Chapter Developing our Businesses Business Overview Summary of business Annual performance The Story of the Group’s Value Creation Single-Family Houses Bolstering competitiveness by expanding business opportunities deriving As a pioneer of industrialized construction, we build Houses sold (Domestic) housing infrastructure—the homes so essential to peo- Single-family houses from social issues ple’s wellbeing. Offering a rich product lineup designed (contracting) 5,917 to accommodate all thinkable needs for safe and enrich- Single-family houses Daiwa House Industry has evolved a distinctive business portfolio by addressing social issues through enhanced and expanded value chains ing living environments, we build both subdivisions and (subdivision) 2,066 custom houses. ZEH ratio 41% and broader product variations anticipating future needs. This diverse portfolio and the ability it gives us to draw on Group synergies enable us to offer customers comprehensive business proposals, the ultimate strength that drives our performance and growth. Leveraging this strength, we contribute to society by redeveloping existing communities as well as building whole new ones with a consistent vision. Our Rental Housing Business accommodates diversifying Rental Housing Rental housing units sold rental-housing needs. Our services feature vertically (Domestic) Message from the CEO integrated support from soil evaluation to design, Rental housing (low-rise) 31,334 FY2019 principal performance indices by business segment construction, and handover for landowners and quality Rental housing living spaces reflecting the residents perspective, thus (medium- to high-rise) 2,168 ensuring owners of stable, long-term rental income. Units under management Operating income 595,182 Single-Family Houses Net sales (¥billion) *1 (¥billion, Operating income margin)*1 Occupancy ratio 97.6% Rental Housing Condominiums 19.2 18.0 530.0 497.8 (3.6%) (3.6%) Existing Homes We develop, sell, and manage properties nationwide, Condominiums Condominium units sold Commercial Facilities supplying comfortable and safe living spaces that keep (Domestic) Developing our Businesses 98.5 Logistics, Business and their asset value over time. Our condominiums feature (including Cosmos Initia) Corporate Facilities 120.6 (9.8%) 1,005.9 added value appropriate to local attributes, and our Group 2,543 (10.5%) Other Businesses 1,152.3 4,380.2 381.1 synergies-leveraging multiuse developments are active Units under management 15.8 senior-friendly and help reinvigorate urban communities. 371,524 (4.3%) 372.7 16.7 (11.5%) 806.7 145.6 140.6 (17.4%) We work to vitalize the market for quality housing stock, Existing Homes Renovations 3 buying, renovating, and reselling existing homes and Approx. 53,000* Contribution to GHG reduction helping homeowners find buyers with services including Percentage of involvement Strengthening our Bases Message from the CFO Number of employees*2 Capital investments (¥ billion) (1,000t-CO2) relocation support and renovations to maintain building in resale of existing 4 5.8 301 value. We are also expanding the scope of our services single-family houses* 34.1 5,583 30.5 to provide corporate clients with renovation and mainte- Approx. 24% 341 15.4 nance solutions. 10,249 136 0.6 6,927 60 Commercial Facilities 47,133 373.8 4,968 We match landowners and corporate tenants to one Construction projects 173.7 113.4 another to develop commercial facilities meeting their 1,075*5 respective expectations. We marshal our wealth of data Leasing floorspace of 7,840 7,731 on land usage and survey the market to accurately gauge sublease areas within 1,924 1,326 the vicinity’s needs so we can provide facilities finetuned commercial facilities 2 5,069 2,902 (Environment and to local residents’ preferences and help townscapes facili- 6,765,150 m Energy Business) 880 tate the flow of people. Logistics, Business and Redevelopment of communities born of our comprehensive business proposal capability Corporate Facilities We leverage diverse plans to produce logistics facilities to Development site area accommodate corporate customers’ needs. We were pro- of logistics projects 2 Single-family Commercial active in developing facilities customize for e-commerce 8,138,620m Railroads Tunnels Hospitals Sports clubs Hotels houses facilities during its rapid rise, and we also provide medical, care, Orders received for social welfare, and nursing care facilities, food-industry contract-based medical and Our start-to-finish 6 comprehensive facilities, offices, and factories. nursing care facilities 578* Data Section services for community Comprehensive business proposal capability development Other Businesses We provide value through businesses that help make Infrastructure Residential Community Lifestyles/services Customer visits to our home people’s lives more pleasant in a spectrum of areas: centers 28,192,000 Redevelopment of hotels, fitness, and health and leisure; and construction Generating capacity of communities support ranging from comprehensive energy solutions to solar power, wind power, home centers, logistic services, and interiors. and hydroelectric power generation facilities 379MW/ 278 sites Logistics Electric power Social-use Expressways Airports Apartments Condominiums Schools facilities facilities facilities *1 Figures include intersegment transactions. *4 Percentage of involvement is the proportion of existing-owner property deals (intermediary or direct *2 Regular employees only, total figures include all personnel in the Company (joint). sales) in which the Daiwa House Group was involved. *3 Figures for Daiwa House Reform only *5 Number of facilities constructed by the commercial facilities business of Daiwa House Industry (non-consolidated). *6 Total for Daiwa House Industry (non-consolidated), Daiwa Lease, and Fujita 29 Daiwa House Group Integrated Report 2020 Daiwa House Group Integrated Report 2020 30 Chapter Developing our Businesses Social issues affecting our businesses and their actions for adapting We are moving sustainably improve corporate value by pushing ahead with Daiwa House Industry is working to sustainably enhance corporate value in line with the four management items defined in our Corporate Governance Guidelines (Secure a stable level of profits and maintain or improve growth rates. Maintain and improve profitability based The Story of the Group’s Value Creation businesses working to address materialities on an optimal capital structure. Strengthen the management base required to realize sustained growth. Lower capital cost by enhancing the Group’s trustworthiness and management transparency.) as we move to address materialities identified out of a clear awareness of Social issues/Megatrends The SDGs on which the externalities that will affect the company up to around 2030. In our implementing our Sixth Medium-Term Management Plan, we will Sixth Medium-Term Management Medium term 75th anniversary we will focus be taking action aligned with our basic policy with particular attention to dealing with contingencies like living with COVID-19, domestic Plan Period (to FY2021) (to FY2025) (FY2030) demographic dynamics, and climate change-driven changes in business conditions. We intend to contribute to achieving SDGs, which are ● Changes in the number of ● Regional depopulation, urban globally shared challenges, by focusing on Goal 11: Sustainable cities and communities, with regard to items related to our business and households in Japan population concentration in-house SDG initiatives. Demographic trends Declining new housing starts/Lower Compact cities in regions/Increasing desire to own a house demand for housing redevelopment/ Developments regarding smart cities ● Increase in untenanted houses Materiality Social issues and six core segments’ actions Message from the CEO Expansion of the existing housing market ● Shrinking and aging population ● Labor shortage, decline in skilled Greater social acceptance of the elderly construction workers and people requiring nursing care/ Expanding business opportunities deriving Social issues Actions Strengths Increasing elderly participation in Commercial Facilities Decreasing working-age population/ from social issues ● ● society/ Changing values per- Diversification of tenants LOC System Decline in skilled construction workers/ Increasing demand for health and care taining to living spaces reflecting social trends and ● Necessity of systematically securing human Grow share in core Organization for in work styles Redevelopment of and working styles local attributes resources in quantitative–qualitative ➊ businesses ➍ communities and home expanding possibilities balance / Enhancing productivity and Segments driving growth ● Changing consumer Steps up involvement in with greater ability to leveraging the talents of human resources ➋ Expanding field of Leveraging our customer behavior and tastes large-scale projects gather intelligence regardless of age, gender, or nationality business ➎ base and stock of existing and offer innovative properties solutions Developing our Businesses ➌ Expanding geographic ● ● business area 2020 Tokyo Olympics and Paralympics Shifts in interest rates due to domestic Logistics, Business and Corporate Facilities ● ● Economic & industry factors ● economic stagnation Advances in business Business establishes itself Ability to identify prom- Broader hiring of foreign labor ● sophistication and as Japan’s No. 1 retail ising tracts and diverse ● Linear Chuo Shinkansen starts Balance of flow