups in October promotion 2011, of ini crime organized groups throughout Japan. tiatives eliminate to The real estate industry groups set up a “Liaison Council for Preventing Transfer of Criminal Proceeds and Damage from Anti-Social Forces in the Real Estate Industry” (comprised of The Real Estate Companies industry four Association groups the “Association”), Japan of (hereafter, involved in real estate transaction* and The Real Estate Transaction Modernization Center Foundation) inDecember 2007with an aimto appropriately respond to the enforcement of the Act on Prevention of Transfer of Criminal Proceeds and establish a relevant compliance system. The Council worked to encourage establishment of responsibility structures and prevention damages. of The four industry groups involved in real estate transaction also took measures such as preparing model provisions concerning elimination oforganized crime groups and other anti-social forces realfrom estate lease contracts and sales contracts, contracts (brokerage transaction provisions “example prepared also Association The contracts). housing for eliminating anti-social forces” in transaction contracts and lease con tracts, in which its member companies are the sellers or the lessors, in in consultationSeptember with the Ministry 2011 of Land, Infrastructure, Transport and and Tourism the National Police Agency, and requested its member companies to adopt these provisions, etc. In the same month, the Aspart of this endeavor, the real estateindustry, which supplies buildings andcondominiums, isspecifically required to provide safe and secure working and living environments. respond To to such requirements, the industry must work to enhance building quality, such asearthquake resistance performance, capabilities to create/store/save energy, and barrier-free specifications. In addition, it is also important to construct high‑grade disaster prevention functions and energy networks, etc. within an entire city by enhancing coordination with responsible organizations partiesand relevant within the community and society. 2. Investigate Issues on Disaster Prevention as Real Estate Industry Joint implementation bythe public and private sectors is required for such initiatives as creating countermeasures for people having difficulty returning home, establishing disaster prevention centers, and preparing disaster prevention plans in unison for communities. As part of this pro cess, the real estate industryneeds toinvestigate whatsuggestions it should For make. this purpose, The Real Estate Companies Association

THE ROLE OF THE REAL ESTATE INITIATIVES TO ELIMINATE ORGANIZED CRIME GROUPS, OTHER ANTI-SOCIAL REAL ESTATE IN JAPAN 2015 INDUSTRY FORCES FROM REAL ESTATE TRANSACTION AND MONEY LAUNDERING REAL ESTATE IN JAPAN 2015 POLITICAL, SOCIAL AND ECONOMIC EVENTS; REAL ESTATE-RELATED POLICY Real Estate Industry News Hold general meeting of of meeting general Hold Estate Real International Federation in Tokyo; Chairman Tsuboi of the Real Companies AssociationEstate of Japan suddenly passes away and Mitsui Fudosan Tanaka Junichiro President chairmanship. the assumes Establish 4 information information 4 Establish (welfare network organizations nationwide; corporations) Revision to the Real Estate (when Act Syndication individuals with specialized knowledge or experience in participating are investment in the project, the application of regulations to protect general investors is exempted); Ministry of Construction issues its Real Estate Renovation Vision (future direction of the real estate industry and issues present countering including the promotion of IT and modernizing a transparent and fair investment market to socio- the in changes the meet Building structure); economic Transaction Buildings and Lots the (extended Law Business valid period of broker licenses from to 3 5 years); The Real Companies AssociationEstate of Japan issues Century its 21st Code Corporate and Vision of Conduct; Sumitomo Realty & Development Chairman appointed Takagi Shinichiro chairman of the Japan Association. Condominium Revision to the Building Lots Transaction Buildings and Business Requirement Law [a. information with registration of certified network organization an of property information exclusive broker contract; b. standing Clarification legal of network information of supervision and organizations by minister; c. Extension of valid license period years (3 to 5 years), abolishment of certain reporting items; and Abolishmentd. of testing qualifications for the testing of partialbrokers, exemption test of individuals who have passed certain courses]. Land and Housing Taxation Housing and Land Reduction of land value tax rate Enlargement (0.3% to 0.15%); of measure to adjust burden of real property tax; Reduction transfer long-term personal of for ¥40tax to 26% (32.5% million or less; 39% to 32.5% for more than ¥40 million to ¥80 million or Reduction less); in focused corporate tax rate (very short period 30% shortto 15%, period 20% andto 10% general 10% Enlargementto 5%; of taxation special for measure acquisition land on standard (registration license tax 50/100 to 40/100 and real estate acquisition tax 2/3 to 1/2). Reduction and deferment of perspective the from burden of balancing the burden standard of real property tax, etc.; Enlargement of acquisition promotion housing tax system and phased reduction in residing years million(maximum in of ¥1.8 million in 1998, ¥1.7 1997, million and in ¥1.5 1999 ¥1.6 million in 2000 and 2001); Halving of reduced tax rate for registration license tax related to housing buildings; Raising of special deduction of real estate acquisition tax for new housing million); million to ¥12 (¥10 tax. stamp Reduction of land Special in drop standard extraordinary taxation for real property tax, etc.; long- personal of Reduction term transfer tax (39% to for32.5% ¥40 million or Partial reduction land of less); value tax (Reduction in half of parking lots that must be attached, etc.). ); Focused); ² 47 Land and Housing Policy Housing and Land Emergency Plan for Reducing Costs Construction Housing (dramatic review of the Building Standards Law, smoothing the overseas housing, of importing overseas and materials components,Revision etc.); to (strengthening Law GHLC the guidancepolicy function by applying different interest rates according to housing structures when loaning to houses). certain new New General Land Policy (proclaimed Outline Promotion that the new objective of shift would from policy land pricessuppressing land to efficient land use; Aim to transactions); land invigorate Revision to the GHLC Law preferential the (extended interest rate terms and repayment period for loans existing certain buying when transparency, Bring housing); simplicity and speed to procedure for approving use conversion agricultural for land. Execution of emergency safety emergency of Execution checks at affected buildings; Revision to the Large City Law (creation of projects to supply joint housing to city centers, enforcement of deregulation requirements for projectsto improve housing districts); Law on Rebuilding, etc. Sectional Disaster in Buildings Ownership Areas (possible to ratify rebuilding with 80% or more of approving such rights in voting the event a property completely collapses in a major disaster); DesignEstablishment of Guidelines for Housing in an Aging Society (installing hand different eliminating rails, etc.). levels, Construction Housing 7th million5-Year houses, Plan (7.3 half of all houses, meet standards; guidance living Goal of average housing floor area of 100m Real Estate in Japan 2015 Regulations, etc. etc. Regulations, Land Planning, City Planning, Land Planning, Architectural Planning, Act on Promotion of Disaster of Improvement Populated in Districts Control Urban Districts (creation of a system for planning the improvement area of disaster prevention districts and associationsimprovement for disaster prevention zones); Revision to the City Planning Law and Building Standards Law (creation of zones for attracting housing high-rise FAR of rationalization and and condominiums for rules Creation housing); joint other of a type of sophisticated use functions; upgrading for zone Creation of a general design system by lot size; Creation of readjustments. lot mini Act on Special Measures concerning Reconstruction of Urban Districts Damaged by Disaster (special exceptions for in business readjustment land disaster areas, Revised etc.); City Planning Law (creation of a district planning system for town promotion); Revised Redevelopment Urban Law (improvement of implementation requirements city redevelopment for projects, Revised etc.); Building (rationalization Law Standards of FAR restrictions in accordancewith the width of of rationalization front, in road road setback rules); City Park Law Enforcement. Revision to the Law for the Areas the of Improvement along Trunk Roads (enhancing improvement roadside the transferring system, planning rights, roadside improvement etc.; added roadside district district planning and planning requirements the to districts districts implementation for and such of city area redevelopment projects). Economic Events Economic Political, Social and Consumption tax rate raised; Failure of the Hokkaido Takushoku Bank and Yamaichi Securities; Opening of the Trans-Tokyo Bay Highway. Act on Special Measures Concerning Promotion of Disposal of Claims and Debts Companies; Jusen Specific of on based elections General constituency single-seat the system. The Great Hanshin-Awaji (Kobe) Earthquake; Sarin gas attack by the Aum cult; yen appreciationSharp the of to below yen 100 per dollar. Political, Social and Economic Events; Events; Economic and Social Political, RealEstate-Related Policy Year 1997 1996 1995 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.

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

1999 Criticality accident in Revision to the Act concerning Special Provisions Law con- Creation of new housing loan Launch of the Housing & Urban Tokaimura, Ibaraki; Lending of Urban Development cerning Promotion of the deduction system (deduction Development Corporation; Real Mergers or business mergers Funds (smoothing the capital Supply of Good Quality Leased period of 15 years, etc.); estate monetization and secu- between major banks, etc.; raising process; enhancing Housing (creation of fixed-term Enhancement of system for ritization; Internet transactions Response to Y2K. measures for efficiently using leasehold rights and enforce- carrying forward deduction of take off. land with low use or non-use; ment in 2000); Housing Quality capital losses for residential improving and enhancing Assurance Law (requirement of property; Improvement of spe- redevelopment methods); 10-year warranty and enforce- cial exception to cash gift for Promoting efficient use of ment in 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 passes Revision to the City Planning Law for Promoting Appropriate Half-year extension of the hous- Growing popularity of large away; Miyake Island erupts, Law and Building Standards Condominium Management ing loan deduction system (up and tower condominiums; floods in the Tokai region; Law (enhancing the master (condominium manager and to taking up residence in June Start of real estate invest- Turmoil in the U.S. presidential plan; reviewing the demar- managerial chief qualification 2001); Improvement in floor ment trusts; Creation of elections; Number of juvenile cation and development system and condominium man- area requirements of special the investment consultant crimes rises. permit system; enhancing the agement company registration real property tax measures registration system; JICPA system for securing a good system; enforcement in 2001). for new housing and 2-year issues the "Audit Handling environment; introducing the extension of application period; of Judgment on Decision to new system for re-adjusting Phased reduction of real prop- Forcefully Reduce Valuation existing city areas; introducing erty tax on land (75% in fiscal of For-Sale Real Estate"; regulations for developing and 2001 and 70% in fiscal 2002); Integration of the Japan Home building non-city planning dis- 3-year extension of special Builders Association and the tricts; promoting transparency measures on land transaction Housing Industry Development and citizen participation in tax (1/3 for registration license Association to form the Japan the city planning and decision tax and 1/2 for real estate Association of Home Suppliers. system, etc.); Law for the acquisition tax). Recycling of Construction Materials (segregation and dismantling of construction materials and such; recycling of specified construction materials; fully enacted May 2002).

Real Estate in Japan 2015 REAL ESTATE IN JAPAN 2015 POLITICAL, SOCIAL AND ECONOMIC EVENTS; REAL ESTATE-RELATED POLICY - - - Real Estate Industry News man of Sumitomo Land and opens. Hills Roppongi Realty); Shinichiro Takagi becomes chairman of the Real Estate Companies Association (chair Construction completed on COREDO Nihonbashi and Marunouchi OAZO; Growth in housing loans issued by private Repeated institutions; financial skyscraper of condo release miniums and progression of residing to return population's in city centers. Integration of the Real Estate Companies Association and the Japan Condominium Association Junichiro with Tanaka serving as chairman (chairman of the Real Estate Real Companies Association); estate investment trusts are listed. Rebuilt Marunouchi Building the Shiodome, Caretta opens; first wave of Shiodome’s rede velopment opens. velopment ------Land and Housing Taxation Housing and Land Reduction in registration and registration and Reduction in license tax rate etc. (sale, 10/1000); Suspension of levying of special land holding ownership tax (ownership and acquisition on or after January 2003); Creation1, of settle ment taxation system at time Abolishment inheritance; of of business office(new tax or Creation of expanded portion); urban renaissance promotion tax system. Creation of measures to reduce ordinance concerning real property tax and city planning tax of commercial property, etc.; Rebuilding of taxation system for capital gains from transfers; land personal Extension of suspension period taxation application of for system on land transfers by companies; Extension of system for reducing home loan contraction (phased taxation 2008). through Creation of new housing loan deduction (deduction system borrowingrate of 1%; limit of ¥50 million; deduction period years);Enhancement of 10 of acquisi house on tax donation tion funds (tax exempt limit of Creation¥5.5 million); of rental tax promotion supply housing for elderly housing years (5 and 40% 3-year depreciation); premium extension of the special tax ation on transfer income of long-term general personal ownership (20% income (26% tax residential and 6% tax)); collectionEnhancement of grace period system for special land ownership tax; Creation of measures to reduce trans action taxes on real estate invest securitization and (SPC Reduction corporation); ment in capital gains tax on listed estatereal investment securi ties for individuals. registration Reduction in license tax on sale of existing buildings (25/1000); Expansion collection grace of period measures for special change (allow tax holding land to exempted land and transfer); Abolish maximum tax rate of 39% for tax on personal ownership long-term general transfer income (taxation suspended). - 49 Land and Housing Policy Housing and Land Launch of securitization sup of Launch Government by port business Corporation Loan Housing type). (acquisition Condominium to Revision Partial Management Rules; Personal the of enforcement Information Protection Law; securitization the of Launch support business by the Finance Housing Government Corporation (warranty type). Enforcement of Law for Dependable Securing Elderly; the of Residences 8th the of Establishment Housing Construction 5-Year Plan; Decision to abolish the Loan Housing Government Corporation withinyears; 5 Abolish the Housing & Urban by Corporation Development fiscal 2003 and have a new administrative independent corporation established to take on a portion of the original functions. Passage of the Soil Contamination Law; Countermeasures Revision to the Law for Condominium Smoothing Reconstruction and revision to Sectional Ownership Law. - - - - - Real Estate in Japan 2015 - Regulations, etc. etc. Regulations, Land Planning, City Planning, Land Planning, Architectural Planning, Finalization of Urban (phases Project Renaissance Designation5 and 6); of emergency renaissance urban (phase districts improvement of 53 districts ; of opera tions by city regeneration fund corporation. investment Finalization of Urban (phases Projects Renaissance 7 and Enhancement 8); of community regeneration creation town measures and 3 of Establishment subsidies; landscaping greenery and laws including the Landscape Law. Launching of Urban Headquarters Renaissance (led by the prime minister); urban regen of Finalization (phases project eration Emergency 3); through 1 measures for promoting city by investment development Direction sector; private the reforms system emergency of for urban renaissance; Report of the urban renaissance team; strategy regeneration Establishment of new city cre ation vision for Tokyo by Tokyo Metropolitan Government; Establishment of City Planning Operational Guidelines. Creation of the Special Measures Act for Urban Designation Renaissance; of the urban renaissance improvement emergency district (total of 44 districts in phases 1 and 2 totaling about Revision5,700ha); to the Urban (confer Law Redevelopment ral of enforcement function condemnation, private for Revisionetc.); to the Building Standards Law and City Planning Law (maximum floor urban 1300%, of ratio area proposal system, speeding up proce design comprehensive dures, Abolishment etc.); of the Industry (factory) Restrictions Law; Deregulation of the assess impact environmental ment ordinance procedure (Tokyo); Flexibility in obligation to provide parking spaces (Tokyo); Finalization of Urban 4). (phase Project Renaissance - - Economic Events Economic Political, Socialand Athens Olympics; Olympics; Athens Second reshuffled cabinet of the Koizumi Cabinet; Occurrence of major natural disasters including a wave of typhoonshitting Japan, the Mid PrefectureNiigata Earthquake, earthquakesand tsuna and Iraq War; Second Koizumi Cabinet. mis in the ocean off Sumatra Island. Prime Minister Koizumi visits Koizumi Minister Prime normalize to North Korea Korea/ relations; diplomatic “Prompt held; Cup World Japan Countermeasures Deflation” to formulated. tural reform; September attacks11 in the Anti- U.S.; Specialterrorism Measures Law enacted; Universal Studio Japan (Osaka prefecture) and Disney Sea (Urayasushi) opens, established in January by MLIT. Inauguration of the Koizumi struc which upheld Cabinet Year 2001 2002 2004 2003 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 Loan Extension of the scope to apply Hiromichi Iwasa (President of LDP wins the Lower House areas in local regions, dis- Corporation, which engaged various preferential measures Mitsui Fudosan) inaugurated as elections in September by an cussion on review of 3 urban in direct financing utilizing for taxation related to existing the president of the Real Estate overwhelming majority, fol- development laws begins to the government fund, is abol- homes (mortgage tax reduction Companies Association of lowed by the enactment of the intensify. ished and instead, the Japan system, preferential measure Japan; Tsukuba Express which Postal Service Privatization Act; Housing Finance Agency, an for replacement of residen- cuts travel from Akihabara Princess Nori marries. independent administrative tial properties, preferential to Tsukuba in 45 minutes is institution, is established to measures for the tax system opened in August; Trust in support and supplement loans for settlement at the time of safety of buildings is shaken for the housing fund; Kubota inheritance concerning hous- with the quake-resistance Corporation, a machinery man- ing purchases and other funds, data falsification scandal and ufacturer, announces to the reduction of registration and surfacing of deficiencies in public that employees working license tax for registering reten- checking functions of building at Kubota's factory have been tion of ownership of housing construction; The Akihabara suffering health problems buildings, preferential mea- Dai Building, Nihonbashi Mitsui caused by asbestos. sures for taxation standards, Tower and other buildings com- Based on the fact that a lot etc. for real estate acquisition pleted; Vacancy rate in central of asbestos is used for archi- tax on existing houses, etc.); Tokyo improves. tectural and other materials, Extension and enhancement of anxiety about health in relation urban renaissance promotion to asbestos spreads to the gen- taxation system; Review of eral public. 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-re- Basic Act for Housing was Reduction and extension of Prefectural land price research in July; Inauguration of the Abe sistance data falsification enacted. preferential measures for reveals that the prices of Cabinet in September. scandal, the Law to Revise land and building related both residential land and Portions of the Building transaction taxes (registration commercial land in 3 major Standards Law, etc. to Secure and license tax, real estate metropolitan areas rose for Safety of Buildings is enacted. acquisition tax); Extension of the first time in 16 years. The Three urban development laws measures to reduce ordinance number of listed REITs reaches enacted. concerning real property 40 in December and the aggre- tax, etc. of commercial prop- gate market value increases to erty, etc.; Extension and about ¥5 trillion. abolishment 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.

2007 Inauguration of the Fukuda The Law to Revise Portions of Japan Housing Finance Agency Extension of preferential Financial Instruments and Cabinet in September. the Urban Rejuvenation Law is inaugurated. measures on replacement Exchanges Law enacted. 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. to Kasumigaseki Common Gate Housing is enacted. land, buildings, etc.; Extension, and other buildings completed. etc. of special tax 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 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 concerning specified sector housing development projects.

Real Estate in Japan 2015 REAL ESTATE IN JAPAN 2015 POLITICAL, SOCIAL AND ECONOMIC EVENTS; REAL ESTATE-RELATED POLICY Real Estate Industry News Completion of constructionCompletion of for Coredo Muromachi, Yuito, etc.; RECAJ formulates the “RECAJ Action Plan for Low Carbon City Development” “‘Future and Strategy’ Development Urban Housing the Growth of the for Development Urban and Sectors”; “Tohoku Shinkansen” opens in December. Law for Preventionof Transfer of Criminal Proceeds enacted. Real estate companies under. go successively Complete opening of Kyushu Shinkansen Kagoshima Route; Keiji Kimura (President of Mitsubishi Estate) inaugurated Real the of president the as Companies AssociationEstate of Japan; Adoption of “Five Principles of Removing Antisocial Forces such as Crime Syndicates from Real Estate Transaction.” Terms for display of real estate advertisement, etc. homes Existing changed; allowed to display double price; Shibuya Hikarie and Tokyu Harajuku Omotesando Plaza completed. Real Estate Market Stabilization Fund established. Both land published were that prices according prices land and to surveys by prefectures The nationwide. decrease number of new housing constructions falls under 1 million units to 780,000 units for the first time years. in 42 constructionCompletion of of Ichigokan. Mitsubishi Land and Housing Taxation Housing and Land Expansion of measures for tax donation of exemption and purchases housing for other funds, etc.; Extension of special measures concerning housing for funds of donations purchases, etc. in the tax system for settlement at the time of inheritance, etc.; Extension of exceptions for fixed asset tax reduction for constructed housing. newly Extension of decreased tax rate of registration and license tax ofhouses and special measures to reduce stamp tax on purchase and sale agreement, etc. for real estate Extensiontransactions; of system of special deduction million concerningof ¥15 housing sector specified projects. development Establishment ofspecial specificmeasures for urban emergency redevelopment areas; development Establishment ofspecial international for measures zones; comprehensive strategy Extension of the tax system for the promotion of construction of prime upon housing senior rental targeting as restructuring services. with housing senior Extension of exceptions for of purchases replacement long-term in assets business ownership of land; Extension of exceptions for fixed asset tax reduction for newly constructed and Enhancement housing; extension of exceptions for funds of donation for acquisition housing, etc. of Establishment of special measures to promote Approved Houses. Energy-Saving Tax ReductionTax System for Housing Loans extended and expanded, Reduction Tax System for Long-term Excellent etc.; established, Houses Special incometax deduction for barrier free and energy conservation renovations of established; houses existing rateTax for registration license tax related to real estate transactions left unchanged; arouse Special measures to during land for demand recovery economic the established. 51 Land and Housing Policy Housing and Land Increased interest-rate reduction from “Flat 35S”; “MLIT Growth Strategy” announced; “New Growth “Three- announced; Strategy” Step Economic Measures for the Realization of the New Growth Strategy” announced. “Serviced Silver Home System” System” Home “Serviced Silver begins; Registration of Implementation System for Rental Housing Operator; Management Establishment ofsystem for Flat 35S Eco Points and Recovery Support/Residence Eco Points. Reconstruction Disaster Support and Eco Point System for Housing System starts accepting applications; Maximum of loan rate for Flat 35 lowered from 100% to 90%; apartment Standard contract revised; Law concerning the low-carbon of promotion cities established; First real the of announcement estate price index (residence); for plan total Formulation of renovation of existing homes; proposals of Compilation of Real Estate Transaction Market Forum. Vitalization Emergency Measures for for Measures Emergency Activation Housing/Real of announced. Market Estate Policy Package to Address Economic Crisis announced. Economic Emergency for Countermeasures Future Growth and Security announced. Eco-point system for housing established. New Growth Strategy (basic policies) announced. Real Estate in Japan 2015 Regulations, etc. etc. Regulations, Land Planning, City Planning, Land Planning, Architectural Planning, Low Carbon City Development (MLIT). created Guidance Establishment of Zone Special “Comprehensive System”; Special Measures of Revision Act for Urban Renaissance (establishment development emergency of areas designated for urban reconstruction). Partial revision of enforcement order of Special Measures Act for Urban Renaissance; Statistics for stock of buildings subject to special easing measures for extension announced; Buildings with earthquakenew resistance standards becomes 67%. National Sustainability Plan National Sustainability Plan a at approved plan) (national Cabinet meeting. strategy spatial National (regional plan) approved by the minister. Economic Events Economic Political, Socialand Tokyo Skytree, the world’s highest free-standing tower opened(643m), in May; Summer Olympics held in August and July during London and Japan wins 38 medals, its most ever; Inauguration of the 2nd Abe Cabinet in December. Great East Japan Earthquake in March; recordsYen highest post-war value in March; Inauguration of Noda Cabinet in September; billion. 7 hits population World Inauguration of the Kan Cabinet in June; Bank of Japan announces its “Comprehensive Monetary Easing Policy” in October. H2N1 virusH2N1 spreads from Citizen springtime; around judge system begins in May; House Lower the wins DPJ elections by an overwhelming majority in August; change first the for government of years;time in Inauguration 16 of the Hatoyama Cabinet in September; Inauguration of the in Affairs Agency Consumer September. Inauguration of the Aso Cabinet; Effects of the financial crisis stemming from the U.S. spread problem loan subprime across the globe. Year 2012 2011 2010 2009 2008 Real Estate Industry News Abeno Harukas is completed, becoming the tallest building in Japan; constructionCompletion of of Hills; Toranomon revised the of Implementation Building Lots and Buildings Transactions Act to change the official Japanese term for real estate brokers from 2015. City of Osaka opens Grand Front Osaka redevelopment of former Umeda Freight Station site; Completion of Otemachi Tower; AssociationJapan Home of National and Suppliers Industry Housing of Federation Associations merge to form Industry Housing National the Association. Land and Housing Taxation Housing and Land Extension of system for carrying forward transfer losses in cases of residential property replacement, etc.; Extension of system for carrying forward transfer losses on specified residential properties; Extension of measures to reduce fixed asset tax for newly constructed housing; Extension of measures to reduce registration license tax for registering ownership of certified long-life quality housing; Extension of measures to reduce estate real acquisition tax on housing and land. Measures accompanying consumption tax rate hike (relating to home buying, etc.); Renewal Urban the Extension of system; Tax Promotion special Creation exceptions of disaster- strengthen to order in prevention capacity cities; of Creation of tax system-related preferential measures for urbanintensive development projects; Extension and expansion of special exceptions for stamp tax on real estate transaction contracts. 52 Land and Housing Policy Housing and Land Publication of Individual Publication of Promotion Residence Rental Investigative Committee report; Formulation of Real Estate Information Stock System Basic Plan; for Guidelines Publication of Application of Health Care REITs; Finalization of revised Japan Strategy; Revitalization Japan Formulation of Construction and Real Estate on Industry Based Strategy International by Analysis Market Region; Certified low-carbon homes surpass units; 6,000 Passage of the Act on Special the Concerning Measures Promotion of Vacant Housing Countermeasures; of Implementation revised Act on Facilitation of Reconstruction of Condominiums. Ministry of Land, Infrastructure, Transport, and Tourism Inspectionformulates Housing; Existing for Guidelines City of Tokyo implements Zones Development Special to Advance Fire Resistance and creates housing subsidy system; Estate Real the to Amendment Act Enterprise Joint Specified passed; Revised Seismic Retrofitting passed; Law Promotion 100% of Implementation financing for Flat 35 further mortgages, and lowering of Flat 35S interest rate; Japan of Finalization Strategy. Revitalization Real Estate in Japan 2015 Regulations, etc. etc. Regulations, Land Planning, City Planning, Land Planning, Architectural Planning, Implementation of Law to Revise Portions of the Special Measures Act for Urban Renaissance; Passage of City, People, and Act; Creation Job Passage of Law to Revise Portions of the Local Revitalization Act; Implementation of Law to Revise Portions of the Basic Act Control Disaster Measures; on Passage of Law to Revise Portions of the Act on Sediment for Countermeasures Disaster Areas. Prone Disaster Sediment Passage of National Strategic Strategic National of Passage Special Zone Law; Industrial of Passage Enhancement Competitiveness Act; Passage of Basic Law of Enhancement; Land National Economic Events Economic Political, Socialand Consumption tax increased to 8% in April; Basic Policies for Economic and Fiscal Management (Big- Boned Policy) approved by Cabinet in June; Tomioka Silk Mill becomes a World Heritage Site in June; approves Japan of Bank in easing monetary additional October; next of Postponement hike consumption tax announced November; in Third Abe Cabinet inaugurated in December; The number of foreign visitors setsto Japan new in 2014 record at 13,414,000. Introduction Special of Reconstruction Income Tax January; in 2037) (until Prime Minister Abe declares intent to participate in TPP March; negotiations in announces Japan of Bank Quantitative Qualitative and Monetary Easing in April; Revision of the Public Officers ElectionsLaw passed in April, lifting the prohibition on online voting; Tokyo selected as host of the Olympics/ Summer 2020 September; Paralympics in in October, it is decided to raise starting 8% to consumption tax 2014. Year 2014 2013

REAL ESTATE IN JAPAN 2015 POLITICAL, SOCIAL AND ECONOMIC EVENTS; REAL ESTATE-RELATED POLICY REAL ESTATE IN JAPAN 2015 OVERVIEW OF PRESENT LAND AND HOUSING TAXATION -

Main Requirements Corporation Loan repayment period must be Floor space must be 50 m² 10 years10 or more or more or 1) 1) 2) *Special measure through the end of March 2017 Only corporation tax regardless of posses sion period 39% of capital gains on capital gains from land owned for 5 years or less (income tax 30% + residential However, 20% for tax 9%). transfers to the State, + etc. (income tax 15% taxresidential 5%). Corporation tax (national tax): (national tax Corporation tax) (municipal tax inhabitant Corporate Corporate enterprise tax (municipal tax) Short-term transfer: Amount Amount ❍ ❍ 4) 4) ❍ Maximum

Residence Tax Deducted from from Deducted ¥97,500 per year ¥97,500 - ¥136,500 per year¥136,500

2 *

Amount Amount ¥2 million¥2 ¥4 million Maximum (¥5 million) (¥3 million) Income Tax Deducted from from Deducted 53 Period 10 years 3% of real property tax assessment amount on housing or land purchasers (limited Deduction Deduction

If taking outa mortgage to buya house, for10-year a of theperiod mortgage1% balance Real Estate in Japan 2015 Rate 1.0% Personal Deduction Deduction Annual tax of 0.15% on valuation amount underAnnual inheritance tax of 0.15% tax law levied on landowners and : Taxation of 10-50% depending on the inheritance tax assessment amount. tax inheritance the on depending 10-50% of Taxation : 2 Annual tax of the of 0.3% valuation amount of fixed asset tax that is levied on land and building * Annual tax of 1.4% of the real Annual property tax of 1.4% tax assessment amount levied on owners of land and buildings : Taxation in accordance with contract amount on the preparation of sales contracts, etc. : There are special tax exemption cases if gift funds for purchasing a home are received from a lineal ¥20 million¥20 ¥40 million (¥50million) (¥30 million) by Deduction by Maximum Loan Amount Covered Covered Amount 1 * 5% Figures in parentheses are for long-life quality housing and low-carbon housing. Figures in parentheses are for long-life quality housing The 5% consumption tax rate maximum deduction amount and so forth are applied to cases where a 5% consumption tax rate The 5% consumption tax rate maximum deduction and to transactions of existing housing between individuals that have been has been applied based on a provisional measure designated as exempt from consumption tax. *Special measure through the end of December 2016 Tax Rate 8% or 10% Applicable Applicable 2 1 owners in city districts as above). (same 14% on a portion million14% ¥20 or less (income + residential tax 10% tax 4%) 20% on a portion more than + residential million ¥20 (income tax tax 15% 5%). The following applies to capital gains on specific land owned for more than 5 years. tion ¥60million or less (income 20%+ residential on a tax 10% tax 4%); portion more than ¥60 + residential million (income tax tax 15% 5%). After subtracting the special deduction of ¥30 million on capital gains from residential land and buildings on owned a por for years; more 14% than 10 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 2015. measure through March 2015) and extension prolonging special measures on residential land taxation standards (1/2; limited limited extension and prolonging special measures taxation land residential on standards (1/2; measure through March 2015) measurethrough (*Therethe end of areMarch special2015) reductions for acquisitions of certainhouses *Referto 10. and lots). houses). 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. (there are certain measures for adjusting the burden). the adjusting for certain measures are (there Uniform tax rate of 20% on capital gains of land owned for more than 5 years + residential (income tax tax 15% 5%). leaseholders *Application has been suspended for the time being (from 1998). (from being time the for suspended been has *Application leaseholders Transfer losses accompanying the disposal or replacement of residential property deducted from income and carried forward for TheHousing loantax deduction system: Realestate acquisition tax (municipal tax): Stamp tax (national tax) (national tax Stamp Registration and license tax (national when Taxed tax): real registering estate (*Special reduction measures exist for certain Inheritance tax (national tax) (national tax Inheritance Income tax (national tax and capital gains) ascendant (temporary measure until December 2014) ascendant (temporary December measure until 2014) Gift tax (national tax) Income tax (national tax) ❍ Personal residential tax (local tax) City planning tax (local tax): Land value tax (national tax): Fixedasset tax (local tax): Transfer of residential property: Superior transfer after long-term ownership: transfer after ownership: long-term Superior * * General transfer after long-term ownership: transfer after ownership: General long-term

• • ❍ ❍ ❍ ❍ ❍ 3) 3) ❍ ❍ Personal residential tax (local tax and capital gains): 1) 2) ❍ ❍ ❍ ❍

(Gift) Transfer *Item for which an extension of the applicable period is expected based on 2015 tax system revisions. Ownership Acquisition

(Inheritance) Overview of Present Land and Housing Taxation Housing and Land of Present Overview General General Housing ¥7 million¥7 million¥7 ¥5 million¥5 ¥3 million ¥10 million ¥10 Other CasesOther Housing ¥8 million ¥12 million ¥12 million ¥12 ¥15 million ¥15 ¥10 million ¥10 High-Quality - General General Housing ¥7 million¥7 ¥10 million ¥10 ¥25 million ¥25 tion Rate Tax Housing ¥15 million ¥15 ¥12 million ¥12 ¥30 million High-Quality Application Consump of 10% – 2015 tions of funds for acquisition of housing, etc. for acquisition of housing, tions of funds housing resale of housing relating to purchase and relating to housing (abolition of building age requirement) relating to housing (abolition Special measures for taxation base for real estate acquisition tax Special measures for taxation 2-year extension of special measures for real estate acquisition tax 2-year extension of special 2-year extension of special measures for registration license tax on for registration license of special measures 2-year extension Enhancement and extension of special measures relating to dona- measures relating and extension of special Enhancement Contract Year 1. 1. 2. 3. 4. Tax policy supporting the formation of quality housing stock the formation of Tax policy supporting In addition to increasing the maximum tax-exempt amount as shown below, In addition to increasing the extended. the application period has been Oct. 2018 – JuneOct. 2019 2018 Oct. 2016 – Sept.Oct. 2017 2016 Oct. 2017 – Sept.Oct. 2018 2017 Jan. 2016 – Sept.Jan. 2016 2016 * ■ 54 Real Estate in Japan 2015 Strategic Special Zones urban disaster-prevention capacity commercial property related to land owned for a long time property related to land commercial tax on land, etc. etc. ing to land transactions, depreciation deduction system relating to urban district redevelop- depreciation deduction system relating to urban ment projects velopment rights relating to land and residential buildings relating to land and residential estate acquisition tax for J-REITs, etc. tion license tax and real ing to cogeneration facilities 2-year extension of special measures to promote enhancement of 2-year extension of special measures to promote 2-year extension of special measures for registration license tax relat- 2-year extension of special Improved application of group taxation regime when converting rede- Improved application of group taxation regime when 2-year extension and enhancement of special measures for registra- 2-year extension and enhancement 2-year extension of special measures to reduce fixed asset tax relat- fixed asset tax 2-year extension of special measures to reduce Increased convenience of duty-free procedures for foreign tourists Increased convenience 2-year extension of special measures and abolition of additional 2-year extension of special measures and abolition 3-year extension of special measures for real estate acquisition tax 3-year extension of special Enhancement and creation of special measures relating to National Enhancement and creation of special measures 3-year extension of burden adjustment measures for real property measures for real of burden adjustment 3-year extension 2-year extension of urban renaissance promotion tax system 2-year extension of urban 2-year, 3-month extension of preferential measures for replacing measures for extension of preferential 2-year, 3-month 2. 2. 1. 1. 3. 4. 1. 1. 2. 3. 4. 5. 5. 6. 6. 6. 5. 5. Tax policy to encourage urban renewal Tax policy to encourage Tax policy to encourage domestic investment and enhance the econo- and enhance encourage domestic investment Tax policy to potential my’s growth The following revisions are anticipated regarding the land and housing tax system in the 2015 revisions 2015 in the tax system housing land and the regarding are anticipated revisions following The ■ ■

REAL ESTATE IN JAPAN 2015 OVERVIEW OF PRESENT LAND AND HOUSING TAXATION REAL ESTATE IN JAPAN 2015 REAL ESTATE-RELATED DATA 1.1 1.7 1.4 1.4 1.6 1.6 1.8 1.2 0.9 0.7 0.7 0.5 0.2 -1.7 -1.5 -2.1 -0.1 -0.5 -0.6 -0.6 14 14 2014 58.2 93.8 82.8 99.3 74.4 93.3 (year) (year) 0.0 0.0 -1.6 -1.6 -1.8 -2.1 -2.5 -2.8 -0.1 -0.9 -0.9 -0.7 -3.3 -0.5 -0.5 -0.6 -0.5 -0.6 -0.6 -0.3 13 13 (unit: %) 163.4 2013 12 12 -1.9 -1.7 -1.7 -1.5 -1.5 -1.6 -1.6 -1.6 -1.6 -1.3 -1.3 -3.1 -2.6 -2.6 -2.3 -3.3 -3.6 -4.3 -0.6 -0.4 -0.8 2012 Tokyo usage and areas Tokyo Nominal GDP All usage and areas Nominal GDP 11 11 186.7 -1.9 -1.7 -1.8 -1.2 -2.7 -2.7 -2.5 -2.5 -2.0 -2.4 -2.4 -3.9 -3.6 -3.6 -3.0 -3.8 -4.8 -0.6 -0.8 2011 10 10 -7.1 -7.4 -7.4 -7.3 -2.5 -6.1 -6.1 -6.1 -6.1 -4.9 -4.5 -3.3 -4.6 -5.3 -3.8 -5.0 -5.4 -5.3 -4.8 -4.2 -4.2 2010 09 09 -6.1 -6.1 -2.0 -2.3 -2.8 -2.8 -5.9 -5.9 -4.7 -4.7 -3.5 -3.5 -3.5 -3.3 -4.4 -5.4 -3.8 -4.2 -3.2 -3.2 2009 08 08 1.7 7.2 1.3 2.7 6.7 6.7 2.8 5.5 5.5 4.3 5.3 3.4 8.4 3.8 3.8 3.8 3.8 -1.4 -1.4 -1.8 -1.8 12.2 10.4 10.4 07 07 2008 Tokyo commercial areas commercial Tokyo areas residential Tokyo All commercial areas All commercial areas All residential 7.8 1.7 9.4 9.4 0.1 1.8 2.7 8.9 2.3 2.8 2.8 4.6 4.6 0.4 3.6 8.3 3.8 3.8 -2.7 -2.8 -2.8 06 06 2007 05 05 1.0 1.0 0.9 0.8 -1.4 -1.4 -1.6 -1.6 -1.3 -1.0 -1.2 -2.7 -2.7 -2.8 -0.9 -0.9 -5.5 -0.7 -4.6 -4.2 2006 04 04 -7.5 -2.5 -3.9 -3.7 -3.5 -5.6 -5.4 -5.4 -3.3 -5.0 -4.6 -3.3 -5.0 -6.0 -3.2 -3.2 -3.2 -5.2 2005 03 03 -7.4 -7.4 -5.9 -5.9 -4.9 -4.9 -5.7 -5.7 -4.7 -5.7 -8.7 -4.5 -5.3 -5.8 -6.5 -8.8 -8.3 -8.0 -6.0 -6.2 2004 02 02 -7.1 -9.1 -5.1 -5.1 -6.1 -6.1 -5.9 -5.9 -8.7 -5.6 -5.6 -5.8 -5.8 -6.5 -6.4 -8.0 -6.0 -6.8 -8.0 -8.8 -10.2 2003 01 01 -7.4 -7.4 -9.1 -8.1 -8.1 -5.9 -5.9 -5.9 -5.9 -6.9 -4.4 -5.0 -4.0 -5.3 -6.5 -8.5 -8.3 -8.6 -6.4 -5.2 -11.3 2002 2000 2000 55 -1.9 -7.5 -7.4 -7.4 -7.0 -6.1 -6.1 -2.8 -2.8 -4.9 -6.7 -5.6 -3.8 -5.6 -5.8 -8.0 -6.4 -8.3 -4.2 99 99 -11.0 2001 98 98 -7.0 -7.4 -7.4 -7.3 -1.8 -9.6 -9.6 -9.6 -9.6 -4.1 -2.3 -6.1 -6.1 -5.9 -5.9 -4.9 -6.9 -3.4 -3.0 -6.6 -8.0 -6.8 -11.3 2000

97 97 -7.1 -1.9 -9.6 -9.6 -8.1 -5.9 -5.9 -4.9 -5.7 -3.0 -3.3 -4.6 -3.8 -6.4 -6.4 -6.8 -5.2 -11.2 -10.1 -10.2 Real Estate in Japan 2015 1999 96 96 -1.9 -7.5 -1.7 -1.5 -1.4 -1.4 -5.1 -5.1 -6.1 -6.1 -2.4 -2.4 -2.3 -3.9 -2.2 -3.0 -3.2 -6.8 -0.6 -0.8 -8.2 -6.2 1998 95 95 -7.8 -1.7 -1.6 -1.6 -1.6 -1.6 -9.9 -2.9 -5.1 -5.1 -2.8 -2.2 -3.4 -3.4 -5.4 -3.0 -4.3 -8.5 -0.4 -11.5 -13.2 1997 94 94 -7.0 -1.8 -9.8 -2.6 -2.6 -3.6 -4.6 -5.0 -5.8 -4.0 -4.3 -6.4 -6.0 -5.2 -0.6 -17.2 -12.6 -12.6 -16.0 -16.0 -15.8 -15.8 93 93 1996 -1.9 -1.6 -1.6 -1.2 -2.9 -2.8 -5.5 -5.6 -3.0 -4.0 -4.0 -5.0 -4.8 -0.3 92 92 -12.7 -15.4 -15.4 -14.8 -15.3 -15.3 -10.0 -10.0 1995 91 91 7.2 6.6 4.8 11.7 19.9 17.0 11.4 11.4 16.7 16.7 22.1 16.6 16.6 15.4 15.4 56.1 56.1 18.6 18.6 53.9 22.4 22.4 22.0 46.3 20.2 1990 90 90 1.7 1.7 7.2 1.6 1.6 2.7 2.5 2.6 2.6 2.4 2.4 2.4 2.4 2.4 2.4 2.0 2.3 5.0 5.8 3.0 2.2 3.8 3.8 3.2 1985 89 89 88 88 Study Year 87 87 Tokyo metropolitan area: All existing city areas and suburban improved areas according to the Tokyo MetropolitanOsaka metropolitan Area Improvement area: All existing Law. city areas and suburban improved areas according to the KinkiNagoya Metropolitan metropolitan Area Adjustment area: All city Law. improvement areas according to the Chubu Metropolitan Area Adjustment Law. 86 86 The nominal GDPfigures were calculated based on 93SNA (fixed-base method)until and based 1993 on 93SNA (chain-linking method) and for after. 1994 The Tokyo Metropolitan Area GDP represents the sum of nominal prefectural GDP of Tokyo, Kanagawa, Saitama and Chiba Prefectures. For each year, the change rate is the simple average of standard land price change rates since the previous year. The nominal GDP and the Tokyo Metropolitan Area GDP represent figures for respective fiscal years.

Land areas are divided as follows Tokyo Area Metropolitan Tokyo National Public Notice of Land Prices by the Ministry of Land, Infrastructure, Transport and Tourism; Annual ReportEstimates on National of GDP by Accounts, the Cabinet Office. Annual Report on Prefectural Accounts and Quarterly 2. 2. 2. 2. 3. REAL ESTATE-RELATED DATA

Tokyo metropolitan area metropolitan Tokyo area metropolitan Osaka 3 major metropolis average average Local average National area metropolitan Tokyo Nagoya metropolitan area metropolitan Nagoya Osaka metropolitan area metropolitan Osaka area metropolitan Nagoya Nagoya metropolitan area metropolitan Nagoya 3 major metropolis average average Local average National area metropolitan Tokyo Osaka metropolitan area metropolitan Osaka National average National 3 major metropolis average average Local

1985 1985 Residential All usage All Commercial History of Year-on-Year Changes in Published Land Prices Changes Published in History Year-on-Year of History of Standard Land Price and as Nominal 100 GDP with 1983 50 60 50 80 Notes: 1. Notes: 1. Notes: 1. Notes: 1. Usage, etc. Usage, 100 150 250 200 350 300 140 120 100 180 160 220 200 240 1 Land Prices Source: Source: Public Notice of Land Prices, Ministry of Land, Infrastructure, Transport and Tourism.

Housing and Housing Lots History of Housing Starts 住宅建設戸数の推移

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 1,213 1,249 <2.9> <3.6> 516 1,180 1,193 <4.7> <4.0> <-1.1> 1,173 1,146 1,174 538 544 (38.5) <-12.0> <-3.3> <2.5> <1.7> 518 426 418 <-2.4> (41.8) (43.5) (34.7) 442 459 467 (41.5) 1,036 1,039 (1.8) 444 (34.5) 455 (37.6) (37.7) (39.1) (39.2) <-19.4> <0.3> 987 1,000 26 (39.7) 431 445 893 <10.6> 352 <6.2> 370 (41.6) (41.6) 819 841 (21.6) 775 <2.7> (37.5) 345 <5.6> 321 26 (1.7) 37 (2.2) 24 (1.8) <-25.4> 387 11 (0.9) 290 (35.9) (23.2) 12 (1.0) 292 351 9 (0.7) 9 (0.7) (23.2) 312 346 9 (0.8) 311 (34.4) 16 (1.3) 10 (0.8) 8 (0.7)

20 (1.6) (35.6)

(26.1) 10 (0.8) 282 (25.5) (28.5) 344 334 349 370 383 (40.2)

227 5 (0.5) (23.9) (29.3) 316 (29.6) (29.8) (28.4) (29.3) 10 (1.0) 11 (1.1) (18.1) 636 (27.6) 6 (0.7) 283 8 (0.9) 259 500 (39.0) 273 7 (0.8) 239 250 (26.3) 551 (27.3) (26.2) 212

13 (1.7) (28.0) 474 (37.1) 476 (28.4) 460 451 438 438 164 (25.9) (36.8) (28.5) (33.6) (38.8) (21.1) (37.1) (36.1) 377 366 373 367 353 353 356 317 (32.1) (31.9) (31.8) (30.8) (28.3) 312 311 287 309 305 (35.7) (27.7) (35.4) (30.1) (29.9) (37.0) (37.7) (36.2)

0 1985 90 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 (ﬁscal year)

Source: Statistics on Construction-started Dwelling Houses issued by MLIT. Notes: 1. Owner-occupied housing is housing that the owner constructs for the purpose of residing there. Leased housing is housing that the owner constructs for the purpose of leasing it. Issued housing is housing that a company, government agency, school, or the like constructs for the purpose of having its employees, staff, teachers, etc., reside there. Condominium housing is housing constructed for selling as ready-built housing or lots. 2. There may discrepancies in the totals due to rounding. 3. The figures in parentheses represent the breakdown by usage (%). The figures on the graph in parentheses are year-on-year variation (%).

History of Floor Space per Unit for New Housing Starts (by Overall Average and Use)

Overall average Owned house Issued house Rental house Ready-built homes for sale 150 (㎡/unit) 137.4 141.0 139.2 139.0 139.3 139.0 136.8 137.0 135.8 134.8 134.2 133.8 133.3 127.4 131.6 130.2 127.2 125.9 125.5 124.9 125.0

100 97.5 97.5 98.1 96.1 93.0 96.3 92.4 94.1 95.0 95.9 93.8 93.8 95.8 91.5 95.3 93.6 93.1 92.4 92.2 88.5 83.7 95.4 96.9 85.3 83.1 83.1 90.6 93.1 92.3 92.8 92.7 90.3 89.4 88.5 90.2 90.0 88.9 88.4 85.4 84.5 87.4 80.8 69.6 71.7 68.9 72.1 70.8 68.9 69.5 69.9 70.6 79.8 75.2 67.4 66.8 63.6 65.7 80.5 71.3 70.1 70.6 72.8 53.2 53.8 50 51.2 53.0 51.4 50.0 48.8 50.4 50.8 51.1 51.0 46.8 45.1 47.4 46.7 46.0 45.5 45.5 53.0 52.3 52.0 48.0

0 1985 90 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 (ﬁscal year)

Source: Statistics on Construction-started Dwelling Houses issued by MLIT.

History of Floor Space per Unit for New Housing Starts (Tokyo Area: by Overall Average and Use)

Overall average Owned house Issued house Rental house Ready-built homes for sale 150 (㎡/unit)

127.9 127.5 125.9 125.3 126.7 126.8 126.8 125.2 125.0 123.7 124.0 124.3 124.8 123.6 123.2 120.1 119.9 119.4 119.1 118.4 118.8

100 90.3 92.6 92.4 90.9 90.7 89.7 89.8 84.9 88.4 86.7 87.1 88.8 88.5 88.0 84.6 88.2 87.8 86.2 86.1 83.9 81.9 87.7 86.1 88.1 88.4 80.0 80.4 77.9 77.3 78.0 80.1 79.9 79.0 78.0 81.9 73.7 85.3 86.2 85.2 74.3 77.0 78.8 71.1 67.0 65.5 75.5 63.5 64.8 70.2 61.7 70.4 60.8 63.0 63.3 71.3 68.9 66.9 55.6 58.0 55.8 67.0 66.0 50 51.6 46.4 55.5 55.3 52.5 52.9 52.2 50.1 46.0 45.7 46.2 46.0 44.7 43.3 44.7 43.3 42.5 41.9 41.6 41.9 43.2 45.2

0 1985 90 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 (ﬁscal year)

Source: Statistics on Construction-started Dwelling Houses issued by MLIT. Note: Tokyo area = Tokyo, Kanagawa, Saitama, and Chiba prefectures

Real Estate in Japan 2015 REAL ESTATE IN JAPAN 2015 REAL ESTATE-RELATED DATA ) 9 8 7 6 5 4 3 2 1 10 (%) 14 76.6 76.6 75.1 75.1 ) 12 14 (year) 18,814 3,029 1,526 (year) 44,913 ﬁscal year ( 13 3.4 13 16.5 79.6 79.6 79.5 79.5 13 24,691 11 595 2,639 56,478 ﬁscal year ( 12 90.0 90.0 91.9 90.0 12 3.1 14.5 Kinki metropolitan area Kinki metropolitan 12 23,266 10 593 45,602 2,815 11 2.9 11 89.4 89.4 88.1 88.1 13.9 11 20,219 44,494 09 882 2,290 10 2.7 10 90.9 87.4 87.4 90.9 12.9 10 21,716 44,535 08 772 Area of approved land readjustment projects land readjustment approved of Area housing construction permits of Area 3,098 09 2.9 09 13.4 09 19,784 84.6 80.2 80.2 84.6 36,376 07 914 3,805 3.4 08 08 16.9 78.3 78.0 78.0 08 22,744 43,733 06 797 Tokyo metropolitan area area metropolitan Tokyo 3,448 07 3.3 07 83.8 83.8 83.8 17.1 07 30,219 61,021 05 721 06 3.8 06 3,312 89.7 86.3 86.3 89.7 06 19.3 Nominal housing investment (left scale) investment Nominal housing Nominal housing investment/nominal GDP (right scale) investment/nominal Nominal housing 30,146 74,463 04 05 3.8 05 05 33,064 19.0 93.5 90.0 1,735 3,437 84,243 3.8 04 04 04 31,857 19.0 03 89.3 91.4 89.3 1,510 3,035 85,429 57 03 03 3.8 03 31,258 18.7 90.1 86.0 86.0 90.1 02 83,183 1,759 2,759 02 39,087 3.8 02 02 18.8 88.0 85.0 85.0 88.0 88,516 01 1,870 3,091 01 36,673 01 01 4.0 19.5 90.3 86.8 86.8 90.3 Real Estate in Japan 2015 89,256 5,575 3,182 2000 39,737 4.2 21.4 2000 91.7 91.7 88.8 88.8 95,635 2000 2000 99 4,778 3,682 99 35,625 Kinki metropolitan area Kinki metropolitan 99 4.3 99 21.7 86,297 91.3 91.3 89.9 89.9 98 3,849 3,887 98 29,452 98 4.2 98 21.2 66,308 86.0 84.4 84.4 86.0 97 4,381 4,387 97 33,147 4.7 97 7 24.3 70,543 88.0 84.7 84.7 88.0 96 96 44,430 4,848 4,761 96 5.8 96 82,795 29.3 92.5 92.5 90.0 90.0 95 38,611 95 Tokyo metropolitan area area metropolitan Tokyo 95 5.2 6,046 5,215 84,885 25.7 95 90.890.8 89.6 89.6 1,097 90 27,299 90 5.8 90 39,548 26.0 90 4,642 4,200 81.4 74.1 81.4 74.1 ) ) 24,841 1985 4.8 40,709 units The construction permit is the approval granted primarily for the objective of building a house based on the City Planning Law. City Planning the on based house a building of objective the for primarily granted approval the is permit construction The The area of approved land readjustment projects represents the total for individuals, joint projects, associations, public bodies, government agencies, the Urban Development Development Urban the agencies, government bodies, public associations, projects, joint individuals, for total the represents projects readjustment land approved of area The JAPAN Innovation, Regional and Enterprises Medium & Small for Organization (present Corporation Development Regional Japan Agency), Renaissance Urban (present Corporation Corporation. Supply Housing Local the and Agency) Renaissance Urban and 15.6 84.1 72.6 ( 1985 5,071 4,463 1985 1985 Prepared from the White Paper on Land, Infrastructure and Transport in Japan by MLIT. Prepared from the Annual Report on National Accounts 2013. Accounts National Report on Annual the from Prepared 2. 2. trillion yen ( History of Housing Construction Permits and Area of Approved Land Readjustment Projects History of New Condominium Annual Contracted Rates History of New Condominium Sales History of Housing Investment 80 Notes: 1. 1. Notes: 2,000 4,000 6,000 8,000 (ha) 100,000 20,000 40,000 60,000 80,000 10 15 20 25

Source: Source: Source: 100 (%) 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 5,060 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 3,647 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 14 (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 1,180 1,119 1,000 907 1,097 859 880 817 832 858 755 808 776 793 739 731 683 706 555 583 612 609 500 488 392 388 367 276 355 308 335 289 358 318 281245 291 275 236 227 267 264 250 259 240 142 177 186 121 90 90 91 85 73 75 113 86 97 119 0 170 201 63 60 65 69 60 2 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 （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.

History of Office Building Vacancy Rates

14 (%) Metropolitan areas Tokyo Nagoya Osaka National average 12

10 7.987.98 8 7.927.92 7.53 6 7.53

4 5.475.47

0 1990 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 (year) 20 (%) Local city areas and nationally Sapporo Yokohama Sendai Fukuoka 18

12 11.0611.06 10

8 8.388.38 7.787.78 6 7.707.70

0 1990 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 (year)

Source: Miki Shoji Co., Ltd., “Office Data.” Notes: 1. Figures as of December each year. 2. National averages calculated by the editors. 58

Real Estate in Japan 2015 REAL ESTATE IN JAPAN 2015 REAL ESTATE-RELATED DATA 14 14 9,207 9,207 9,103 8,189 (year) (year) (year) (year) 10,422 16,953 11,123 10,819 10,742 13 13 12 12 (unit: billion yen) (unit: billion yen) 11 11 10 10 09 09 08 08 07 07 06 06 05 05 Yokohama Fukuoka 04 04 59 03 03 Nagoya National average 02 02 Real Estate in Japan 2015 Sapporo Sendai 01 01 Tokyo Osaka 2000 2000 99 99 98 98 97 97 Local city areas and nationally and nationally city areas Local Metropolitan areas areas Metropolitan 96 96 95 95 The areas covered in Tokyo are Chiyoda Ward, Chuo Ward, Minato Ward, Shinjuku Ward, and Shibuya Ward. The buildings covered are buildings with a standard floor space of 100+ tsubo in Tokyo andbuildings with a total floortsubo space in Sapporo, of 1,000+ tsubo 300+ in Osaka, tsubo 500+ in Sendai, tsubo 500+ in Nagoya, tsubo 100+ in Yokohama, and 1,000+ tsubo in Fukuoka. Miki Shoji Co., Ltd., “Office Data.” 2. 2. 0 0 1990 1990 5,000 5,000 History of Asking Rent Notes: 1. Notes: 1. 10,000 20,000 (yen/tsubo) 15,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 45,000 (yen/tsubo) Source: Others

Valuation of Real Estate in Gross National Assets (unit: trillion yen) 1 Year 1985 1986 1987 1988 1989 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Category Gross national assets 3,936 4,536 5,341 5,994 6,858 8,430 8,483 8,575 8,979 8,996 8,913 8,508 8,457 8,488 8,448 8,669 9,295

Valuation of real estate 1,320 1,578 2,014 2,203 2,538 1,945 1,871 1,824 1,808 1,839 1,880 1,870 1,786 1,750 1,713 1,681 1,683

(34) (35) (38) (37) (37) (23) (22) (21) (20) (20) (21) (22) (21) (21) (20) (19) (18)

Housing 159 161 173 182 201 337 340 345 347 356 361 365 350 349 344 339 350

Non-housing buildings 156 160 169 181 201 211 212 212 212 214 216 218 209 209 210 207 211

Land 1,004 1,257 1,673 1,840 2,136 1,397 1,319 1,267 1,249 1,269 1,303 1,287 1,227 1,192 1,159 1,135 1,122

Financial assets 2,132 2,455 2,800 3,231 3,706 5,567 5,683 5,807 6,203 6,167 6,006 5,590 5,651 5,724 5,715 5,978 6,751

Source: The Cabinet Office’s National Economic Statistics Report (2000) was used for 1985 – 1989 and the same for 1996 and after (2013 version). Notes: 1. Revisions to the counts were done by tracing back the data from 1992 onward and so the premise of these figures differs from that of 1989 and earlier. 2. The figures in parentheses show the percent of gross national product.

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

Year 1980 1985 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Real estate 22,654 32,358 53,517 53,576 53,788 54,042 55,365 55,721 56,013 56,879 56,890 56,726 56,505 56,181 Construction 22,506 25,381 32,331 31,667 31,200 29,018 29,547 29,385 28,091 26,948 26,198 26,461 26,797 27,914 Manufacturing 70,232 94,672 98,222 98,914 100,915 99,699 100,268 103,565 98,666 83,351 94,333 87,284 87,948 88,284 Service 28,063 46,390 101,155 100,853 100,656 88,433 90,731 94,012 94,580 91,541 91,266 91,183 93,254 94,871 Finance/Insurance 12,440 16,971 29,834 30,799 30,383 30,789 30,215 30,808 25,082 23,742 23,766 22,430 21,865 21,514 Total for all industries 249,050 333,678 495,207 494,519 499,252 500,608 503,291 509,559 496,705 467,336 478,775 468,964 472,746 476,451 (Reference) GDP 240,175 320,418 499,147 498,855 503,725 503,903 506,687 512,975 501,209 471,139 482,384 471,311 475,110 480,128

Source: The Cabinet Office's National Economic Statistics Report (2000) was used for 1980 and 1985 and the same (2013 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 onward so the premise of these figures differs from that of 1985 and earlier.

History of Sales Share by Industry 1

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 1.2 1.3 1.4 1.5 1.3 1.3 1.2 0 1.1 1.1 1.1 0.9 1.0 0.9 0.9 0.9 1.0 1.1 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)

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 Real 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 parentheses represent the share (%) versus the sales of all industries.

Real Estate in Japan 2015 REAL ESTATE IN JAPAN 2015 REAL ESTATE-RELATED DATA - 9.9 9.5 4.1 3.1 2.9 0.7 2.5 2.5 2.0 2.4 2.4 2.6 2.6 2.8 4.4 4.4 3.5 3.4 0.8 3.0 3.2 (％) -0.1 -0.1 37.4 37.4 1.28 32.9 0.96 0.72 28.5 35.7 35.7 0.82 0.26 30.2 2012 12 10 8 6 （0.1）（0.9） ¥1 billion or more 422 1.1 1.9 1.9 1.7 1.7 9.3 4.1 3.1 1.4 1.4 1.5 1.6 1.6 1.3 2.7 3.7 2.5 2.4 2.4 2.8 2.8 3.3 11.7 27.4 27.4 29.6 29.6 26.9 26.9 0.95 1.22 34.9 0.21 0.85 0.68 35.3 ¥100 million less than to ¥1 billion 2,929 2011 9.1 1.7 1.4 1.4 1.6 1.6 2.9 2.7 2.7 2.7 2.4 2.4 2.3 2.0 2.3 2.8 2.0 2.8 4.4 4.4 3.0 3.8 3.8 3.2 27.1 12.1 37.0 0.61 0.61 0.96 1.22 25.4 25.4 35.6 0.83 0.22 30.0 2010 12 11.7 （38） 321,182 （61） (unit: billion yen) 122,010 195,821 (unit: billion yen) Less than ¥10 million ¥10 million to less than ¥100 million 1.1 1.9 1.9 1.9 7.5 1.7 9.3 (ﬁscal year) 3.1 1.4 1.4 1.3 2.3 2.4 2.4 2.0 2.3 4.0 2.2 -0.7 -0.5 -0.6 -0.4 37.5 13.0 0.61 0.61 1.28 0.71 0.95 26.4 26.4 0.25 34.5 30.6 2009

11 11.0 1.9 7.6 7.6 1.7 2.1 1.0 1.3 1.3 5.9 5.9 5.7 5.7 5.7 5.7 3.7 2.5 2.4 2.4 2.5 2.0 2.0 2.3 5.5 5.5 3.0 8.8 8.8 302,939 37.5 29.0 1.27 1.04 1.06 0.67 0.67 24.6 24.6 33.9 26.2 0.26 2008 10 10.9 1.7 3.1 1.6 1.6 9.2 2.9 3.9 8.7 3.7 2.0 2.8 4.5 4.0 3.4 8.6 8.6 8.6 3.4 2.2 3.3 1.17 11.0 301,005 27.0 1.01 29.3 1.28 38.1 0.73 25.0 25.0 33.5 0.30 2007 09 9.9 9.7 1.7 9.6 9.6 3.1 1.8 2.9 2.4 2.4 2.8 4.6 4.6 5.5 5.5 4.0 3.5 3.6 3.4 3.0 2.2 10.8 1.14 11.0 32.1 29.4 29.4 0.97 1.28 10.0 10.0 10.2 24.3 32.8 0.27 0.63 38.8 Percentage of total companies for all industries (right scale) companies for of total Percentage 299,818 2006 9.1 1.7 2.1 1.5 3.9 2.7 2.7 2.0 2.0 4.4 4.4 5.4 3.4 3.6 6.8 3.3 3.2 08 11.1 1.14 27.1 17.5 10.7 10.7 1.27 0.61 0.61 0.97 30.1 10.6 10.6 10.2 26.4 26.4 38.7 0.29 2005 297,586 9.1 1.7 9.6 9.6 3.1 8.1 3.1 3.1 1.8 1.8 2.3 2.3 6.5 6.5 3.5 4.8 8.5 3.4 3.4 2.2 2.2 1.11 29.8 1.27 36.1 36.1 28.9 22.9 10.2 20.7 07 0.89 0.89 0.28 0.66 10.6 2004 293,330 7.5 2.1 1.6 1.6 1.4 1.4 1.4 1.4 1.8 2.9 2.9 4.9 5.9 5.9 2.7 3.7 2.0 2.0 2.8 4.5 4.4 4.4 3.0 3.3 5.2 27.1 11.0 0.76 1.27 1.09 32.5 22.5 28.3 0.27 0.66 06 2003 10.6 288,638 7.1 2.1 9.6 9.6 3.1 1.5 1.6 1.6 1.3 1.6 1.6 1.3 2.5 2.6 2.6 2.4 2.4 2.6 2.6 2.4 2.4 2.3 2.3 2.0 4.6 4.6 3.4 3.0 27.4 27.4 14.3 1.06 1.20 24.8 0.69 22.4 22.4 0.27 0.68 30.2 2002 05 10.4 284,693 1.1 9.7 1.7 2.1 7.2 6.1 6.1 1.4 1.4 1.4 1.4 1.4 1.4 1.6 1.6 1.6 1.6 1.6 1.6 1.0 2.5 2.4 2.4 2.3 2.2 2.2 3.3 0.2 0.2 1.19 27.9 19.8 1.07 0.67 0.67 22.0 25.2 0.26 0.66 2001 04 10.4 281,046

1.9 2.1 1.6 1.6 1.6 1.6 1.6 1.6 1.3 1.8 2.9 2.9 2.5 2.6 2.6 2.4 2.4 2.0 2.8 2.8 4.3 8.6 5.3 3.0 4.2 1.11 1.16 29.9 21.2 14.6 14.6 25.7 25.7 20.7 0.69 0.24 0.66 61 2000 03 10.5 277,143 7.9 1.9 1.9 1.7 2.1 2.1 1.5 1.6 1.6 1.4 1.4 1.4 1.4 1.8 0.9 5.7 5.7 2.6 2.6 2.3 2.3 2.3 4.3 0.6 3.4 0.8 1.17 1.08 22.6 22.6 28.3 0.69 22.3 0.62 0.25 20.8 1999 02 10.4 273,202 1.9 1.9 1.9 7.0 1.5 1.5 1.6 1.6 1.6 1.6 1.3 1.3 1.3 1.8 1.2 2.4 2.4 2.0 3.6 0.8 0.2 -8.4 -0.5 -0.3 17.7 0.18 19.2 27.4 27.4 21.4 21.4 1.04 1.22 0.67 0.67 0.64 1998 Real Estate in Japan 2015 01 10.4 1.9 1.7 1.7 1.7 2.1 2.1 2.1 4.1 1.3 1.8 1.2 2.5 2.3 2.3 2.8 4.0 3.0 6.2 -1.8 270,555 -0.1 -0.4 1.12 19.9 27.8 20.1 1.25 0.75 0.69 20.3 0.20 1997 10.4 1.9 1.9 2.1 2.1 5.1 5.1 3.1 1.6 1.6 1.4 1.4 1.2 2.7 2.7 2.5 2.6 2.6 2.4 2.4 2.0 4.3 6.0 3.6 2.2 2000 -2.2 -0.5 1.12 19.9 27.7 19.3 1.27 18.4 18.4 0.73 0.73 0.23 265,166 1996 1.1 7.5 2.1 3.1 1.5 1.4 1.4 1.6 1.6 1.8 2.7 2.7 2.7 2.5 2.4 2.4 99 2.0 2.0 4.5 3.5 3.6 2.2 10.4 -0.1 -0.3 1.12 0.74 18.9 18.9 26.1 26.1 1.23 18.4 18.4 0.69 0.22 261,128 1995 1.1 7.3 6.1 6.1 5.1 5.1 8.1 8.1 3.1 2.7 3.9 4.7 4.6 4.6 4.6 4.6 5.6 3.5 3.5 3.5 5.3 3.4 3.8 3.8 4.2 19.1 98 11.5 1.31 26.1 26.1 15.6 15.6 23.9 1.35 0.92 0.90 0.37 0.37 10.4 1990 257,052 1.1 2.1 2.1 9.4 9.4 3.1 3.1 1.6 1.6 1.4 1.4 1.3 3.9 3.9 2.4 2.4 2.0 2.3 2.8 4.4 4.4 4.3 3.5 8.0 3.3 3.8 3.8 17.7 1.16 16.1 16.1 14.9 15.4 15.4 1.44 1.44 1.54 0.42 0.42 0.88 97 10.4 1985 253,653 96 10.6 260,985 95 10.5 257,358 Construction Steel transport Land Real estate Real Steel transport Land Construction Steel transport Land estate Real Construction Real estate Real Construction Steel transport Land estate Real Steel transport Land estate Real Construction Steel transport Land Real estate Real Construction All industries All All industries All All industries All industries All All industries All All industries All

Year 90 10.1 204,700

Operating profit is sales – (sales cost + sales expenses and general administrative expenses) Ordinary profit is operating profit + (non-operating revenues – non-operating expenses) – revenues (non-operating + profit operating is profit Ordinary *Non-operating received, interest revenues discounts, are investment security received from investment interest, dividends, securities, capital gains etc. *Non-operating expenses are interest paid, discounts, corporate bond interest, amortization of bond issue discount, capital losses from investment securities, etc. Corporations are unlimited partnerships (gomei kaisha), limited partnerships (goshi kaisha), joint stock corporations (kabushiki kaisha) and limited corporations (yugen kaisha) with with kaisha) (yugen corporations limited and kaisha) (kabushiki corporations stock joint kaisha), partnerships (goshi limited kaisha), partnerships (gomei unlimited are Corporations head offices in Japan. Total capital is the total of liabilities indicated on the credit side of the balance sheet (notes payable, accounts payable, accrued payments, corporate bonds, borrowings, allowanc es,reserves, and etc.) capital (paid-in capital, capital surplus and profit surplus) until 2006. it is From liabilities 2007, indicated(total of paid-in on the credit capital, side capital of the balance surplus, sheet profit and net surplus, assets etc.). The figure for fiscal is the breakdown 2012 by paid-in capital amount. The figures in parentheses show the percentage of the total (unit: %). Net worth is the total amount for the capital section on the credit side of the balance sheet. 8.9 Monthly Finance Review: Annual Special on For-Profit Corporation Statistics issued by the Ministry of Finance. of Ministry the by issued Statistics Corporation For-Profit on Special Annual Review: Finance Monthly Prepared using the Monthly Finance Review: Annual Special on For-Profit Corporation Statistics issued by the Ministry of Finance. of Ministry the by issued Statistics Corporation For-Profit on Special Annual Review: Finance Monthly the using Prepared 2. 2. 2. 2. 3. 4. 4.

1985 162,208 0 50 History of AdministrativeIndices by Industry Type History of Number of Real Estate Companies Notes: 1. 1. Notes: Notes: 1. Notes: 1. Ratio of operating operating of Ratio total to profit (%) capital profit/ Operating Total capital Total Total capital Total Ratio of net worth (%) capital total to Net worth/ Turnover of total (times) capital Sales/ Sales capital Total Ratio of ordinary ordinary of Ratio (%) sales to profit profit/ Ordinary Ratio of ordinary ordinary of Ratio total to profit (%) capital profit/ Ordinary capital Total Ratio of operating operating of Ratio (%) sales to profit profit/ Operating Sales 100 150 200 250 (thousand companies) 300 Source: Source: 1 Source: Source:

List of Figures

Number of For-sale Condominiums in Stock Nationwide 11 Changes over Time in Elderly Population/Aging Rate 44

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 Reinforcing Disaster Prevention Functions of Cities (Summary) 45 Flow Chart of Condominium Business 12 Overview of Present Land and Housing Taxation 53 Primary Systems for Promoting Urban Redevelopment 16 History of Year-on-Year Changes in Published Land Prices 55 History of Building Vacancy and Floor Area (Stock) 16 History of Standard Land Price and Nominal GDP with1983 as 100 55 Flow of an Urban District Redevelopment Project 17 History of Housing Starts 56 Major Private City Redevelopment Projects 18-19 History of Floor Space per Unit for New Housing Starts History of Supply Volume of Major Office Buildings in 23 Wards of Tokyo 20 (by Overall Average and Use) 56

History of Office Floor Space in the Wards of Tokyo 27 History of Floor Space per Unit for New Housing Starts (Tokyo Area: by Overall Average and Use) 56 History of Building Lot and Building Transaction Firms 29 History of Housing Investment 57 Flow of Real Estate Brokerage Work 29 History of Housing Construction Permits and Area of Approved Land Market Trends for Existing Housing 30 Readjustment Projects 57

Number of Contracted Stand-Alone Houses in the Tokyo Metropolitan Area, History of New Condominium Sales 57 Average Contracted Price and Building Age 31 History of New Condominium Annual Contracted Rates 57 Number of Contracted Existing Condominiums in the Tokyo Metropolitan Area, Average Contracted Price and Building Age 31 History of Average Price for New Condominium Units 58

History of Real Estate Securitization 32 History of Floor Space for Launched Office Construction 58

Real Estate Investment Trust (Company Type) Structure 33 History of Office Building Vacancy Rates 58

Tokumei Kumiai Structure Using Real Estate Syndication 33 History of Asking Rent 59

Major International Projects Announced in Recent Years Valuation of Real Estate in Gross National Assets 60 (Implemented and Planned) 36 Production by Industry and Gross Domestic Product 60 Major Resort Projects of Japan 40 History of Sales Share by Industry 60 History of Energy Consumption by Usage in the Business Sector 42 History of Administrative Indices by Industry Type 61 Breakdown of Housing Stock and Energy Consumption in Household Sector 42 History of Number of Real Estate Companies 61

Real Estate in Japan 2015 Real Estate in Japan 2015 ● Published: May 15, 2015 (Japanese version: February 27, 2015) ● 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., Mori Building Co., Ltd., Sumitomo Realty & Development Co., Ltd., Tokyo Tatemono Co., Ltd., Tokyu Land Corporation

Real Estate in Japan 2015