Xymax Real Estate Institute

RESEARCH REPORT

Building Owner Survey 2020 (COVID-19 Edition)
The impact of the COVID-19 pandemic and countermeasures

October 21, 2020

Since 2015, Xymax Real Estate Institute (hereinafter, “Xymax REI”) has conducted questionnaire surveys ofowners of small and medium-sized buildings nationwide who lease out their buildings (*1), in partnership withthe laboratory of Lecturer Kosei Ishida of the Department of Architecture at Waseda University.
In this fifth survey that was conducted between August and September of 2020, we asked building owners
about the impact of the novel coronavirus (COVID-19) pandemic on the building business and about antiinfection measures, in addition to our regular questions of the current state of the building lease business, its
outlook and responses to changes in the environment surrounding the buildings.
On the back of drastic changes in the situations surrounding the building lease business due to the pandemic,
we have found through this survey that many business operators are looking for clues to overcome this crisis.
Therefore, we are publishing the survey results on matters concerning COVID-19 as part one (COVID-19 Edition)of the report ahead of the results on our regular survey items, which we plan to publish as part two in November
2020.
*1 Building Owner Survey 2015–2019: https://www.xymax.co.jp/english/news_research/?type=research(The survey from 2015 to 2019 was carried out in partnership with the laboratory of Professor Yukio Komatsu.)

Key Findings
1. Impact of the COVID-19 pandemic on the building business

The most common event in the business due to the pandemic was “Request by tenant for rent
reduction” (72%), followed by “Departure of tenant (including request for departure)” (44%) and“Request by tenant for postponement of rent payment” (42%).

By type of tenant (office or retail), a greater impact was seen among operators with retail tenants
for many of the developments. In particular, more than 60% of operators with retail tenants
experienced a “Request by retail tenant for rent reduction.”

By region (23 wards of Tokyo, Osaka city, other government-designated cities), the percentage ofimpact was the largest among operators in Osaka city (both for those with office tenants and for
those with retail tenants).

2. Measures against the spread of COVID-19


More than 60% of operators had implemented one or more of the 14 anti-COVID-19 measures
we listed.

The most popular measure was “Install disinfection equipment for hands and fingers (e.g. alcohol
disinfectants)” (43%), followed by “Clean/wipe surfaces touched by many people (e.g. automaticdoor or elevator buttons)” (38%) and “Open windows for ventilation” (38%).

3. Key comments


We introduce extracts of firsthand comments by building owners about the impact of the pandemic
on the business and the management of leased buildings, the short-term concerns and outlook of
the building lease business and its medium/long-term outlook and issues.

Building Owner Survey 2020 (COVID-19 Edition)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institute

1. Impact of the COVID-19 pandemic on the building businessWe asked building lease operators what they faced or did in the building lease business in the wake of the
COVID-19 pandemic. The top answer was “Request by tenant for rent reduction” (72%), followed by “Departureof tenant (including request for departure)” (44%) and “Request by tenant for postponement of rent payment”(42%) (Figure 1). Tenants’ suspension of business and drops in sales due to the corona crisis have had a large
impact on the building business.
Figure 1: What Building Lease Operators Faced or Did in the Wake of the COVID-19 Pandemic (n=901)

Building Owner Survey 2020 (COVID-19 Edition)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate InstituteFurthermore, we looked at the percentages of “Request for rent reduction,” “Departure (including request for
departure),” “Request for postponement of rent payment,” “Non-payment of rent,” “Request to reduce rented
floor area,” and “Bankruptcy” for operators with buildings housing office tenants (hereinafter, “operators with
office tenants”) and operators with buildings housing retail tenants (hereinafter, “operators with retail tenants”)(Figure 2). The percentage of answers related to rent, including “Request for postponement of rent payment”
and “Non-payment of rent,” was higher among operators with retail tenants. In particular, the percentage of“Request by retail tenants for rent reduction” was more than 60% among operators with retail tenants.
Comments included, “We accepted a rent reduction for a fixed period,” “We had no choice but to consent to a
reduction since it would be difficult to find a new tenant if we rejected the request, as business was suspended
across the board,” “We reduced common area management fees instead of rent,” and “We could not respondto requests for reduced rent since public aid for building owners is limited and we have to repay our debt.”
Figure 2: Developments in Building Lease Business Due to the Pandemic (by Type of Operator)
Operators with Office Tenants

Operators with Retail Tenants

Building Owner Survey 2020 (COVID-19 Edition)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate InstituteWe then divided the geographic areas into the 23 wards of Tokyo (“Tokyo 23 Wards”), Osaka city and othergovernment-designated cities and examined what operators faced (Figure 3). Among operators with officetenants, Osaka city stood out in “Request by office tenant for rent reduction,” followed by Tokyo 23 Wards andother government-designated cities. Other answers also tended to have larger percentages in Osaka city andTokyo 23 Wards, and smaller in other government-designated cities. Among operators with retail tenants, there
was no major difference in “Request by retail tenants for rent reduction” between Tokyo 23 Wards, Osaka cityand other government-designated cities. As for the other answers, operators in Osaka city faced the largest
impact as did operators with office tenants, while operators in other government-designated cities tended tosuffer a greater impact than operators in Tokyo 23 Wards.
Figure 3: Developments in Building Lease Business Due to the Pandemic (by Type of Operator & Area)
Operators with Office Tenants

Operators with Retail Tenants

Building Owner Survey 2020 (COVID-19 Edition)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institute

2. Measures against the spread of COVID-19
We listed 14 anti-COVID-19 measures and asked operators if tenants have requested the measures andwhether they implemented them.
In terms of the number of measures implemented, a majority of operators had implemented some kind of
measure, with 64% of the operators replying they implemented one or more (Figure 4).
Figure 4: Number of Measures Implemented to Counter the Spread of COVID-19 (n=935)

The most common measure that was implemented was “Install disinfection equipment for hands and fingers(e.g. alcohol disinfectants)” (43%), followed by “Clean/wipe surfaces touched by many people (e.g. automaticdoor or elevator buttons)” (38%) and “Open windows for ventilation (38%)” (Figure 5). Many of the measures
were implemented on the operators’ own will regardless of requests from tenants, indicating high awareness ofanti-COVID-19 measures among building lease operators. Comments also revealed other measures carried out
by the operators, such as re-establishing the emergency contact system between the tenants and the owner,
adding masks and disinfectants to their supplies, reviewing their ventilation equipment, and installing mosquito
nets on windows and doors so that they can be opened, in addition to the usual anti-disaster measures.

Building Owner Survey 2020 (COVID-19 Edition)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institute
Figure 5: Measures against the Spread of COVID-19 (n=935)

Building Owner Survey 2020 (COVID-19 Edition)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate InstituteWe then compared the number of anti-COVID-19 measures implemented by size of the major building inpossession. The comparison showed that the larger the building was, the more measures tended to be
implemented (Figure 6). We believe that operators took steps against the spread of the virus since large
buildings have larger common areas and thus larger numbers of attached facilities and people within thebuilding. On the other hand, nearly half of the operators of relatively small buildings took no steps, but many
commented that the tenants implemented their own countermeasures.
Figure 6: Number of Measures against the Spread of COVID-19 (by Floor Area of Major Building)

3. Key comments
In this survey, we asked the operators about the impact of the COVID-19 pandemic on the building leasebusiness, anti-infection measures, and concerns in building management going forward (write-in answers). The
following is an extract of the firsthand opinions of building owners obtained from the comments to thequestionnaire.

Under the corona crisis[Business]We signed a rent reduction contract with all tenants (some declined the offer). There was some
confusion due to the slow response of the government.

I have been responding flexibly to requests by tenants for rent reductions and postponementsof payment.



I did not comply with requests to reduce the rent but repaid part of the lease deposits instead.



There were requests for rent reductions, but I managed to reach a compromise with my tenants.
If I reduced the rent, there is a risk that we might also go under. The government’s business
continuation benefits do not apply to us either.

I accepted retail tenants’ requests for rent reductions and utilized the ward government’s store
rent reduction subsidy program.



There is some support from the government to tenants but hardly any to building owners.
Nevertheless, the tenants request rent reductions like it was the most natural thing to do.

Since there are numerous types of support funds and subsidies for tenants by the national,

Building Owner Survey 2020 (COVID-19 Edition)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Instituteprefectural and municipal governments and chambers of commerce, I make efforts todisseminate and share information by organizing the information and sending out materials to
all tenants, revising the information each time there is an addition, so that the tenants will not
be confused.


While I think rescuing tenants is important as a temporary matter, there is little support for
property owners. It may be difficult, but I hope the government considers some kind of rescue
plan for owners, such as a partial reduction or exemption of property tax (for a fixed period isfine).

[Building management]As anti-infection measures, we installed disinfectants for hands and fingers, restricted the useof meeting rooms, and stepped up the daily cleaning process. We turned off the hand dryers inlavatories and introduced paper towels, which resulted in an increase in waste.


Although there was a request to install lids on toilet bowls, we did not change our previous
method and have kept the lids removed in order to avoid contact upon opening and closing
the lid. When we renovate the toilets in the future, I am considering introducing toilet lids that
open and close automatically.



Basic anti-infection measures are taken by the tenants. We changed the settings of ventilation
timers in the common areas.



We introduced air purifiers and AEDs.



I maintain communication with tenants by creating a manual for responding to infections
occurring within the building.



We reviewed the cleaning process according to the number of people in the building at eachtenant and adjusted the work schedule of cleaning staff. We reviewed the building’s opening
and closing times since almost everyone in the building now comes to and leaves work on time,
as opposed to the previous custom of coming to work early in the morning and working
overtime until late at night. We also enhanced security procedures by having patrol in thebuilding in the evenings.

Short-term concerns and outlook of the building lease businessNeighboring buildings are having difficulty filling their vacancies, which is a cause for concern
toward future rebuilding plans.



The impact of COVID-19 on leased buildings may be yet to manifest itself, such as in the form ofa decrease in new contracts and the departure of tenants.

I have a sense of urgency that leasing may become even more difficult in the future due to the
spread of telework caused by COVID-19, limiting industries to which we can rent our buildings.

I am concerned about reductions in leased areas or tenants’ relocations to another building due
to companies’ reductions of (office) size because of the introduction of telework, etc.



A drop in the rent market is expected since the decline in revenues of restaurants due to having
fewer tables as anti-corona measures will affect rent.

I am worried whether antibacterial and antiseptic equipment, which I might introduce more in the
future, will affect running costs.



A tenant that moved in recently downsized their office and relocated due to the increase of work-

Building Owner Survey 2020 (COVID-19 Edition)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institutefrom-home and telework. This has led me to consider increasing rooms compartmentalized intominimum room areas so that we can respond to office size reductions and relocations fordownsizing.
Due to the spread of telework, I have been reconsidering the raison d’etre of tenant buildings, orthe way they should be. It might be necessary to provide new contract terms, such as weekly
contracts, and new usages of offices.



Assuming that telework—mainly working from home—sees further expansion, I have been
considering diversifying my source of revenue by switching from offices to other usages.



The use of shared meeting rooms (remote meetings) has increased due to the pandemic. This isprobably because there are no closed meeting rooms in the exclusive compartments. This maylead to changes in the use and layout of office rooms.



There is fear that the building lease business will shrink due to telework. I am also concerned
about how to respond to tenants whose staff have tested positive for COVID-19.

Medium/long-term outlook and issues of the building lease business

It is worth paying attention to the way offices and buildings should be and how the specifications,size and infrastructure of buildings that meet tenant needs will change under the “New Normal.”

I am interested in whether the changes in work styles will give birth to new systems in theoperation of office buildings.

The expected progress of telework might bring about significant changes to future offices(location, size).

I expect telework to spread further, as well as outsourcing. Under such circumstances, there is apossibility that large offices will become unnecessary. I intend to start thinking of measures toaddress this possibility.



Due to the emerging changes in work styles, I am concerned about the development of officedemand itself as well as the demand for offices of up to around 30 tsubo (1 tsubo = 3.3 sqm),
which constitute the majority of our supply.

I am concerned about the possibility of drastic changes in what tenants require in office buildings
and whether such changes in requirements are one-off or persistent.

Going forward, it will become necessary to improve our skills of responding to natural calamities
and sudden disasters such as the COVID-19 pandemic.

Building Owner Survey 2020 (COVID-19 Edition)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institute

Summary
Xymax REI has been surveying the situation of building owners in Tokyo and government-designated cities
since 2015. Many of the owners of small and medium-sized buildings are elderly and own a small number ofbuildings (one or two), the majority of which are 20 years old or older. We have also found that theirmedium/long-term outlooks remain uncertain due to concerns toward increases in expenditure for repairing
old buildings and property tax payments, as well as the need to address changes in social conditions, including
the declining population, work style changes and an increase in natural disasters.
In this fifth survey, we identified the impact of the COVID-19 pandemic on the building lease business and themeasures taken against it, in addition to earlier concerns and issues. We also asked building owners’ opinions
on future issues and outlooks. Many owners have taken measures against COVID-19 in consideration of thesafety of their tenants and responded to rent reductions and postponements of rent payments in support oftenants’ business management. However, while there is public rent support for tenants, there are few public aids
for building owners. Furthermore, the prolonged pandemic is feared to lead to a decline in the building leasemarket, which is a cause of concern for many building owners toward the building lease business going forward.
Xymax REI intends to continue publishing beneficial information by surveying the situation of building owners
and gathering examples of initiatives on a regular basis.

Building Owner Survey 2020 (COVID-19 Edition)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institute

Survey Overview
PeriodAugust – September 2020

Coverage

21 government-designated cities(Sapporo, Sendai, Tokyo 23 Wards, Saitama, Chiba, Yokohama, Kawasaki, Sagamihara, Niigata, Shizuoka,
Hamamatsu, Nagoya, Kyoto, Osaka, Sakai, Kobe, Okayama, Hiroshima, Kitakyushu, Fukuoka, Kumamoto)
A total of 10,830 companies extracted from Tokyo Shoko Research (TSR)’s data based on the following:[Net sales] 10 million–3,000 million yen (30 million–3,000 million yen for Tokyo)[Industry] Companies whose “principal” or “secondary” business (thus registered) is office leaseNo. of valid
answers

Questionnaire: 946 companies; 8.7% response rate
(Number of companies: 63 in Sapporo, 57 in Sendai, 298 in Tokyo 23 Wards, 25 in Saitama,9 in Chiba, 66
in Yokohama, 28 in Kawasaki, 4 in Sagamihara, 7 in Niigata, 13 in Shizuoka, 7 in Hamamatsu, 65 in
Nagoya, 41 in Kyoto, 92 in Osaka, 9 in Sakai, 32 in Kobe, 15 in Okayama, 34 in Hiroshima, 20 in
Kitakyushu, 44 in Fukuoka, 17 in Kumamoto)

MethodQuestionnaire survey by post or online

Survey details

I.

II.
III.

IV.

Respondent company data
Age of owner / business experience / lease business’ share of total sales / number, age, location ofbuildings in possession, and more
Situation of the office building lease business
Situation of buildings in possession / business condition / income / expenditure, and more
The office building lease business going forward
Outlook (short-term, medium/long-term) / social conditions interested in / social conditions
affecting the building lease business / measures to improve the value of buildings, and more
Impact of COVID-19 on the company
Developments in the building lease business / measures against infection

Building Owner Survey 2020 (COVID-19 Edition)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate InstituteAttributes of respondents (Upper row: %; lower row: n)[Business experience]
Up to 10 yrs Up to 20 yrs Up to 30 yrs Up to 40 yrs Up to 50 yrs Up to 60 yrs

61 yrs+

5%

14%

22%

20%

18%

12%

8%

51

128

204

191

173

116

74

[Age of owner]
20s

30s

40s

50s

60s

70s

80+

0%

1%

9%

22%

33%

26%

8%

2

14

88

206

309

244

77

[Building lease business' share of total sales]
Up to 10%

Up to 20%

Up to 30%

Up to 40%

Up to 50%

Up to 60%

Up to 70%

Up to 80%

Up to 90%

Up to 100%

8%

5%

5%

4%

4%

5%

8%

10%

17%

36%

70

49

44

37

34

43

72

91

156

336

[Tenant occupying leased building (multiple choice)]
RetailOffice679

Residence646

Warehouse Accommodation

367

123

38

Other

110

[Number of buildings owned or managed]
1

2

3

4

5+

42%

20%

13%

9%

17%

345

162

104

76

142

[Size of building owned or managed (in tsubo (1 tsubo = 3.3 sqm))]
Less than 300

Up to 500

Up to 1,000

Up to 2,000

Up to 5,000

27%

18%

23%

18%

10%

5%

223

151

186

148

80

38

5,000+[Construction year of building owned or managed]
Before 1950

1950s

1960s

1970s

1980s

1990s

2000s

After 2010

1%

2%

9%

20%

24%

26%

11%

8%

8

14

78

167

202

217

96

66

*The figures indicated in the charts contained in this report are rounded to the first decimal place and therefore may not add up to 100%.
*The charts contained in this report represent aggregations excluding non-respondents for each question.

For further inquiries please contact:
Xymax Real Estate Institutehttps://soken.xymax.co.jp | E-MAIL: info-rei@xymax.co.jp

Building Owner Survey 2020 (COVID-19 Edition)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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