Xymax Real Estate Institute

TOPIC REPORTTOPIC REPORTReal Trends of Real Estate 2020
The Current and Future State of the World and Real Estate

September 30, 2019Japan became a major economic power after a period of high economic growth following the war, enriching
the lives of the people as well. On the other hand, it has experienced an extended period of economic
stagnation—the so-called “lost two decades”—after the burst of the bubble economy, resulting in a continued
decline of international competitiveness. Furthermore, due to the diminishing and aging population, theproductive age population is expected to fall by 6 million between 2019 and 2030: from 75 million in 2019 to
69 million in 2030. This has given rise to concerns of a serious shortage of labor. Amid these circumstances, thesocioeconomic situations surrounding us have been changing at an accelerating pace. Such changes include
globalization, the advance of technology, a data society, and the advance of a sharing economy. Although weare able to obtain more information on such changes through the Internet, it is, in reality, not easy to grasp the“true” (or “actual”) trends and impacts due to the excess of information.
Real estate has supported our lives and activities as an “important foundation” all through the ages, providing
places to live, study, play, and enjoy. This has not changed and will never change. Meanwhile, the way we use
real estate has been influenced by socioeconomic situations and has changed with time. In other words, how todeal with real estate will be key to the continued development and prosperity of society, companies, andindividuals.
In April 2019, the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) formulated and announced
its “Real Estate Industry Vision 2030” for the first time in a quarter-century. As the real estate industry is an
important key industry that underpins a prosperous society and economic growth and is expected to continue
developing as a growth industry, the MLIT formuated its “vision” as guidelines for the industry to attain its
desirable form as well as its goals.
As mentioned earlier, the socioeconomic situations surrounding us are changing at an accelerating pace.
Although the way they impact real estate and the real estate business is a very important theme, there are hardly
any comprehensive reports in Japan that summarize the impacts.
Therefore, Xymax Real Estate Institute (“Xymax REI”) has selected themes considered to be important andexamined their situations and impact on real estate. The featured themes are the following 11. All themes areranked equal in importance. We hope that this report will facilitate the understanding of the real (“true” or“actual”) trends of real estate. Xymax REI intends to release the “Real Trends of Real Estate” on a regular basis tocontinuously examine socioeconomic changes and their impact on real estate.
Summary：https://www.xymax.co.jp/english/research/images/pdf/20190930_s.pdf

Themes featured in Real Trends of Real Estate 2020
1. Diversifying values

5. Data society

9. Natural disasters

2. Labor shortage

6. Advance of technology

10. Environmental issues

3. Work style reform
4. Internationalization,
coexistence with foreigners

7. Cities and provinces

11. Mega events

8. Dilapidation of buildingstock

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

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TOPIC REPORT｜Xymax Real Estate Institute

1 Diversifying values

1.1

Background of diversification of values

People’s ways of thinking and values are not uniform. They differ according to nationality, gender, theenvironment they were brought up in, and socioeconomic situations. The differences in the ways of thinking
and values not only have an impact on major decisions in life such as education, employment, and homepurchase, but also on everyday situations such as hobbies, travel, shopping behavior, and communication
with family members and friends.
For example, the baby boomers, who were born during the post-war baby boom, and the Bubble
generation members, who experienced the bubble economy, have spent relatively stable lives as theyjoined the work force based on the assumption of lifelong employment during times when the economy
continued to rise and people were rewarded for their efforts. The members of these generations havestrong inclinations toward owning things and purchase mass-produced products of the same standards.
The mentality of the times when they grew up was called “All Japanese are middle-class,” as most people
faced the same direction to improve their lives. In contrast, the post-Bubble generation members tend tohave strong intentions of improving their individual careers and affluence due to difficulties in finding
employment and the collapse of the lifelong employment system as the economy entered a sustained
period of recession. Members of the generation born when digitalization rapidly progressed due to the
spread of PCs and smartphones, especially from the late 1990s onward, are called the digital natives. They
have been accustomed to the Internet and PCs since they were born, and are characterized by theircommand of the Internet and social network and their establishment of new, online lateral networks.
Furthermore, in terms of work, for example, they do not put too much effort into improving their annual
earnings or advancing their careers but tend to place more emphasis on their private life. Their attitude
toward goods is also changing from “owning” to “using.” Compared to the times of mass-production prior
to the bubble economy, the post-Bubble generation members live in times of high-mix low-volume
production and an excess of goods. Their lifestyles and ideas of marriage and family are diversified, with
the number of single persons and small families increasing due to late marriages and declining birth rates.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

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TOPIC REPORT｜Xymax Real Estate Institute

There are similar generational differences in values in the United States as well. The “2019–2020 Top Ten
Issues Affecting Real Estate” by the Counselors of Real Estate of the United States, which Xymax REI has
introduced, points out that there are differences in behavior—from marriage and employment to the choiceof housing and office—between the baby boomer generation and Millennials and Generation Z members
due to differences in values.
In addition to such generational differences in values, the recent increase in foreign tourists, who amountto more than 30 million (as of 2018), non-Japanese workers who are said to be one in every 50 workers,
and foreign students studying in Japan is also a factor that cannot be ignored. With the addition of newvalues through foreign culture, religion, and customs, values are diversifying in various situations of daily
life.

1.2

Impact of diversifying values on real estate

The diversification of values has affected real estate in the following ways.
In housing, the post-Bubble generation members, whose attitude toward goods has shifted from“owning” to “using,” prefer rented housing, with some favoring “address-hopping,” i.e., to frequently
change houses instead of staying in a particular house, or shared housing, in which the residents share the
kitchen and living room, etc. On the other hand, according to the Family Income and Expenditure Survey
by the Ministry of Internal Affairs and Communications (MIC), the tendency to purchase a house is also
rising, with 10% more households of two or more persons in their 20s and 30s owning a house compared
to 10 years ago, indicating that not everyone moves in the same direction today. Furthermore, there has
been an increase in the number of businesses of renovating old houses that offer a high degree of
convenience due to a greater tendency to place importance on where to live and lifestyles, rather thangiving top priority to newly built houses, which was the traditional norm.
In offices, workplaces are becoming diversified by reducing commute time and improving employees’
convenience within the workplace, respecting the working conditions of individual employees. The
traditional style of working was to turn up at the headquarter office and work at a fixed desk assigned tothe employee. The recent trend is to consolidate the head office to a place that offers good traffic accesswhile aggressively providing workspaces other than the head office at the same time, such as establishingsatellite offices, using flexible offices, and enhancing (or introducing) work-from-home programs.
According to our research, office workers prefer flexible work styles and diverse workplaces in general, withyounger workers (male and female workers in their 20s and 30s) and workers with children under school
age preferring to work in a place other than the head office such as from home or a third-place office to agreater degree than other workers. Offering flexible work styles and work environments will improve
workers’ satisfaction as well as productivity.
In commercial outlets, consumers’ shopping behavior has become diversified as a result of the progressof e-commerce. Today, consumers not only buy at physical stores but also complete their entire purchaseonline or check a product at a store and purchase it online, and have the product delivered to their homeor receive it in a home delivery locker. In response to such changes in behavior, there has been a rise in“showroom” stores that do not carry much stock or stores relocating from the suburbs to a more convenient
place for consumers such as in front of train stations with good traffic access.
Diversified values combined with the development of IT technologies has led to the spread of sharing
economy services, which makes effective use of unused things and spare time, intermediated by theInternet. These services have enabled consumers to efficiently use services that suit their personal, product,monetary, transport, and spatial needs, such as people, pets, daily supplies, cars, housing, andaccommodation, without being required any initial investment. These services include, for example, services
that turn vacant houses into accommodation facilities or satellite offices, car-sharing services, and bicyclesharing services that use vacant parking lots.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

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TOPIC REPORT｜Xymax Real Estate Institute

In addition, due to the increase in inbound visitors to Japan, changes have been seen in building facilities
and public spaces that are used by them. Some office buildings and accommodation facilities have provided
spaces for purifying and praying or cafeterias that allow diners to choose the ingredients. Public facilities
such as railway stations have been providing more multilingual signposts and signage using pictrograms
and symbols. Furthermore, new communities where fellow countrymen gather are emerging in areas suchas Kasai (Indian), Kawaguchi, Saitama (Chinese), and Takadanobaba (Burmese). In rural areas, there havebeen cases such as in Niseko, Hokkaido, where an increase in inbound visitors to Japan has led to new
tourism demand, attracting investment from abroad in tourism facilities, which has led to an increase inemployment and revitalization of the area. It has also become possible for foreigners to rent real estatethrough a guarantee company instead of the traditional guarantor, and there has also been a rise ininsurance services that handle trouble caused by differences in language and customs.
Values are expected to further diversify due to changes in the economic situation and social structures.
Moreover, the speed of change may accelerate. Amid this trend, it can be said that times have shifted fromlow-mix high-volume production to high-mix low-volume production in real estate as well. In view of this,it will become increasingly important to capture the core needs of the diversifying values and to develop
and provide services that can flexibly satisfy such needs, in addition to the conventional, fixed services.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

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TOPIC REPORT｜Xymax Real Estate Institute2 Labor shortage

2.1

Situation of labor shortage

The tightness of the labor market has remained at an unprecedented level, with the unemployment rate
and jobs-to-applicants ratio in July 2019 published by the Ministry of Health, Labour and Welfare standingat 2.2% and 1.59, respectively. Considering that the number of employed workers has been rising due toan increase in female and elderly workers, the main cause of labor shortage is the strength of demand forlabor. One major issue for Japan to maintain sustainable economic growth is to solve the labor shortage.
Under such circumstances, various measures and initiatives have been implemented to increase theparticipation of women and older people in the labor force and to acquire non-Japanese workers as ameans to solve the labor shortage.
With regard to women, their current employment rate has reached 70% due to the penetration of theEqual Employment Opportunity Law and the government’s initiatives to support parents in working andraising children at the same time. Although there are still issues of a lack of day-care centers mainly in thecities, the trough of the “M” curve, which indicates a drop in women’s employment rate between ages 30
and 40, which correspond to a period of childbirth and childcare, is becoming flatter.
With regard to the elderly, the Law Concerning Stabilization of Employment of Older Persons wasrevised in 2006, making it mandatory for employers to extend the retirement age to 65 and implement job
security measures such as introducing a continued employment program. In October 2018, the Council on
Investments for the Future, chaired by Prime Minister Abe, discussed the reform of the employment system
in view of a 100-year life and stated that it will become necessary to facilitate workers to choose a work
style of moving between several companies in accordance with the rise and fall of industries. Based on this,the government announced in May 2019 its policy of raising companies’ age limit of continued employment
from the current 65 to 70 and requesting companies to take the necessary responses (e.g. extending or
abolishing the retirement age, supporting re-employment at other companies, supporting

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

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TOPIC REPORT｜Xymax Real Estate Instituteentrepreneurship) to allow older people to work until 70 years of age if they wished. According to a survey
by the Cabinet Office, it has been indicated in a labor force survey that 65% of the elderly aged between
65 and 69 wished to work, while only 44% were actually working. It is necessary to create an environmentthat enables older people to work actively.
With regard to foreigners, there are 1.46 million non-Japanese workers in Japan already as of October
2018, with the number rising each year. On April 1, 2019, the Revised Immigration Control Law, which
includes a new status of residence called “specific skills,” was enforced, allowing foreign nationals with acertain level of skills and Japanese proficiency to work in 14 sectors that face a serious shortage of labor.
Due to this system, up to 345,000 non-Japanese workers are expected to be accepted into Japan over the
next five years. Since there is a limit to the increase in the participation of women and the elderly in thelabor force in a country where the population, and hence the workforce, will decline over the long term,
the presence of non-Japanese workers is expected to increase in the future. However, labor shortage is acommon issue for other countries as well. Therefore, countries will likely compete with each other overforeign workers, and it will be crucial for Japan to attract the necessary number of foreign nationals on acontinuous basis.

2.2

Impact of labor shortage on real estate

The impact of labor shortage is evident in all areas related to real estate. In particular, there is a noticeable
shortage of workers in the maintenance of real estate, with the jobs-to-applicants ratio of security andcleaning jobs extremely high at 7.73 and 2.20, respectively. The ratio has been continuously rising in thepast several years. The situation is similar with construction workers, which has led to delays in the start ofconstruction and increases in costs.
There is also a serious labor shortage at companies that use real estate. For operational assets such ascommercial outlets, distribution facilities, hotels, and healthcare facilities, in particular, acquiring personnel
to be engaged in operation has become a major management issue. In a 2018 questionnaire survey ofcommercial operators by Xymax REI, the top reason (70%) for operators taking a cautious stance in new
store openings was the failure to acquire part-time and full-time staff. At hotels, housekeeping requires
time and effort and must be carried out within a limited amount of time before the next guest arrives. A
certain period of time is also needed to learn the cleaning techniques that are required to maintain thebrand of the hotel. The chronic shortage of housekeeping staff will not be solved, and the shortage of hotel
workers is expected to accelerate as many new hotels are scheduled to open in the near future. In the
distribution sector, a shortage of drivers has been a major concern, but it has also been difficult to acquire
personnel to work in distribution facilities. Traditionally, distribution facilities were preferred to be locatedin key traffic areas close to highways, interchanges of expressways, and ports from the perspective ofefficient transport. However, labor shortage is having an effect on the location of distribution facilities, withsome recent facilities constructed near areas with residential districts behind in order to acquire personnel
who can work in the facilities. The shortage of workers in the nursing care industry is also a major problem.
The Ministry of Health, Labour and Welfare estimated in 2018 that 0.55 million workers will be required in
the industry by fiscal 2025 (around 60,000 workers per year), in addition to the 1.9 million in fiscal 2016.

2.3

Initiatives to solve labor shortage

Companies are striving to secure staffing by making various efforts to maintain and improve the retention
rate of employees, such as reducing working hours, introducing flexible shift patterns including the settingof holidays, providing welfare facilities such as company dormitories and day-care facilities, and turning
temporary staff into regular employees, in addition to strengthening employee recruitment. Companies are
required to provide a work environment where not only women and the elderly but also a diverse range of
people, such as employees with restrictions in the hours and place of work, can continue working withpeace of mind over a long period of time.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

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TOPIC REPORT｜Xymax Real Estate InstituteFurthermore, the employment of foreign nationals is being promoted as a means to solve labor shortage.
The 14 sectors subject to the Revised Immigration Control Law mentioned earlier include nursing care,building cleaning, construction, accommodation, and restaurants, which all face a serious shortage of labor.
Despite the possible language and communication issues, the dependence on and the number of nonJapanese workers are expected to rise.
In addition to securing the “quantity” of workers, the “quality” of work, which will eventually compensate
for labor shortage, is being transformed. In the maintenance of buildings, labor-saving measures using
cutting-edge technology is being promoted, such as smart meters to read electricity usage, remote
inspections of equipment, and management of buildings using cloud technology. Robots are also being
introduced in various situations. In April 2018, Mitsubishi Estate started to introduce robots for security,
cleaning, and other services and operations in the Marunouchi area of Tokyo. Kajima Corporation isapplying and demonstrating technologies and systems such as robots and remote control at actual new
construction sites. These can be said to be efforts in manpower saving.
In operational assets, self check-out machines and cashless payments are being introduced at commercial
outlets, for example. Initiatives that contribute to solving labor shortage by improving work efficiency havealso started, such as social experiments by the Ministry of Economy, Trade and Industry (METI) using
electronic tags. At hotels, mechanization and labor-saving measures are being implemented by introducing
automatic check-in and payment machines as well as through operational measures to secure time forhousekeeping with few cleaning staff by shifting check-out times. Distribution facilities are also making
efforts in mechanization and introducing robots for picking and sorting processes.
Labor shortage problems are expected to further accelerate efforts to save labor, the diversification ofworkers and the progress of technology. They are also expected to bring about changes in the traditional
ideas of the locations of real estate or how buildings are constructed. The employment reforms based on
a 100-year life that the government is promoting will have a large impact on individual workers’ idea of“work” and, in particular, are expected to bring about a shift in awareness among elderly workers. It is
expected that more workers will try new work or engage in social contribution activities as a result of theextension or abolition of the retirement age, in addition to continue working at their previous companies.
The motives for continuing to work will not only be economic ones but also those that would lead tohappiness, such as a purpose in life, health, social contribution, and learning.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

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TOPIC REPORT｜Xymax Real Estate Institute3 Work style reform

3.1

Changes in work styles

In the previous chapter, we discussed the labor shortage issue and identified how the number of workers
impacts society. However, in order to understand the social changes that are currently taking place, wemust pay attention not only to the changes in the size of the labor force as a whole but also to changes in
the work style of individuals. Therefore, in this chapter we will identify how the changes in individuals’ work
styles will affect society and the real estate industry today and in the future.
Work style reform is one of the most important keywords for considering the future changes inindividual’s work styles and their impact on society. The government’s efforts in work style reform
accelerated when the government announced in 2015 to aim for a society based on Dynamic Engagementof All Citizens as the second stage of Abenomics and the post of Minister for Work Style Reform wasestablished in 2016. After the Lower House elections in September 2017, the Prime Minister advocated the
100-year life concept and the realization of work style reforms in his policy speech, leading to the enactmentof the Law for the Establishment of Acts Related to Work Style Reforms (so-called Law Related to Work
Style Reform or Comprehensive Laws on Work Style Reform), which have been enforced in phases sinceApril 2019. Initiatives involving the entire society are also being carried out by the central government such
as MIC, in cooperation with the Tokyo Metropolitan Government and the business community. Suchinitiatives include designating July 24, the day of the opening ceremony of the Tokyo Olympics, as Telework
Day—the “Day You Change Your Working Style”—and encouraging companies and organizations
nationwide to carry out telework on the day. The number of organizations participating in Telework Day
has been increasing year after year from around 900 in 2017, the first year, to 1,200 in 2018 and 2,900 in
2019. The public’s interest in Telework Day has also been rising accordingly. Various work style reform
initiatives have been undertaken at many companies as well, going beyond labor affairs and leading to theprovision of new related services involving a range of industries including HR (human resources), ICT, andreal estate. The public’s interest in work style reform has also remained high, with the term being nominatedfor the grand prize in the new words and buzzwords contest (2017). The background to such popularity of

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

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TOPIC REPORT｜Xymax Real Estate Institutethe concept includes significant shifts in society at large, such as a decline in the workforce (refer to Chapter2), technological innovations (refer to Chapter 6), the social problem of long working hours, faltering laborproductivity, declining international competitiveness, and changes in values held by individual persons(refer to Chapter 1).
Work style reform has thus attracted attention but has become vague in some respects due to its very
popularity among the public. Here we would like to recap its definition, what issues it aims to address, andthe background to the development of the initiative. According to a public service announcement, thegovernment defines work style reform as a means to “realize a society where workers can choose from awide variety of work styles according to their circumstances,” and aims to correct long working hours andrealize diverse and flexible work styles through a series of measures and initiatives, with the ultimate goalof ensuring fair treatment regardless of the form of employment.
From a different point of view, this indicates that the Japanese society had made it difficult for workers
to choose flexible and diverse work styles according to their individual circumstances. The traditional
Japanese way of working, as represented by lifelong employment and a seniority system, was suitable forthe post-war high economic growth period but at the same time became a remote cause of various
problems surrounding Japan today, such as low fluidity of the labor market, gaps between regular and nonregular workers, retirement from work due to childbirth, greater opportunity costs for having children, long
working hours, and resigning from work due to nursing care requirements. Furthermore, the fourthindustrial revolution is currently taking place all over the world, bringing about a shift in social andeconomic structures from homogeneous cost competition to competition for added value. As a result ofsuch changes in socioeconomic structures, a polarization of the labor market is progressing not only inEurope and the United States but also in Japan, where the share of workers of high-skill professions, suchas specialist jobs and technical jobs, and those of low-skill professions, such as personal services, has
increased, while the share of medium-skill professions such as manufacturing and clerical work decreased.
This may lead to greater income gaps. Work style reforms are expected to solve the aforementioned issues
surrounding “work” and improve Japan’s labor productivity and economic growth by reconstructing thesocioeconomic system as a whole, such as the form of corporate organization and the content and methodof work of individuals.
The above is the background and definition of work style reform and the issues it aims to tackle. In thefollowing sections, we will examine how work styles are expected to change and how they will affect thereal estate industry, following the initiatives in work style reform.

3.2

Future work styles

What will work styles be like in the future?
First of all, a work style that is not bound by time or space should become common. In the past, work
could not be done unless many people gathered in the same room at the same time and worked together.
However, the spread of the Internet and mobile technologies has made it possible to communicate andcollaborate with people located far away. As it is expected that the processing and transmission speed ofcomputers will continue to advance, VR (virtual reality), AR (augmented reality), spatial projection displays
and other means of telework and mobile work, which are not restricted by physical constraints of time andspace, are expected to see further progress. Offices and other places for work will also be re-examined interms of interior, fixtures, equipment, location, size, and number, with an emphasis on the ease of work ofworkers according to their individual circumstances of the moment. Furthermore, workers will be required
to be assessed not only by the hours they worked but by their achievements and productivity, which is
expected to lead to a correction of the current long work hours.
Secondly, the relationship between companies and workers is expected to change. Technologicalinnovations and social changes may shorten business cycles. For companies, a project-oriented
management style where the necessary personnel, place, and space are procured for each project will be

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

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TOPIC REPORT｜Xymax Real Estate Institute

more suitable for agile and flexible changes than retaining a large number of regular employees, renting
expensive offices in city centers, and maintaining workplaces with low utilization rates. For workers, it will
no longer be common to work at the same company for the same job for one’s entire life. Since people’s
healthy lifespan will increase, they will experience several major shifts in life due to career changes and reeducation through recurrent education. Following such trends, companies are expected to become acollective of projects with a clear mission and purpose, and workers will flexibly move within and outsidecompanies according to their preference and circumstances. As a result, differentiating between regularand non-regular employees and full-time and part-time based on the length of service or the existence of
employment security will cease to have meaning. Side jobs, concurrent jobs, and multiple jobs will
become common. However, these will all be based on the transparency and efficiency of the labor market
for all generations and professions, such as the development of a system in which information on acompany’s reputation or a worker’s skills are broadly shared, enabling workers to move between jobs as
they wish.
Thirdly, it is expected that nursing care, childcare, and housework will no longer restrict work. At thesame time as infrastructure for childcare and nursing care is developed, it is expected that a wide variety ofoutsourcing services and businesses will be developed for nursing care, childcare, and housework using
crowdsourcing and matching. Sufficient preventive measures will be made by health management systems
before someone becomes in need of nursing care, while workers’ nursing care burden will be alleviatedthrough wearable nursing robot suits, care beds that can be separated into a wheelchair, and remotemonitoring systems. Housework is an area where the use of AI (artificial intelligence) and robots isanticipated. Automation of cleaning has already been realized, while cooking robots are likely to be put
to practical use soon. Furthermore, workers who wish to carry out nursing care or childcare by themselves
will be able to obtain childcare or nursing care leave without much trouble and choose flexible work styles
such as earning an income by using crowdsourcing from home in between childcare or nursing care tasks
according to their circumstances.
Lastly, it is expected that workers will no longer face restrictions based on gender, race, nationality,
sexual orientation, gender identification, or disabilities. Due to the technological progress of AI,
telecommunication, VR, and translation, the hurdles for communication will drop regardless of physicaldistances, language differences, one’s appearance, and the existence of handicaps. Many jobs will be
exchanged beyond borders, with individual workers choosing a work style that suits their abilities andorientation, in harmony with society.

3.3

Changes in the workplace

Work styles that are not bound by time and space have already had an impact on how real estate is being
used. Compared to a few years ago, changes can be seen in the layout within offices, with more spaces forworkers to spend time apart from work, such as open meeting spaces and spaces for refreshing.
Furthermore, fixed desks are being replaced by hot desking, which allows companies to save office space.
Promoting paperless processing and introducing business systems and remote conference systems thatcan be accessed from outside the company have also relieved workers from the constraints of having tocome to, stay at, and return to the office of their company’s headquarters.
A concept that has been attracting attention in improving companies’ productivity and achieving a worklife balance through workplace reforms is ABW (Activity Based Working). ABW enables companies todevelop workplaces and tools based on the specific actions of workers. A day of a worker is a mix of various
activities that include solo concentrated work, refreshing, project work, team communication, and open
innovation with parties outside the company. When creating an office based on ABW, facilities with different
functions such as concentration booths, open meeting desks for small groups, lounge seats, counter seats,and phone booths are laid out based on the actual use and degree of necessity at the company. ABW thus
creates environments, tools, and culture that allow individual workers to be aware of and think about
improving their productivity on a daily basis and put such thoughts into action.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

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TOPIC REPORT｜Xymax Real Estate Institute

While ICT (information communication technology) developed and tools and devices facilitating remotecollaboration disseminated, “places” suitable for so-called telework, which is to work from somewhere awayfrom the headquarter office (e.g. work-from-home, mobile work, satellite offices), have not been developed.
The reasons behind this include the fact that Japanese houses are not necessarily suitable as a place towork and cafes raise concerns of information security. Amid this situation, a service that is becoming
popular recently is the flexible office. A flexible office is a collective term for office space that is neither
the company’s office nor the worker’s home, such as shared offices and co-working spaces. Contracts do
not take the form of lease contracts but temporary use contracts or service contracts. The party to thecontract can be either a corporation or an individual. Various types of flexible offices are being provided byoperators, including satellite offices, rental offices, shared offices, mobile work offices, and co-working
offices. Some offices also provide services such as staff operations and event planning/operation, in
addition to office space.
A major issue in large metropolitan areas is commuting. Long commutes place commuting stress on
workers, negatively affecting workers’ productivity as well as their engagement and satisfaction in work andprivate life. An increase in flexible offices due to the progress of work style reform at companies should befavorable for both workers and companies. In addition, since the IFRS (International Financial ReportingStandards), which is currently being introduced at listed companies, requires office rent to be recognized
as an asset, the use of flexible offices may also progress from an accounting perspective.
Business customs and workers’ work styles vary between countries. The degree of penetration of flexible
offices also differs between Europe/US and Japan. Flexible offices in Europe and the United States haveincreased in presence as the receptacle of office needs of small businesses such as individual proprietors,
freelancers, and startups. More recently, there have been an increasing number of cases where generalcompanies use flexible offices as their offices. The reasons behind this include the fact that lease contracts
over five to ten years, which is the norm in Europe and the United States, do not match the speed ofbusiness and that companies now require community development functions in offices. In Japan, we believethat a hybrid-type, which is to use the fixed, headquarter offices and flexible offices for different purposes
depending on the need, will become the mainstream. With the hybrid-type, companies will maintain their
headquarter offices as a place for functions such as “interaction,” “information exchange,” and “sharing of
the company’s vision,” while using flexible offices to carry out telework to promote work style reforms ofindividual workers. A questionnaire survey conducted by Xymax REI (“Metropolitan Areas Office Demand
Survey Spring 2019”) also revealed that the hybrid-type was the most supported future real estate strategy
among companies.
To allow such flexible offices and ABW to function, it is essential to identify the managerial issues of eachcompany and understand individual workers’ work styles and their actual use of the workplace. As few
companies can carry out the entire process from planning and implementing projects by themselves, theexpectations toward real estate operators are large, especially in the field of workplace. For real estate
operators, work style reform is not only a matter that concerns the traditional relationship between thelessor and lessee but also a chance to capture new revenue opportunities of REaaS (Real Estate as aService).

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

11

TOPIC REPORT｜Xymax Real Estate Institute4 Internationalization, coexistence with foreigners

4.1

Internationalization by attracting foreigners

In recent years, the need to establish a cohesive society with foreigners in Japan has been actively
talked about. Behind this are two major developments in internationalization.
The first development is the surge in inbound visitors to Japan. The number of inbound visitors toJapan exceeded 10 million in 2013 for the first time and surpassed 30 million only five years later in 2018.
The government’s target of 40 million by 2020 is not at all unfeasible. On the other hand, foreign visitors
to France have exceeded 90 million in 2018. A late comer as a tourism-based nation, Japan must continue
to improve its presence in the competition with other countries.
The other development is the Revised Immigration Control Law that was enforced in April 2019. The
revised law includes a new status of residence (Specific Skills (i)), targeting 14 sectors that face serious labor
shortage. This opens the doors to foreign nationals in engaging in unskilled labor, which had not been
allowed in the past, and expects to accept up to 340,000-strong foreign nationals over five years. While
technical interns and students (engaging in activities outside the scope permitted) have become precious
workers at workplaces with a serious shortage of labor, there are many problems to be solved such as theexistence of heinous brokers, poor working environments, and low wages. The government, supervisoryorganizations, receiving companies, and schools must work together to solve the problems without
shelving these apparent issues.
The key points in creating a cohesive society is to make foreigners “want to visit Japan (again),” “wantto work/study in Japan,” and “want to continue living in Japan.” It will be important for Japan tocontinue to be a country that is chosen. This will require the Japanese people to change their awarenessand to develop infrastructure both in tangible and intangible terms, which, in turn, will force real estate tochange as well.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

12

TOPIC REPORT｜Xymax Real Estate InstituteIn the following sections, we will identify the trends of a cohesive society and the impact it has on realestate as well its issues from the perspective of inbound visitors and non-Japanese workers and students.

4.2

Inbound visitors to Japan

As of 2019, more than 90% of inbound visitors to Japan entered the country by air. To further increase
the number of visitors, it will be necessary to expand the capacity of airports. Specific initiatives include
the operation of new flight routes for Haneda Airport, a one-hour extension of the departure and arrival
times at Narita International Airport, and a major renovation of Terminal 1 at Kansai International Airport.
In recent years, the destinations of visitors have diversified. According to the inbound visitors
consumption trend survey by the Japan Tourism Agency, 61.4% of inbound visitors in 2017 were repeat
visitors who have visited Japan two times or more. The more they visited, the more they tended to visit theprovinces. This diversification from well-known sightseeing destinations to rare sightseeing destinations
has been encouraged by the improving transportation infrastructure, the advertising of tourism resources,
and the development of accommodation facilities, which revive the local economy. The official
announcement of land prices in March 2019 indicated that land prices rose significantly not only in urban
sightseeing destinations such as Asakusa but also in regional sightseeing destinations such as Niseko,
Hokkaido, which attract many foreign visitors, giving rise to needs for commercial outlets andaccommodation facilities. Going forward, the key to improving the appeal of and differentiating sightseeing
destinations will be to continue addressing the various needs of inbound visitors, such as enhancing
spending on experience, which is expected to lead to an increase in inbound visitors who “want to visit
Japan (again).”
There has been a rush to construct hotels ahead of the Tokyo Olympics & Paralympics in 2020. Although
it is estimated that there will be an oversupply of hotel guest rooms after the Olympics in the Tokyo
metropolitan area, it is believed to be unlikely that the total demand for hotels and private lodging will
drop from current levels on a nationwide basis, as the government aims to attract 60 million inboundvisitors to Japan by 2030. There is a certain number of hotels and guest rooms in Japan already, but, as inbusiness hotels, many of them are mainly single rooms and small, as they were designed to accommodate
short-term stays by Japanese guests. On the other hand, inbound visitors to Japan require large rooms with
twin beds or more, since they usually stay at hotels with family or friends and their luggage will increase
after shopping. They also have different needs from the Japanese, such as a prayer room, universal electric
outlets, and multilingual services. In reality, although there are many hotels in Japan, not many of them aredesigned for inbound visitors to Japan.
The locations of accommodations are also becoming diversified. As a specific example, a Japanese realestate operator and a US hotel chain announced that they will open hotels adjacent to nationwide “roadsidestations” from 2020 onward. They propose a travel style of visiting multiple tourist attractions of the area,with a hotel specializing in accommodation functioning as a hub. Economic ripple effects for the area canalso be expected from an increase in spending on meals and shopping.
With regard to private lodging, the number of lodgers in such accommodation totaled 1.32 million
between June 15, 2018, when the New Private Lodging Business Act was enforced, and May 31, 2019 (thegross total was 3.67 million for the period). Despite a weak start due to the fact that illegal private lodging
was eliminated by the new law, the number of lodgers between April and May 2019 amounted to 0.34
million (a gross total of 0.93 million), of which a little over 70% were foreign nationals. The number ofregistered properties exceeded 18,000 by August 2019, more than eight times the number of lodging at
the time when the new law was enforced. Factors for the increase include the spread of services supporting
private lodging and related industries, such as major convenience chains offering their stores as a place fordelivering the keys to the rooms. Furthermore, the number of simple lodging that can operate for morethan 180 days a year has exceeded 30,000 as of 2017 and is expected to continue to increase as they meetthe demand of inbound visitors to Japan.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

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TOPIC REPORT｜Xymax Real Estate Institute

Inbound spending in 2018 exceeded 4.5 trillion yen, a new record high. Consumption expenditure canbe largely broken down into 30% for accommodation, 35% for shopping, and 20% for meals, indicatingthat inbound spending is a large market for commercial facilities and stores. The key to capture and increase
inbound spending is to provide products, services, and experiences that suit the needs of foreign visitors.
An example would be to hold events linked to the seasonal events calendar of each region in cooperation
with local governments. Disseminating the information via social media and asking visitors to post reviews
may improve the recognition of the facilities and attract new tourists.
Another service is cashless payment. The government announced its policy of granting reward points forcashless payments as an economic stimulus measure at the time of the consumption tax hike in October
2019. The penetration rate of cashless payments is expected to gradually rise, helped by the rising
momentum for multilingual support ahead of the Tokyo Olympics & Paralympics in 2020.

4.3

Non-Japanese workers and students

The number of non-Japanese workers and foreign students studying in Japan hit record highs of 1.46
million (+14.2% year on year) and 0.29 million (+12.0%), respectively, as of the time of aggregation in 2018.
The MIC published “Multicultural Coexistence Cases” in 2017, which introduced 52 initiatives collectedfrom local public agencies, local internationalization associations, and NPOs. The initiatives are categorized
into the following four groups: communication support (9 cases), daily life support (28 cases), regional
development based on multicultural coexistence (9 cases), and contribution to local vitalization andglobalization (6 cases). A large number of cases involves daily life support. Looking at the particulars of theinitiatives, more cases concern intangible aspects than tangible aspects. Housing support business forforeigners who “want to work/study in Japan,” in particular, seems to offer room for the real estateindustry to engage more actively. A specific example is the provision of company dormitories and student
dormitories that accommodate foreigners in the provinces. As also mentioned in the Multicultural
Coexistence Cases, a common issue concerning non-Japanese workers and students is theoverconcentration of their employment and acceptance in Tokyo. In a society with a declining population,
the need for non-Japanese personnel is likely to increase in the provinces, and providing company andstudent dormitories would be effective as a matching/motivating measure to attract foreigners.
Under the Revised Immigration Control Law, foreign nationals will be able to obtain permanent residency
if they acquire the Specific Skills (ii) status of residence by passing advanced tests. Since this status allows
family members to accompany the worker, it is expected that foreign nationals who “want to continue
living in Japan” will increase in the future. The government presented its “Comprehensive Measures for
Accepting and Coexisting with Foreign Workers” at the third Meeting of Relevant Cabinet Ministers on
Accepting and Coexisting with Foreign Workers in December 2018, in which it announced a plan to establish“Multicultural One-Stop Comprehensive Consultation Centers,” which will be the integrated contact
point for local government and immigration control, at 100 locations nationwide. However, for foreign
nationals to live safely with peace of mind, it is necessary for companies and schools that employ or accept
them to bear daily life support costs more aggressively, instead of leaving the matter to the local
government. The time will come when related real estate businesses will also be required to change.
Discussions on how to coexist with foreigners are still in early days. As mentioned at the beginning of
the above Comprehensive Measures, the key to achieve a sustainable coexisting society will be to foster
mutual understanding where not only the Japanese people, the accepting side, strives to understand andcooperate in achieving a coexisting society, but also foreigners, the accepted side, try to understand thephilosophy of coexistence and understand the Japanese culture.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

14

TOPIC REPORT｜Xymax Real Estate Institute5 Data society

5.1

Data society

It is said that data is the oil of the 21st century. The advance of technologies such as IoT and AI has
brought about an era where a vast amount of data, which does not have any mass, is born every day,creating added value and driving not only industries and the economy but also the entire social structure.
In this data society, possessing many data becomes vital. Today, major digital platformers such as GAFA
(Google, Apple, Facebook, Amazon) own a huge amount of data and have come to have an impact at thenational security level of countries around the world.
Why did no major digital platformer such as GAFA emerge in Japan? One reason is that, since Japan grew
as a major manufacturing nation after the war, the industrial transition from hardware to software was slow.
The fact that Japan has a strong self-sufficient mentality, which hindered open innovation compared toother countries, must have also had an influence.
In recent years, however, collaboration between private companies beyond industry borders is increasing
in industry, government, and academia collaborations that are carried out when the government examines
new social system designs and at companies searching for new business models.
In the next section, we will examine the environment surrounding GAFA, which are taking the world bystorm. In the third section we will introduce the trends in Japan in a data society and in the fourth section
we will identify the impacts of the various developments of technology on future real estate following the
expansion of the data society.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

15

TOPIC REPORT｜Xymax Real Estate Institute

5.2

Environment surrounding GAFA, which is taking the world by storm

GAFA’s businesses originated from web-based digital domains, such as searches and browsing (Google),
PCs and smartphones (Apple), social network (Facebook), and e-commerce (Amazon). In recent years,
however, they have been expanding their businesses into physical domains such as cashless payments,
retail (physical stores), smart homes, self-driving, and drones, on the back of their vast amount of collected
data and infrastructure platform. Furthermore, Google, Amazon, and Microsoft also provide a wide rangeof cloud services by focusing on AI-related services.
Thus, they have established the world standard for near-future technology and are competing with eachother to become the champion of the data society, while locking in both BtoB and BtoC customers. Suchactions have a large influence on various industries, markets, and nations.
Meanwhile, the EU, in particular, aggressively imposes the following regulations on GAFA’s businessmodel.
 Personal data (GDPR: EU’s General Data Protection Regulation): Prohibits the transfer of personal data,
even if it was collected legitimately, to outside the EU area.
 Fair competition (EU Competition Law): Google’s search results for a product’s price predominately
displaying Google Shopping results takes advantage of its dominant position and hinders faircompetition.
 Tax (digital tax): Introduced in France in 2019. The tax is imposed on the net sales of global IT companies
generated within the relevant country.
There have been moves to regulate GAFA in the United States as well. In July 2019, the US Departmentof Justice announced that it would start investigating IT companies for possible violations of antitrust laws
(equivalent to Japan’s Anti-Monopoly Act). The targets are considered to be four GAFA companies. The
United States may also shift to tighter regulations.
The Japanese government included its policy of regulating large IT companies in the draft of the “Council
on Investments for the Future—Growth Strategy” in June 2019. The government will proceed to enact the
Digital Platformer Transaction Transparency Act (tentative name), a new law that supplements the AntiMonopoly Act to ensure a fair transaction environment, and strengthen the protection of privacy by revising
the Personal Information Protection Law. The government aims to achieve both regulation and growth as
it takes technological innovations into consideration by establishing a specialist organization that evaluates
the digital market. Furthermore, the participants of the G20 Finance Ministers and Central Bank Governors
Meeting held in Fukuoka last month agreed to prepare unified rules for international digital taxation thatprevents tax avoidance by huge IT companies.
It is unlikely that GAFA alone will continue to be the winners in the global markets due to regulations of
GAFA being tightened as a result of the development of laws in different countries and the emergence of
new players such as China’s BAT (Baidu, Alibaba, Tencent). It is necessary to pay attention to thedevelopments of Internet companies that operate globally as well as to the regulatory developments
against them.

5.3

Data society—the trend in Japan

In this section we will introduce some of Japan’s initiatives concerning the data society. The Information
Bank advocated by MIC is a new concept in data distribution. It refers to operators that receive personal
data from individuals, accumulate, manage, and utilize the data on behalf of the individual, and return thebenefits gained from such activities to the individual. It is attracting attention as a novel initiative that

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

16

TOPIC REPORT｜Xymax Real Estate Institutecounters GAFA companies, which hold a vast amount of personal data, with a clearly defined advantage forindividuals, which is to pay them consideration. Some of the advantages for individuals who provide
information are that the contact point for managing their data is unified and that they will have knowledgeof who their data is provided to. Authorization of operators by the Information Technology Federation ofJapan started in June 2019, and there are few examples so far that indicate the specific advantages
individuals can receive. In order to spread the Information Bank, it would be necessary to start from raisingawareness among individuals that personal data is an asset or product that they should manage bythemselves.
In 2017, METI announced a new vision for industries that Japan aims to achieve, namely, Connected
Industries (CI). Specifically, Connected Industries aim to achieve a super smart society (Society 5.0) by
establishing an industrial society where various data connect with each other beyond borders andgenerations, such as “goods & goods,” “people & machines,” “production & consumption,” “large
companies & small companies,” “region & region,” and “capabilities of actual work sites & digital,” togenerate new added value. A keyword for improving the competitiveness of the industries is “high-mix
low-volume,” which is expected to lead to accelerated construction of factories not in countries where
personnel costs are low but close to consumers if smart factories become common due to the progressof CI.
Examples of private companies’ initiatives include the Seven & i Data Lab, which was launched by Seven& i Holdings in 2018. It aims to solve social issues by mutually utilizing the insights gained from statistical
data owned by companies of different industries. 10 leading companies from multiple industries participate
in the initiative. They discuss with Seven & i on a one-on-one basis to designate several issues and seek tosolve them through demonstration tests. At the same time, the results obtained are shared within the Lab
and further data utilization is also being considered, creating the largest ever big data collaboration
between companies.
With the shortage of IT personnel estimated at 0.79 million in 2030 by METI, the government, industry,
and academia have been engaged in collaborative efforts to foster data scientists. Universities are
establishing departments that aim to raise data scientists (e.g. at Shiga University and University of Hyogo)
and are growing in number.

5.4

Impact on real estateConsumer behavior changes due to the advance of technologies following the expansion of a datasociety, transforming existing business styles in turn. In this section we will explain the major keywords andthe impact they have on real estate.
 E-commerce: According to METI, BtoC e-commerce accounted for 6.22% of the Japanese market in 2018
and is continuing to expand along with CtoC e-commerce as represented by flea market apps. Currently
we find no factors that hinder the growth of the market. The growth of BtoC and other e-commerce inJapan, where household spending is stagnant and the population is declining, is in a trade-off relationshipwith a decrease in sales of physical stores and should not be considered as a separate business.
Consumers are choosing between e-commerce and physical stores according to their purpose, such as
convenience, comfort, and fun. Amazon’s acquisition of a major food supermarket and Uniqlo’s aim ofachieving a 30% e-commerce sales ratio in Japan indicate that e-commerce and physical storessupplement each other to provide seamless customer contact opportunities. Retailers must continue tomodify the positioning of their e-commerce business and physical stores and examine their strategies inorder to respond to changes in consumers’ spending behavior. Amid such drastic changes in theenvironment surrounding commerce, the direction of real estate, which are commercial facilities in thiscase, is a major issue. In the United States there have been an increase in dead malls, which are shopping
malls that have been abandoned due to an excess of stores and e-commerce. Some of them have been
converted for other usages such as distribution. We must keep a close eye on these developments andconsider the future of commercial facilities in Japan.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

17

TOPIC REPORT｜Xymax Real Estate Institute FinTech: FinTech is a portmanteau of financial technology and refers to innovative developments thatconnect financial services with information technology. Specifically, the concepts that FinTech embraces
are wide-ranging, from virtual currency to crowdfunding and cashless payment. They have given birth to
new financial ventures that provide services using the Internet, smartphones, AI, and big data. As a result,the positioning of physical outlets of financial institutions, which have hitherto enjoyed an effective
monopoly in providing financial products and services, is changing. Financial institutions are also seeking
to transform their business model from the traditional distribution of funds to distribution of
information. Physical outlets in the future are expected to diversify in terms of location and size according
to their functions, such as outlets specializing in consulting and joint outlets that provide one-stopbanking, trust banking, and securities services. Efficient use of idle properties that go on the market due
to mergers, abolitions, and closures of outlets will offer significant business opportunities for real estate
players.
 MaaS (Mobility as a Service): MaaS is a new concept of “mobility” that considers mobility by all meansof transport other than the users’ private car as one service, regardless of whether it is public transport or
who the operator is, and links them seamlessly by applying cloud technologies to transportation using
ICT. Although it is still early days in Japan, it is believed that a sharing economy represented by car sharing
and ride sharing will become wide-spread and that the time will come in the medium to long term whenthe mainstream of consumers’ private cars will shift “from owning to using.” The progress of MaaS is
expected to alleviate the burden related to travel and the means of travel, change how real estate suchas buildings and parking lots are used in urban development, reduce traffic accidents, solve urban
problems including traffic congestion, and solve problems of the provinces that suffer from a declining
population. Under these circumstances, Toyota Motor announced in 2018 its e-Palette Concept, a mobility
service using a dedicated next-generation electric vehicle that can be applied to various purposes suchas travel, distribution, and product sales. It is an attempt to replace services currently based on real estatewith various concepts of movable properties such as physical e-commerce, multipurpose travel space, ondemand shopping streets, and one-stop distribution. It has the potential to drastically change the concept
and value of real estate.
 RealTech or propTech: In Japan’s real estate industry, it is not uncommon for property information tostill be exchanged over the phone or by fax. In an effort to turn Japan’s real estate business into an
information industry, the Real Estate Tech Association for Japan publishes a “Real Estate Tech Chaos Map.”
This map categorizes real estate players that are making efforts to improve business efficiency and added
value by utilizing technology based on their business area. The map includes business areas that haveexisted from before, such as “intermediation support,” “matching,” and “renovation,” as well as businesses
that transform the customs of the real estate industry, such as “crowdfunding,” which enables highyielding real estate investment from a small amount of money, “VR/AR,” which enables previews ofproperties using smart devices, and “space sharing,” which refers to private lodging and shared offices.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

18

TOPIC REPORT｜Xymax Real Estate Institute6 Advance of technology

6.1

Integration of physical and digital

Technology is an element of competitiveness of a country or a company, and its importance is risingcontinuously. The World Economic Forum, which is known for the Davos Meeting, revised the methodology
for its 2018 Global Competitiveness Index ranking to place more emphasis on technological innovation,and on technology in particular. Following this revision, major countries have been increasing their scienceand technology budgets and companies have been stepping up their R&D investment.
Technology has made significant progress on the back of strategic investments by different countries,
bringing about structural changes in every industry. A keyword that symbolizes this trend is X-Tech. X-Techrefers to business areas where physical and digital have integrated, such as FinTech, HealthTech, EdTech,
AdTech, AgriTech, HRTech, and FoodTech. Business areas where information communication technologies
had not yet penetrated are embracing information technology, and new industries and companies are
emerging as a result of redefining industrial structures due to the digital revolution (the fourth industrial
revolution). Digital disruption, where existing industrial structures and the principle of competition arebeing destroyed or redefined, is happening in various industries as innovative products and services usingsophisticated information communication technologies spread globally. In the real estate industry, realTech,or propTech, is attracting attention as values or mechanisms that intend to change industry problems andtraditional business customs with digital technology. In Japan, the Real Estate Tech Association for Japanwas founded in 2018, in which more than 70 companies currently participate.
To understand the various technologies in an organized manner, we will introduce technologies in thefollowing sections in relation to the three aspects of technology for real estate, namely “building andmoving,” “using,” and “trading,” with a focus on technologies that are deeply related to the real estateindustry and business innovations generated by technology.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

19

TOPIC REPORT｜Xymax Real Estate Institute

6.2

Technologies for “building and moving” real estate

The progress of technologies related to real estate enables to “build and move” real estate with theminimum resources. “Resources” in this context include materials such as steel, stone, and sand, as well as
energy such as electricity and water, and workers (number of persons and hours) for constructing andmaintaining buildings and infrastructures. As the shortage of human resources such as construction workers
and cleaners, in particular, affects the continuity and productivity of the real estate business (refer to
Chapter 2), there are high expectations for technology as a solution to problems.
A typical example of technology for building is the 3D printer. A 3D printer produces complex threedimensional objects by providing data and materials. By molding components of complex forms at theconstruction site, 3D printers can reduce assembly work as well as materials to be discarded, materials
storage space, and conveyance operations. Furthermore, they will also contribute to stable quality since
work that requires advanced construction work such as welding at construction sites will be reduced.
Unique materials and buildings that meet the needs of the customer can also be manufactured, paving theway for being able to respond to diversified values. There are many examples around the world already ofreal estate being built with a 3D printer. In China, a house was built with a 3D printer in 2015, followed bya bridge in 2019. Dubai is developing a strategy to use 3D printer technologies for 25% of its buildings by
2030, with 2,700 square feet of office buildings constructed in 17 days for 140,000 dollars in 2016. In the
United States, start-up company ICON builds 600–800 square-foot houses in only 24 hours and for 4,000
dollars. In Japan, although the technology has not yet been put into practical use due to the need to meetearthquake resistance standards, construction companies such as Obayashi Corporation and Taisei
Corporation are carrying out R&D.
Robotics is attracting attention as a solution to the shortage of human resources at construction andmanagement sites. Large construction sites are introducing land levelers, loaders, backhoes, and trucks with
automatic control technology. Such equipment works autonomously using GPS, digital drawings, and
LIDAR (remote sensing using lasers) and can be controlled remotely. The excavator with GPS by Komatsu,
a leading company in this field, can excavate land in centimeter units. Robots that work with humans havealso emerged. SAM100, a robot that assists in masonry made by Construction Robotics of the United States,
accurately lays 1,000 bricks a day even on shaky ground by automatically correcting itself. In Japan, major
general contractors are carrying out R&D of robotics in the face of serious labor shortage and aging of
construction site workers (30% of construction workers are aged 55 or older, while 10% are in their teensor 20s). In 2019, Kajima Corporation introduced robots for works such as welding iron frames, spraying fireresistant covering, and attaching exterior components at Kajima Fushimi Building. Furthermore, robots thatcan work automatically for long hours are in the actual introduction stage in the cleaning and security areas
where there is upward pressure in personnel costs due to a serious shortage of labor. Examples include
cleaning robot Whiz (SoftBank Robotics) and security robot SQ-2 (SEQSENSE).
Drones (UAVs: Unmanned Aerial Vehicles) are expected to play an active role in a wide range of areas
such as surveying, testing, inspecting, and crime prevention. Surveying with drones will significantly reduce
the time required for surveying and will improve the productivity of other processes of building real estateand infrastructure. The 3D survey data created by combining the aerial images taken by the drone will be
used for creating design drawings and construction plans, automatic control of ICT construction machinery,automatic calculation of construction volume, and saving labor of post-construction tests. Drones are also
expected to play an important role in i-Construction, which is being promoted by the Ministry of Land,
Infrastructure, Transport and Tourism (MLIT). Drones have started to be used for inspecting infrastructure
facilities such as roads, bridges, tunnels, and dams, as well as buildings, not only reducing time and costs
but also enabling safe inspection even at hazardous places that previously required scaffolding. Drones forcrime prevention, which detect intruders and send reports to the control center and the police, have also
been developed. Secom launched a service in 2015. Other effects on society and real estate include
improved efficiency of the last mile of distribution due to unmanned delivery and creating floor area
demand for landing pads. However, based on drone-related legislation such as the revised Civil Aeronautics
Act and the Act on Prohibition of Flight of UASs around and over Key Facilities, drones are prohibited fromflying within densely inhabited districts, flying in airspace within 30 meters from people or buildings, flying
within private property, flying out of eyesight, and landing or departing from a road (as of 2019). For drones

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

20

TOPIC REPORT｜Xymax Real Estate Instituteto proliferate on a full scale and be used in urban areas, there remain several issues other than the above
legislation, such as the need to reduce the size and weight of drones, improve load capacity, reduce noise,and train pilots.
Technologies to reduce the workload of humans are also being developed. Takenaka Corporation’s
fatigue-reducing wear is designed for rebar workers and plasterers to ease work that requires slouching or
half-crouching and bending the knees. Kajima Corporation’s wearable vibrator is a 10-kilogram, lightweight
backpack vibrator that enables concrete compaction work, which usually requires several people, to bedone by one person. Power assisted suits support the movement of man with built-in motors, springs,
and gas pressure. Following an increase in their introduction in the nursing care field when METI and theMinistry of Health, Labour and Welfare (MHLW) started a subsidy program, they are now being introduced
at construction and distribution sites as well. Cyberdyne’s HAL reduces the load on the hip by reading
biopotential signals sent from the brain to the muscles and providing assistance with electric power. Daiwa
House Industry introduced power assisted suits in all of their factories in 2018.
BIM (Building Information Modeling) is anticipated to improve the productivity of everyone involvedin a construction project. BIM can specify attribute data such as costs, finish, management information, andgeographical information to a 3D model of a building created in a computer. The 3D model that has beencreated can be shared on BIM with architectural designers, surveying engineers, structural designers,
construction companies, and owners. By reducing errors and reworks in design or construction andfacilitating agreement between the parties concerned, BIM improves productivity in all processes of abuilding, from design and construction to maintenance. Leading software include Autodesk’s Revit,
GRAPHISOFT’s ArchiCAD, and NYK Systems’ Rebro. According to the Japan Federation of Construction
Contractors, 67% of its member companies replied that they have introduced BIM. Products that create
digital data of existing buildings in a short amount of time using 360-degree cameras have also beendeveloped, raising hopes for BIM to be used in renovations and repairs. In 2018, STARTS Research Institutedeveloped LAPLACE, a system that swiftly and automatically creates construction plans and business plansthat meet construction requirements in accordance with laws such as the Urban Planning Law by linking
GIS (geographic information system) with BIM and AI. The MHLW also launched the Construction BIM
Promotion Conference to establish a system to implement BIM under the united efforts of the public andprivate sectors.
Real estate consumes a large amount of resources for daily operation even after they are built. In Japan,
while energy consumption by the industrial and transportation sectors has declined, that of the consumer
sector (household, professional) has continued to rise, accounting for 33.8% of total as of fiscal 2011.
Energy-saving measures for buildings have become required, which led to tighter regulations in 2015
through the Building Energy Efficiency Act and the establishment of systems for certifying the energysaving performance of buildings such as BELS. This trend has led to ZEBs (net zero energy buildings) and
ZEHs (net zero energy houses), which realize net zero energy consumption by introducing various energysaving technologies. The technologies being used can be largely grouped into the following three
categories: passive technology, active technology, and energy-generating technology. Passive technology
is technology that reduces the amount of energy required and includes thermal insulation technologies
such as natural ventilation, natural lighting, and low-e multi-paned glass. Active technology is technologythat uses energy efficiently and includes moderate temperature air conditioning using chilled water closer
to room temperature, thermal storage technology that stores heat during the night, heat conveyancetechnology that naturally circulates refrigerants using the difference in specific gravity of gas and liquid,
and lighting technology such as LED lights. Energy-generating technology refers to renewable energy
technologies such as solar power generation. In addition, products that adopt energy management
technologies, which visualize consumed energy from data obtained by sensors and optimally control
equipment to provide comfort and save energy, have also been developed. Research is also being carriedout on using AI for IoT sensors and optimization controllers.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

21

TOPIC REPORT｜Xymax Real Estate Institute

6.3

Technologies for “using” real estate

The latter half of the 20th century saw significant progress in ICT (information and communication
technology) as computers’ processing speed improved, telecommunication capacity expanded, andnetwork technology advanced. The Internet, which was born during the 1960s to the 1980s, created anenvironment that connected people and machines around the world and enabled information to beexchanged, which contributed to economic growth and social progress. According to a survey, the GDP ofJapan’s Internet industry is expected to grow to 35 trillion yen by 2020, improving the productivity ofindustries by 9 trillion yen. In this section, we will introduce technologies and services that enhance thevalue of real estate per hour and per area by utilizing technologies that connect people with real estate, as
represented by the Internet, and optimizing the utilization of real estate.
Due to “diversifying values,” which we described in Chapter 1, people have come to require lifestyles andwork styles that are not bound by place and time. This new need led to the birth of various matching
services, which attract numerous users and sellers and connect them. In addition to platforms that handle
products such as Amazon, Rakuten, and Mercari, there has been an emergence of platforms that handle
services such as Uber (taxi, food delivery) and Airbnb (spare room), resulting in active CtoC transactions ofgoods and services via the Internet. This has enabled people and companies to thoroughly compare thegoods and service they require and purchase or use them the moment they need them. Furthermore, thosewith spare goods and time can now monetize such idle assets easily. This trend has been elevated to asharing economy, a new economic movement of sharing idle assets between individuals by lending, selling,or exchanging them via Internet platforms. The sharing economy is having an impact on existing rules andbusiness models in various industries.
The wave of the sharing economy has also reached the real estate industry. Traditionally, when real estate
became necessary or unnecessary there were two choices: to purchase or sell, or to rent or lease out. Since
real estate is not traded as frequently as consumer discretionary items and are expensive, it was difficult toacquire or dispose of them flexibly in accordance with individuals’ life cycles or companies’ business cycles.
As a result, real estate that were not put to effective use were left unattended, leading to social issues suchas the vacant house problem. Space sharing, which was born under such circumstances, is a service forsharing or matching real estate or spare space on a short or medium/long-term basis. The advance ofInternet technologies has enabled small spaces to be managed by the hour and huge numbers of a varietyof spare space information to be directly connected with numerous users on the Internet. Furthermore, thepenetration of smartphones that emerged in the early 2010s lowered the hurdle for registering or using
space, attracting even more users. Today’s space sharing has expanded to various usages such as meetingrooms and event space (SPACEMARKET, SPACEE), parking lots (akippa), private lodging (Airbnb), sharedoffices, hair salons (AirSalon), and spare space (Nokisaki Business). Subscription services that allow users
to live in several houses as they wish for a flat rate (ADDress, OYO LIFE) have also emerged and are providing
new options other than owning or renting. Space sharing has led to the birth of incidental and derivative
services. Smart locks, which can operate and manage the locking and unlocking of keys with a smartphone,
are essential for ensuring the security of space sharing, which is used by an unspecified large number ofpeople. SESAME, a smart lock device, can be attached to existing keys and operated remotely via a Wi-fi
network.
On the other hand, the development of ICT has made it possible to collect data on the use of facilities
and services such as meeting rooms, cafeteria, and refreshing rooms as well as the flow of people within
the rooms by attaching sensors to various points of the property. Amid the progress of work style reforms,
individual workers’ use of facilities has become diversified, and it is expected that FM (facility
management) services, which enhance the utility value of facilities by optimizing the usage situation withina property, will become important. Coworking office operator WeWork considers buildings as a place tocollect data and strives to derive an optimal balance in the number or layout of desks, meeting rooms,
common space, and telephone booths by detecting the flow of people within the space through accessrecords and heat sensors. WeWork also measures the room environment such as room temperature andlighting to create an office environment that improves user satisfaction. In addition, a service has beenlaunched for detecting the risk of abnormalities of billboards, such as falls and collapses, by installing
sensors on the billboards and measuring tilts and acceleration. This will enable inspections, which had

Topic Report: Real Trends of Real Estate 2020
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.
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TOPIC REPORT｜Xymax Real Estate Instituterelied on short-range local visual observation, to be carried out frequently and safely from remote locations
over an extended period of time. Maintenance work using IoT sensors is anticipated to be applied to a wide
range of subjects other than billboards such as outdoor lights, concrete walls, electric poles, and road signs,
making risk management of real estate even more efficient.

6.4

Technologies for “trading” real estate

Real estate is an aggregate of various rights such as ownership, trust beneficiary interest, and leaseholdinterest, as well as an aggregate of a huge amount of information such as on location, size, age, andtransaction history. In this section we will introduce technologies and services related to “trading,” i.e., theact of swiftly distributing a large amount of information and transferring rights smoothly and safely. In
recent years, there have been technologies and companies that aim to improve the transparency andefficiency of the market by accelerating settlement speed and visualizing prices while guaranteeing fairnessof the market by using ICT. This has been made this possible by the dramatic progress of ICT. The
computing power of computers has seen exponential growth, the capacity of data storage expanded, anddata processing and accumulation developed into crowd computing. Telecommunication capacity also
grew rapidly, as represented by optical fiber and 5G, enabling all kinds of data to be shared in an instant.
Amid the shift from paper to big data, technologies that improve the efficiency of sales and leasetransactions have spread. A service that emerged relatively early was real estate portal sites. They allow
site operators to obtain sales and rental property information from real estate companies, compile theminto a database, and enable those who wish to buy or rent real estate to search or make inquiries online.
Major sites include SUUMO, HOME’S, and At Home. The limits to the amount of information that can be
included in paper media do not apply to websites, which allow portal sites to post abundant informationsuch as detailed information on the equipment, photos, and videos, in addition to basic information suchas size, listed price, and floor plan. Today, real estate portal sites are broadening their targets to corporatetransactions and have been including properties such as offices, stores, and distribution facilities, in addition
to residential properties for individuals. Infonista, a membership-based matching service for stores,
facilitates corporate real estate transactions, which are expensive, complex in the conditions, and requireconfidentiality by directly delivering property information that meet the requirements to companies looking
for vacant stores. LIFULL has joined hands with Trovit, one of the world’s largest aggregation sites, toaggregate information from multiple countries and allow users to access information at one site.
On-site confirmation is an essential step in trading real estate. However, travelling to the location andwitnessing the confirmation had been a time and space constraint for both the customer and the real estatecompany. VR (virtual reality), AR (augmented reality), and MR (mixed reality) are technologies that use
computer graphics and enable VR previews, which allow customers to check the property anytime without
visiting the actual spot. NUR*VE provides a cloud service that creates VR content from images. Utilizing VR
previews, unmanned real estate customer service stores, and virtual housing exhibition sites is expected to
improve real estate companies’ business efficiency, ability to attract customers, and contract rates.
Real estate is unique, and no two properties are the same. Since real estate is affected by thecircumstances of both the seller and the buyer and the amount of information, its pricing structure is
extremely complex. Also due to expensive prices, there is a strong need among market participants to know
the true prices of real estate. This has led to services that visualize and assess real estate prices and rent
as well as their future outlook on the back of the development of real estate data such as real estate portalsites and the progress and penetration of analysis technologies including statistics and AI. LIFULL’s Price
Map is a service that allows anyone to check on the map on the website the reference prices estimatedfrom location elements, time elements, and property attribute elements using statistical analysis methods.
LEEWAY’S Gate. is a cloud service that forecasts rent for up to 50 years using AI to analyze long-term cash
flows and assess risks. This service is not only provided to real estate operators but also to financial
institutions, investors, and tax accountants.
Social lending is a service that matches individual investors who wish to lend money and operators who

Topic Report: Real Trends of Real Estate 2020
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.
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23

TOPIC REPORT｜Xymax Real Estate Institutewish to borrow money on the Internet. It grew rapidly mainly in real estate loans, with its market reaching
131.6 billion yen by 2017. This financing method, which enables borrowers to gather small amounts offunds from a large number of investors via the Internet, is effective for operators that were recently
established and operators with few track records to finance real estate projects. For investors, it is also acasual and easy real estate investment method since it accepts applications and payments from a small
amount online. However, since social lending is a loan to a fund based on a silent partnership agreement,
it was subject to regulations as a moneylender, and investors could not gain knowledge of which specificproperties they invested in. Furthermore, it was still in development stages in terms of legislation andstability as seven companies were subject to administrative measures between 2017 and 2019. However,
the revision of the Real Estate Specified Joint Enterprise Act in 2017 enabled direct investment in small realestate projects (the total amount of funds raised from investors under 100 million yen) and online executionof contracts and delivery of documents. Following this move, there has been an increase in operators thatprovide online small-lot real estate investment services (crowdfunding), such as CREAL and Bit Realty.
These services enable investors to check the details of the properties they invested in, while some adopt a
priority/subordinate scheme in which the operating company bears losses first. Aiming to reuse vacanthouses, the MLIT is promoting the development of a crowdfunding environment by establishing guidelines
for real estate crowdfunding in 2019.
There are also initiatives to improve the efficiency of contract procedures of real estate transactions byusing ICT. If electronic contracts are realized, they will accelerate the speed of contract execution andreduce postage, stamp, and administrative costs. The deregulation of the Building Lots and Buildings
Transaction Business Act in 2017 enabled important items in lease contracts to be explained via online
conference systems, while social experiments of issuing documents on important items via electronic media
started in May 2019. Bengo4.com provides a service called Cloudsign, which enables users to create,
execute, and store contracts online. Such initiatives are paving the way toward electronic real estatetransactions.
Blockchain is a technology that is anticipated to improve the efficiency of real estate transactions.
Blockchain records the time and details of transactions on ledgers distributed on computers that are
scattered across the world and is used as the core technology for bitcoin, a cryptocurrency (virtual currency).
While centrally managed systems are prone to concentrated attacks to the server and face the risk of being
tampered, blockchain is said to be difficult to tamper. Therefore, it is expected to be used for tax collection
and pension distribution (UK), voting (Russia), document management (Dubai), personal authentication(Australia), and payments, as well as in real estate registration (US, Netherlands, Dubai, Ghana, Sweden, etc.)
in the real estate industry. Using blockchain is expected to reduce human costs and time costs of processing
documents, improve transparency of transactions, and enhance security. Dubai plans to record all land
registration information in its Emirate on blockchain by 2020. In Japan, the Cabinet Office and the private
sector are carrying out discussions and experiments to determine whether blockchain offers enoughadvantages to replace the existing real estate registration system it already has in place. Other than for realestate registration, blockchain is also being considered for use by a consortium (ADRE) that aims to develop
a platform for constantly sharing real estate data maintained at individual companies between real estatecompanies in the latest form without being tampered.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

24

TOPIC REPORT｜Xymax Real Estate Institute

7 Cities and provinces

7.1

Cities burgeoning and provinces facing depopulation

During the period of high economic growth between the 1960s and 1970s when Japan’s economy grew
dramatically with the help of special demand due to the Tokyo Olympics and the Osaka Expo, Japan’s real
economic growth rate reached around 10% per year, with GDP (gross domestic product) exceeding that ofGermany’s and ranking second globally after the United States.
Due to the concentration of companies in cities and a population flight from the provinces to the cities
following the economic growth, the gap between cities that grew larger and provinces that faced
depopulation gradually increased. The comprehensive national development plan was a comprehensive
and fundamental plan on the use, development, and maintenance of the nation. Although the plan aimed
for a balanced development of the nation at that time by aggressively developing transportation
infrastructure such as expressways and the Shinkansen that connected cities with the provinces, thepopulation flight to cities did not stop, or rather, accelerated. In the cities, land prices of central areas surged
as businesses concentrated in such areas and large-scale housing development spread to the suburbs due
to a population increase. Behind the economic growth, problems such as overcrowding due to aconcentration of population, traffic congestion, environmental destruction and pollution owing to rapid
industrialization, and waste problems due to mass production became serious social problems. The
provinces, on the other hand, lost their workforce to the cities, which weakened local industries and led todepopulation and aging of the population. Subsequently, following inflation, the oil shock, and the burstof the bubble economy, Japan’s real economic growth rate, which was around 10% per year during thehigh economic growth period, currently stands at around 1%. The economy slowed down over an extended
period of time especially after the burst of the bubble, resulting in stagnant urban development anddeclining international appeal and competitiveness of cities, which are the source of a nation’s vitality.
Urban regeneration became an urgent issue. This led the government to carry out urban structural reforms
such as establishing the Urban Renaissance Headquarters in 2001 and enacting the Act on Special
Measures concerning Urban Regeneration in 2002, which stipulates the government’s basic policy on

Topic Report: Real Trends of Real Estate 2020
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.
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25

TOPIC REPORT｜Xymax Real Estate Instituteurban regeneration. The Urban Renaissance Headquarters focuses on regenerating large metropolitan
areas, which are drivers of the economy, and on realizing affluent and comfortable living in regional cities,
as it comprehensively and vigorously promotes 21-century urban regeneration projects that aim toregenerate cities from environmental, disaster prevention, and internationalization perspectives as well asurban regeneration measures such as the effective use of land. Specific initiatives include developing core,wide-area disaster prevention bases, promoting securitization of real estate, actively using PFIs (private
finance initiatives), and establishing special zones for structural reform, where exceptions to regulations
are introduced according to the characteristics of the region. Subsequently, comprehensive zones were
established in 2011 to strengthen international competitiveness by concentrating industries and to enhancethe vitality of the regions through childcare support and the development of traffic networks.
However, as overconcentration in Tokyo continued and Japan faced major problems of a rapidly shrinking
and aging population, the second Abe administration advocated regional revitalization in 2014 based on
the idea that it was necessary to introduce measures that enabled each region to autonomously regenerate
itself through initiatives that applied the characteristics of each region, and has been carrying out measures
such as creating employment opportunities, strengthening economic foundations, and improving living
environments in accordance with the Regional Revitalization Act and the Act on the Regeneration ofCommunities, People, and Jobs. Specific measures include strengthening tourism, creating local industries,
establishing compact cities where lifeline functions are consolidated, connecting small communities
scattered over the region into a network, creating regional management organizations, and promoting
community development where people can play active roles over their lifetime. The major policies ofregional revitalization include the establishment of national strategic special zones in 2014, which are
regulatory reforms intended to create “the world’s most business-friendly environment” and significantly
ease regulations and systems or provide tax advantages by limiting regions and sectors, in addition toexisting policies such as reviving central urban districts, revitalizing regions, and introducing theenvironmental model city concept. These policies have led to various initiatives such as smart cities,
supporting start-ups, hiring non-Japanese personnel, and encouraging tourism and healthcare.
In 2018, the government announced that it would promote i-urban regeneration, which is urban
regeneration based on figures and space data, and that it would review its basic concept of urban
regeneration to address new needs such as investing in the future and improving productivity, and generate
or increase related population as measures that stimulate migration to the provinces.

7.2

Urban regeneration and regional revitalization

As mentioned in the previous section, cities and provinces have different characteristics and problems,
based on which the government and other parties are making efforts in urban regeneration and regional
revitalization. In this section, we will introduce such initiatives as well as consider the future roles of the realestate industry.
[Cities]
In Tokyo, large-scale redevelopment plans are being implemented, providing office buildings, houses,
and hotels on a continuous basis. Real estate development has accelerated in areas designated as national
strategic special zones, with districts where idle land, small buildings, and wooden houses with low fire
resistance were clustered becoming large urban blocks with upgraded roads, superskyscrapers and highrise condominiums, and transforming into resilient cities. On the other hand, areas where large
condominiums are concentrated in face a lack of public facilities necessary for urban life such as schools
and nursery schools. According to the Tokyo Metropolitan Government, about 3,690 people are on a
waiting list for nursery schools in Tokyo, which is hindering women’s participation in society. Furthermore,
although hotels and other accommodation facilities are increasing year after year due to the recent increaseof foreign tourists, it is said that Tokyo lacks high-class hotels compared to cities abroad such as London
and New York. It has been pointed out that Tokyo’s appeal in cultural tourism resources is weak, andmeasures to address this matter are required in order to enhance the appeal of the city from a more global

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

26

TOPIC REPORT｜Xymax Real Estate Instituteperspective.
As a local government, the Tokyo Metropolitan Government established its long-term vision with theaim of making Tokyo the best city in the world and sets its goals on solving its problems and achieving
continuous development over the future. Furthermore, it established the Tokyo Future Vision Panel toexchange opinions with up-and-coming young people of various circles with the aim of making Tokyo themost attractive city in the world by 2050 where technologies, culture, and human force clash.
In Osaka city, visitors from abroad increased nearly three-fold between 2014 and 2017, with theirconsumption during their stay exceeding 1 trillion yen. In addition to mega events such as the Osaka Expoin 2025, the city has plans to become an international tourism destination centered around an integrated
resort (IR), which are expected to attract even more tourists. Hotels and other accommodation facilities
will be constructed, as well as new transportation infrastructure such as the extension of the Osaka Metro
Chuo Line in 2024, which connects the city and the Expo site, and the construction of the Naniwasuji Linethat connects Kansai International Airport with Osaka and Kyoto in 2031. Looking 20–30 years ahead, thecity is also considering the Osaka metropolis plan, which aims to invigorate the city even more, as anotherkey measure that supports Japan.
In Fukuoka city, there has been an influx of population from within and outside the prefecture.
Dilapidated housing complexes are being rebuilt and residential land is being developed in the suburbs asa result. The city has formulated the Fukuoka City Comprehensive Plan, which sets out the direction the city
should take in the future, with the aim of creating a virtuous cycle of quality of life improvement and urban
growth and becoming a leading city in Asia. Specific measures include large-scale plans that involve thereconstruction of existing buildings, such as Tenjin Big Bang and Hakata Connected, on the back ofderegulation of height restrictions of the Civil Aeronautics Act and the floor-area ratio regulations, as well
as extending subway lines and developing the waterfront.
[Provinces]
In the provinces, there are many local governments and regions that were revived due to the policies andlaws described in the previous section. Examples of model businesses of local governments SDGs
(sustainable development goals) of the eco city concept include Shimokawa-cho, Hokkaido, where the local
economy was revived while co-existing with the environment by utilizing forest resources, and Toyama city,
Toyama, which aimed to introduce a compact city model by developing a local public network andintegrating energy management. Another example is Higashikawa-cho, Hokkaido, which has been
experiencing a continued growth of population over the past 20 years by introducing a shareholder system
to the community’s businesses, promoting Japanese language education and immigration of foreigners,
and focusing on education and childcare, supported by the Hometown Tax, a tax scheme based on the
Regional Revitalization Act in which taxpayers can choose to divert part of their residential tax to a specified
local government. The entities carrying out community development may not only be the central or local
governments but also private companies. Tokyo-based companies and foreign companies focusing on theprovinces to improve productivity are opening satellite offices in the provinces, creating industries andemployment and vitalizing the community. Examples include NIPPONIA in Hyogo Prefecture, a tourism
development project that utilized historical resources and turned vacant houses into accommodation,
restaurants, and workshops, creating employment and industries in the community, and Kamiyama-cho,
Tokushima, which saw an increase in migration and employment by utilizing old Japanese-style houses toattract ICT satellite offices.
A problem that will be common to both cities and provinces in the future is the rapid dilapidation ofsocial infrastructures, which were built nationwide mostly during the period of high economic growth.
According to the White Paper on Land, Infrastructure, Transport and Tourism in Japan, 2010, the percentage
of social infrastructures built 50 years ago in 2010 and 2023 (forecast) is expected to surge from 8% to 63%
for roads and bridges, from 2% to 21% for pipes for sewage, and from 5% to 58% for quay walls of ports.
Urban areas are expected to see a continued shortage of facilities that provide convenience for living, suchas nursery facilities, nursing care facilities, and medical institutions, as well as a shortage of workers thatrun them. Reusing abandoned real estate such as vacant houses in the provinces is also a major issue.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

27

TOPIC REPORT｜Xymax Real Estate InstituteAs described above, the problem of cities and the provinces is the history of Japan’s past economic
development, and urban regeneration and regional revitalization pose major challenges to the central andlocal governments. Within such a large framework, the real estate industry is anticipated to continue
developing as a growth industry and as an important key industry that supports a prosperous society andeconomic growth. In urban regeneration, the real estate industry is a key developer of communities andreal estate as well as the manager of tangible and intangible matters after the development. It is an
important role of the industry not only to carry out new development but also to consider and implement
the optimal usage of existing real estate stock according to changes in the needs. In regional revitalization,on the other hand, the real estate industry may be able to contribute to society in many ways, such as
improving the appeal of the provinces and addressing new needs generated from diversifying values (e.g.
inducing the use of multiple properties, such as living in two areas), utilizing idle real estate such as vacanthouses and vacant land, and providing area management.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

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TOPIC REPORT｜Xymax Real Estate Institute

8 Dilapidation of building stock

8.1

The problem of dilapidating building stock

As described in the previous chapter, buildings are dilapidating as social infrastructures are dilapidating.
Dilapidation generally means to become old and unserviceable. However, there are many old buildingsthat are well managed, many of which are historical buildings with historical value and designated asimportant cultural properties of the nation. Therefore, such buildings are not dilapidated even if they havegrown old. Being unserviceable means that structures, materials, and equipment have deteriorated andbecome dangerous or hazardous in terms of safety and health. Not only buildings that have deteriorated
physically due to age but also those that can no longer meet the needs of society due to changes of times
and ceased to be used can also be considered to be “unserviceable.” Such buildings pose safety risks suchas scattering of construction materials or collapse as well as external diseconomy such as deterioration of
security and scenery and decline of the community. Since such old buildings will increase in great numbers
in Japan due its shift from a scrap-and-build society to a stock society, there are concerns that“unserviceable,” i.e., dilapidating buildings, will increase among them.

8.2

The situation of dilapidating and aging of buildings

In this section, we will examine the situation of dilapidation and aging of building stock, grouping theminto houses or commercial real estate (office buildings, distribution facilities, commercial facilities).
[Houses]According to the Fiscal 2013 Housing and Land Survey by MIC, housing stock reached 60.63 million,
and has continued increasing since it exceeded the number of households in 1968. 13.69 million houses

Topic Report: Real Trends of Real Estate 2020
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.
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TOPIC REPORT｜Xymax Real Estate Institutewith a residing household, which is around 30% of a total of 52.10 million houses that have a residing
household, are 35 years old or older, while 4.48 million houses are considered blighted. Vacant houses
have also continued to increase to 8.2 million houses, with the vacant house ratio rising to 13.5%. Of suchvacant houses, 3.18 million are “other vacant houses,” whose residents have been absent for a long periodof time or which are scheduled to be demolished. 1.05 million of such other vacant houses are consideredblighted. When including secondary houses, such as holiday homes, and houses for rent or sale, the numberof blighted vacant houses amount to 2.13 million. According to the Fiscal 2018 Housing and Land Survey(Approximate Aggregation) released in April, vacant houses have increased further to 8.46 million,
suggesting that blighted houses have also increased.
For condominiums, MLIT expects the total condominium stock to have been 6.54 million as of the endof 2018, those older than 40 years of which are expected to account for 10%, or 0.81 million, which is
expected to increase 2.4 times to 1.97 million in 10 years’ time. The Comprehensive Condominium Survey,
which is carried out once every five years, revealed that the number of condominiums with a shortage ofrepair reserve has increased and that 35% of condominiums are currently short of reserves compared tothe plan. The percentage of condominiums with vacancies tends to rise as the building becomes older, withthe percentage among condominiums completed in and after 2010 at 20% as compared to 70% among
those completed in 1979 or earlier.
The number of households in Japan is expected to peak out at 54.19 million in 2023 and decline thereafter.
Nearly 0.9 million houses are still being built each year, and even if the pace of new supply of houses
decelerate, there will be a surplus of houses as long as there is new supply in excess of consumption, withsuch houses becoming vacant houses. Economic reasons also hinder the decrease in empty houses, as
property tax may increase if vacant houses are demolished, excluding them from the special provisions ofresidential land, while converting a vacant house into a restaurant or accommodation facility will be subject
to usage restrictions or require costs for changing the usage. Old vacant houses, which are potential
dilapidated houses, are expected to increase in the future.
[Commercial real estate]With regard to office buildings, there are 9,206 office buildings for rent with a gross floor area of 300
tsubo (1 tsubo=3.3 sqm) in the Tokyo 23 Wards, of which 2,884 buildings, or 30%, are aged 35 years orolder, according to an aggregate by Xymax REI (Office Pyramid). 8,459 buildings, or more than 90% of
total, are small and medium-sized buildings with a gross floor area of less than 5,000 tsubo. Many of them
(3,062 buildings) were built in the seven years between 1985 and 1991, which include the bubble economy
period, indicating that the number of buildings aged 35 years or older will double in 10 years’ time. However,since most office buildings have robust structures, they will be able to maintain their functions as officeseven after 35 years from construction if they are maintained appropriately. Moreover, the current officemarket is extremely strong and there are few vacancies or dilapidated office buildings.
However, the average ceiling height of small and medium-sized buildings completed by the 1970s is lessthan 2.5 meters, which is more than 20 centimeters lower than the that of buildings built in and after 2000
(2.7 meters). This is because height regulations compelled developers to build as many floors as they couldby keeping the floor height as low as possible to secure leasable floor area. Even if equipment can be
updated to the latest equipment through renovation, it is difficult to raise the ceiling height. A ceiling heightof 2.5 meters feels low today, and it is undeniable that such offices are less appealing as a product.
According to the Building Owner Survey by Xymax REI and the laboratory of Professor Yukio Komatsuof the Department of Architecture at Waseda University, which targets owners of small and medium-sizedbuildings, 60% of building owners are 60 years old or older and 70% own one or two buildings. Many small
and medium-sized buildings built during the bubble economy period when mass supply was concentrated
are located far from office districts and from railway stations, which is not considered suitable for offices.
Owners who entered the building lease business during this period have become old and are hesitant aboutcarrying out major renovations or rebuilding the building from a profitability point of view, and haveconcerns about the future of their building business. Large-scale redevelopment projects will continue in
urban centers, resulting in an increase in large state-of-the-art buildings. A downturn of the office market

Topic Report: Real Trends of Real Estate 2020
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TOPIC REPORT｜Xymax Real Estate Institutewill lead to a negative spiral where rent income decreases due to a rise in vacancies, making it difficult forowners to properly manage or renovate the buildings, which drive tenants out and result in more vacancies.
The increase of such dilapidated buildings may turn vacant buildings into a social problem.
With regard to distribution facilities, the 2013 Tokyo Urban Area Goods Movement Study Results by
MLIT reported that 30% of distribution facilities located in the Tokyo urban area were 30 years old or older,mostly small, and the building, equipment, and machinery in poor condition. The current supply-demandbalance is stable, with continued new supply of distribution facilities and strong demand from mail-order
operators and 3PL operators. Today, distribution facilities are required not only to be large in size but tohave quality specifications, the ability to respond to natural disasters and environmental load, and workerfriendly environments such as shower rooms and day care for children. Old distribution facilities may beleft behind from the trends surrounding distribution in recent years such as globalization and sophistication.
Commercial facilities and hotels and Japanese inns will not face major problems even if the buildings
were old, as long as they are able to meet the needs of consumers and lodgers. However, they will not be
used even if the buildings were not old if the current usage of the building cease to meet users’ needs.
Across Japan, there has been an increase in dead malls, i.e., suburban shopping centers that remain
operating with extremely low utilization rates, and hotels and inns that have turned into ruins in hot spring
resorts after a sharp fall in tourists.

8.3

Initiatives against dilapidation of buildings[Houses]
Since dilapidated and vacant freestanding houses have a negative effect on neighboring residents as wellas on the community, various measures have been implemented by the central and local governments. The
Act on Special Measures for Promoting Countermeasures against Vacant Houses, etc. was enforced
in 2015, enabling poorly managed vacant houses that are in danger of collapse or pose other serious risks
in terms of safety if left unattended to be categorized as “specially designated vacant houses,” and allowing
municipalities to advise or instruct the owners to eliminate the hazards or repair the house and recommend,order, or carry out by proxy if the situation is not improved. If a recommendation was made for a vacanthouse, it will no longer be subject to tax benefits of the special provisions of residential land. Various othermeasures to reduce vacant houses are also being implemented, such as the revision of the BuildingStandards Act and support for the establishment of a vacant house bank to facilitate the conversion ofusages of freestanding houses.
The Act on Smooth Rebuilding, etc. of Condominiums that was enforced in 2002 was revised in 2014,enabling the sale of the buildings and lots of condominiums that did not have sufficient quake resistanceif more than four fifths of condominium owners supported the sale. Although less than 300 condominiums
have been rebuilt as of 2019, including those in preparation of rebuilding, the number is gradually growing.
In the private sector, there is a momentum of considering the increase of vacant houses as a business
opportunity. According to an estimate by the Reform Shimbun in 2016, the potential market size of vacanthouses is 9,060.1 billion yen, which is broken down into: distribution (sale) as a pre-owned home (6,406.9
billion yen); renovation (1,071.7 billion yen); rebuilding (928.4 billion yen); dismantling/removal (415.0
billion yen); lease (220.8 billion yen); and entrusted management (16.3 billion yen). In leasing, vacant houses
are being utilized in the form of shared houses and private lodging, which had not existed before. The
Private Lodging Business Act (New Private Lodging Business Act) that was enforced in June 2018clarified the legal positioning of private lodging. The number of houses registered for private lodging issteadily increasing and stood at 17,343 as of July 16, 2019. Vacant houses are also being valued as quaintJapanese-style houses in the provinces and are being increasingly reused.

Topic Report: Real Trends of Real Estate 2020
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TOPIC REPORT｜Xymax Real Estate Institute[Commercial real estate]
Commercial real estate is mostly renovated, rebuilt, or their usage converted by the owner in order toimprove profitability of the building, and they are less dilapidated compared to houses. In central Tokyo
today, old small and medium-sized buildings are being turned into large buildings by redevelopment
projects led by major real estate developers involving small and medium-sized buildings. Many officebuildings have been rebuilt or their usages converted into condominiums and hotels in the past. Morerecently, entire office buildings are sometimes converted into trunk rooms and rental meeting rooms. In
addition, the progress of telework has led to new demand such as for shared offices and satellite offices,
resulting in offices in the suburbs that used to be less competitive in terms of location being valued as
offices close to home. Many old, small and medium-sized buildings have been addressing tenants’ needs
by differentiating from others by carrying out renovation and fine-tuned management in response totenants’ requests, improving communication with tenants, and highlighting the ‘retro feel’ of the building.
There have been many cases where the buildings of commercial facilities and hotels/inns were sold basedon business strategy and profitability and went into the hands of a new manager, who regenerated orrevived them by renewing concepts and reviewing costs. There is also an example of a large, roadsideconsumer electronics mass retailer that was converted into a hotel specializing in accommodation (Sennangun, Osaka: karaksa Spring hotel Kansai Air Gate). In commercial facilities, many buildings have thus beenreused or utilized by changing their usage in accordance with the changes of the times on the back of newvalue added by the ingenuity of the operator.
In Atami, there was a sharp drop in hotel guests after the burst of the bubble economy, resulting in hotels
and inns closing or turning into ruins one after the other. However, due to various initiatives carried out by
the city of Atami and the private sector in 2007, the number of hotel guests that had dropped to 2.56
million in 2011 increased to 3.3 million by 2017, and hotels have been newly built or revitalized. This is an
example where individual buildings were revitalized or utilized as the entire area revived. The same canhappen in offices and commercial facilities.
However, in any type of building, there will be an increase in buildings that attract no interest or a buyer
or a tenant if a gap appears in both quality and quantity of demand amid continued new supply. This iswhat happened to houses. If the situation is left only to individual operators, it may lead to problems ofvacant properties of different categories. This is an issue that must be considered today in order to maintainand build high quality stock.

Topic Report: Real Trends of Real Estate 2020
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.
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TOPIC REPORT｜Xymax Real Estate Institute

9 Natural disasters

9.1

What are natural disasters?

Natural disasters are critical natural phenomena such as abnormal weather, volcano eruption, earthquake,and landslide that result in losses of human lives or losses or damages to economic activities and daily lives.
Specifically, they include wildfire caused by extreme dryness or lightning strike, earthquake-induced
collapse or fire of buildings, land sinkage and liquefaction, buildings washed away or submerged due totsunami, flooding and landslides caused by huge hurricanes, typhoons and local torrential rain due toabnormal weather in recent years, food shortage and plagues caused by drought or dry weather, damage
to agriculture and fishery due to plagues of locusts and jelly fish, and the spread of epidemics.
The 2011 Tohoku earthquake and tsunami brought about huge damage due to the tsunami in addition
to the earthquake itself. According to MIC, damages as of March 2019 are: 22,252 persons dead or missing;
6,233 persons injured; 1.15 million structures collapsed or damaged (including partial damage), with thetotal damage amounting to 16,900 billion yen (source: Cabinet Office, June 2011). Damages occurred
beyond the year of the disaster, with bankruptcies due to the economic downturn following the disastertotaling approximately 1,800 between 2011 and 2017 (source: TSR Information. Teikoku Databank). Largeearthquakes have since followed, such as the 2016 Kumamoto earthquake and the 2018 Hokkaido Eastern
Iburi earthquake, with earthquakes that resulted in casualties amounting to around 100. According to theJapanese government’s Headquarters for Earthquake Research Promotion, there is a 70–80% probability ofa huge earthquake with a magnitude of 8–9 occurring in the Nankai Trough within the next 30 years. The
Headquarters’ website provides information on major active faults nationwide and the probability of atrench-based earthquake.
In addition, short, local torrential rain has been observed in both cities and suburbs due to global
warming. The number of occasions when rainfall of more than 100 millimeters per hour was measured has
increased by severalfold from some 20 times over 10 years from 1977 to more than 50 over 10 years from1997. In the 2018 West Japan Floods, check dams were destroyed, causing landslides to hit dwellings, killing

Topic Report: Real Trends of Real Estate 2020
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.
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TOPIC REPORT｜Xymax Real Estate Institute100 persons.

9.2

Countermeasures and preparations against natural disasters

Damages by a natural disaster may be exasperated by vulnerable measures made by man, in addition to
the natural phenomenon.
As countermeasures against natural disasters, the government developed a national resilience plan inaccordance with the Basic Act for National Resilience that was enforced in 2013 to protect human lives,maintain key functions of the nation and society, minimize damage to the property of the citizenry andpublic facilities, and achieve swift recovery and restoration. Based on the plan, the government carries out
an action plan each year for disaster prevention as well as quick response and recovery in the aftermath ofthe disaster by efficiently implementing the plan in both tangible and intangible aspects, combining selfhelp, mutual help and public help, and utilizing private funds. Specific measures include preventiveengineering such as breakwater and bank reinforcement, proper inspection and maintenance of buildings
and necessary revisions of laws, regional collaboration and developing communities resilient to disasters.
At the regional level, local governments have required building owners since 2011 to take quake proof
measures for roadside buildings that are in danger of collapsing, in accordance with the Act for Promotionof Renovation for Earthquake-Resistant Structures enforced in 1995, to secure emergency transportroutes during a disaster. Awareness toward quake resistance is rising, as 97.4% of buildings in Tokyo havegone through seismic diagnosis and 84.3% are quake-resistant, while on a nationwide level the progress ofaseismic reinforcement has exceeded 60% at a majority of local governments (as of June 2018). The central
and local governments release hazard maps for floods and landslides on the Internet and are reviewing
their disaster-prevention facilities and building stockpiles of emergency supplies at public facilities andparks. Private sector shopping centers and buildings are also stockpiling disaster provisions as evacuation
points for those who have difficulty returning home when a disaster occurs.

9.3

Impact on real estate

Since the earthquake in 2011, the industry’s awareness on safety has been rising in order to protect theregion, human lives, and assets, requiring safety in individual properties. The value of real estate that
ensures safety of the building and enables early restoration is expected to rise even more in the future.
Activities at the regional level include disaster drills carried out under the cooperation of several publicorganizations such as elementary schools, regional communities, and fire stations, and activities led byprivate companies. Osaka Business Park (OBP) is making efforts not only in securing the safety of individual
real estate but also in developing communities resilient to disasters that accompany self-help andmutual help, and has been carrying out disaster drills by the entire community since 2016.
For houses, quake-proof improvements have progressed among freestanding houses due in part tosubsidies, loans, and tax benefits, while apartments and condominiums have been increasingly stockpilingemergency supplies.
In commercial real estate, buildings and commercial facilities are increasingly stockpiling emergency
supplies as part of BCP measures due to ordinances on stockpiling and a program of easing floor-area ratio
restrictions. Among skyscrapers, not a few have introduced seismic isolation or damping devices to counterlong-period oscillation. Some pay-by-the-hour parking lots have equipped themselves with tents,
foodstuff and communication equipment to help persons who have difficulty returning home when adisaster occurs or serve as an evacuation site or disaster-prevention facility.

Topic Report: Real Trends of Real Estate 2020
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.
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TOPIC REPORT｜Xymax Real Estate InstituteWith regard to building equipment, some kind of disaster measures are being implemented to facilities
we use every day, as remote control functions that can respond to blackouts and confinement in elevators
and water stop shutters and simplified sandbags or water bags against sudden heavy rain are being
developed. Some vending machines offer WiFi connection and drinking water for free in emergency
situations.
Awareness toward safety and security is also rising among tenants who use the buildings. According to
Xymax REI, 83.5% of tenants place importance on high quake-resistant performance and 71.3% on BCP
support, which rank after convenient location and good state of maintenance in the ranking of elements
required of office buildings.
In recent years, there has been a diversification in the people who use buildings in Japan. Ordinary
disaster-prevention measures may not be enough for foreigners or persons with disabilities. Although thecentral and local governments as well as various organizations have issued emergency response manuals,
their recognition is low. It will be important to take steps at individual buildings in order to enable smoothcommunication and support in the future.

Topic Report: Real Trends of Real Estate 2020
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.
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35

TOPIC REPORT｜Xymax Real Estate Institute10

Environmental issues

10.1 Environmental issues in human society
Environmental issues are issues that have been caused by changes in the surrounding environment as aresult of activities of mankind and are likely to directly or indirectly damage the lives and health of people
and/or destroy the earth’s ecosystem. Problems such as pollution of air, water, and land, food crisis, foodsafety, disaster response, urban issues, and over-population are major issues that face the continuous
development of our civilization. In this chapter, we will identify environmental issues including climatechange, pollution and destruction of the ecosystem as well social and economic measures against them,and examine the impact on Japan’s real estate industry.
Social recognition of environmental issues has gradually spread among the people since the midtwentieth century. In his 1966 essay The Economics of the Coming Spaceship Earth, Kenneth E. Boulding
said that the earth’s resources were finite and that mankind existed within an ecosystem. Rachel Carson’s
Silent Spring and Al Gore’s An Inconvenient Truth shed light to environmental issues and pioneered theenvironmental movement. Eventually, environmental labeling given to electric appliances and products
were established, such as ENERGY STAR of the United States (launched in 1992) and the eco mark of Japan(launched in 1989). Subsequently, new consumption behavior of consumers choosing products that arefriendly to the environment, society, and region, such as green consumption, fair trade, and ethicalspending, were born. More recently, social issues caused by corporate activities have attracted attention,with global firms being required to respect the environment, human rights and labor, contribute to society,advocate peace and non-violence, contribute to animal welfare, and disclose information on these matters.
Environmental issues have also become recognized politically as the greatest uncertainty and a risk factor
for the sustainability of the development of mankind. The United Nations advocated “human security” in2003 and listed environmental destruction as a broad and serious threat against man’s existence, life, anddignity, along with human-rights abuse, immigrants, and poverty. The Global Risks Report by the World
Economic Summit includes a top-five ranking of feasible risks and risks with a large impact. Along with

Topic Report: Real Trends of Real Estate 2020
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TOPIC REPORT｜Xymax Real Estate Instituteweapons of mass destruction, large-scale terrorist attacks, and unauthorized use of data, risks related toenvironmental issues such as abnormal climate, natural disasters, water crisis, and failure to alleviate oradapt to climate change ranked high.
Furthermore, direct means such as emission control based on an international framework have beensought following a rise in social and political awareness of environmental issues. Reduction target setting
and progress reports such as the Kyoto Protocol in 1997 and the Paris Agreement adopted in 2015 aremajor examples. However, these required multilateral agreements, which tended to become political issues
such as conflicts between developed and developing nations and departure of a major country. On theother hand, many of the environmental issues are caused by external diseconomy effects under freecompetitive activities, but it is basically difficult for individuals and companies to control their economic
activities voluntarily. Therefore, economic measures such as environmental tax, subsidies, and emissions
trading had also been considered. Emissions trading has begun being introduced all over the world,
including Europe, North America, and Asia, since the signing of the Kyoto Protocol. Europe’s EU-ETS (EUemissions trading system), which started in 2005, reduced greenhouse gas by 24% between 2005 and 2015.
There are also moves for cooperation across countries and regions such as ICAP (International Carbon
Action Partnership), in which 31 countries and region participate.

10.2 ESG investment connects environmental issues and real estate economically
Amid such circumstances, ESG investment is attracting attention as new economic means. ESG
investment is a new investment style that takes into consideration not only financial information such as
cash flows and profit margins but also ESG elements, i.e., environment, social, and governance elements.
There is a consensus among investors to deem environmental issues, social issues, and corporate
governance issues as long-term risk factors. Companies and real estate that actively address these issues
are considered to be resistant to downside risks (e.g. environmental regulations, decline in sales, accounting
fraud).
PRI (Principles for Responsible Investment) was formulated and advocated by the United Nations
Environment Programme Finance Initiative in 2006, prompting large pension funds in and outside Japan to
be conscious of ESG investment. In 2015, the SDGs (sustainable development goals) were agreed oninternationally at the United Nations at the same time as the Paris Agreement, while Bank of England
Governor Mark Carney indicated his recognition in his speech titled “Breaking the Tragedy of the Horizon–Climate Change and Financial Stability” that climate change could become a long-term risk as well as anopportunity in a financial and investment context. In 2017, the TCFD (Task Force on Climate-related
Financial Disclosures that was established by the G20 Financial Stability Board) submitted its final report,
recommending companies to disclose climate-related financial information, and has obtained signaturesof approval from 834 institutions from around the world as of September 2019. The ESG investment market
increased 34% on a global basis from 23 trillion dollars in 2016 to 31 trillion dollars in 2018 and 360% inJapan to 2.2 trillion dollars (source: GSIA survey).
ESG investment methods include negative screening, which excludes certain industries such as weapons,
tobacco, gambling, and fossil fuel from being invested in, ESG integration, which evaluates not only
financial information but also ESG information, engagement, which encourages companies to make efforts
in ESG through dialogue and exercise of voting rights, sustainable theme investment or green bonds, social
bonds, sustainability loans, which invests in themes and assets related to sustainability, such as green
energy and green technology.
The ESG investment momentum is starting to influence Japan’s real estate investment industry as well.
Real estate investors are shifting to focus more on sustainability and their investment horizon is changing
from short term to medium to long term. According to a survey on real estate investment by Sumitomo
Mitsui Trust Research Institute, the percentage of investments of less than five years decreased from 46%
in 2012 to 34% in 2018, while that of seven years or longer increased from 18% in 2012 to 47% in 2018.
Going forward, investors’ and tenants’ selection of real estate from a medium- to long-term perspective is

Topic Report: Real Trends of Real Estate 2020
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
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TOPIC REPORT｜Xymax Real Estate Instituteexpected to become more austere. Improving the environmental performance of real estate, accumulating
and analyzing energy consumption data, obtaining environmental certification, and enhancing explanation
on initiatives will help in attracting investment funds. On the other hand, real estate that fail to respond to
this trend may become subject to divestment.
In addition, the preference for environmental real estate is increasing not only in direct real estate
investment but also from indirect channels through corporate investment such as stocks and bonds. The
Ito Review 2.0 (METI) in 2017 pointed out that, in addition to conventional financial indicators, nonfinancial information such as brand, intangible assets, and ESG will become important for evaluating acompany’s sustainable growth potential, and formulated the Guidance for Collaborative Value Creation as
a common language that connects companies with investors. In 2018, the Government Pension Investment
Fund (GPIF) selected global environmental stock indices, indicating that investors are using ESG information
to select companies to invest in. Furthermore, information platforms that facilitate investors to understandcompanies’ ESG responses are also being established, such as SBT (Science Based Targets), CDP (Carbon
Disclosure Project), and RE100 (Renewable Energy 100%). Companies whose value will be significantly
damaged due to the exhaustion of resources, government regulations, progress of technology, andchanges in social norms are being deemed as “stranded assets” by investors and are required to explain
to investors when investors invest in such companies. The ESG investment trend in corporate investment is
prompting companies that aim for sustainable growth to prefer real estate with high environmental
performance over those with low performance. As if to support this, empirical studies in Japan and all over
the world suggest that real estate with environmental certifications are higher in rent and real estate value
compared to real estate with no environmental certification.

10.3 Impact on real estate
In this section, we will identify the changes that are occurring in Japan’s real estate market on the backof the socioeconomic trends related to environmental issues that we identified in the previous section.
Specific changes include an increase in environmental real estate, information disclosure for ESG investment,
and the progress of architectural environment technologies.
First is the increase in environmental real estate. To achieve the reduction targets of greenhouse gas
emissions based on the Paris Agreement, regulatory measures of the Building Energy Efficiency Act started
in 2017. The Building Energy Efficiency Act was enacted on the back of energy consumption of the
housing and building sector remaining high while energy consumption of the industrial and transport
sectors was declining. These regulations prohibit builders to accept certificates of building confirmation
unless energy consumption performance standards are met when building or renovating a building of acertain size. The Act includes incentive measures such as exceptions of the floor-area ratio regulation andcertifying and labeling conformity with the standards. The scope of the Act is gradually widening as
medium-sized buildings will be subject to regulations in 2021. In addition, the Re-Seed Organization wasestablished in 2013 as a public-private investment fund to build high-quality real estate with quakeresistant and environmental features (environmental real estate). It invests in special purpose companies(SPCs) that renovate, rebuild, or develop dilapidated real estate with low environmental and quake-resistantperformance. Furthermore, the Ministry of the Environment published the Green Bond Guidelines in 2017
to create an environment for financing, and 10 J-REITs have already issued green bonds (as of 2019). Japan’s
real estate stock is expected to turn into environmental real estate, though gradually, not rapidly.
The second change is information disclosure for ESG investment. Due to the nature of the assets(regionality, fixation, diversity of usages), real estate has a large potential to contribute to solving social
issues from an ESG perspective. Examples include reducing energy use, improving health and comfort,
enhancing the value of the area, contributing to the regional society and economy by addressing thediminishing and graying population, and responding to disasters. ESG investment in real estate requires
both such positive impact to society and a stable economic return on a medium- to long-term basis, and
it is considered important to develop an appropriate environment, including information disclosure toinvestors. Examples of information disclosure in the real estate industry includes GRESB, an ESG benchmark

Topic Report: Real Trends of Real Estate 2020
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TOPIC REPORT｜Xymax Real Estate Instituteevaluation in company or fund units, and CASBEE, DBJ Green Building certification, and BELS, which aretools to evaluate environmental performance. In particular, 89% of the J-REIT market in terms of market
capitalization participate in GRESB (as of 2018), with REIT operators aggressively disclosing their ESG
initiatives to society and investors. Initiatives to promote the spread of real estate stock that not only has
lower environmental load but also high health and comfort features for the users of real estate are also
being implemented. In 2019, the Institute for Building Environment and Energy Conservation (IBEC) beganevaluating and certifying CASBEE-Wellness Offices. Furthermore, the Japan Association of Real EstateAppraisers considered how to reflect high levels of environmental considerations and comfort of real estate
in real estate appraisals. Thus, the environment for environmental information disclosure in the real estateindustry is gradually being developed. However, there are still issues in matters such as the appropriate
content and volume of disclosure information, international comparability, ease of access, accumulation ofstudies of the effects of ESG investment, and information dissemination to raise awareness of companies
and investors.
The third change is the progress of architectural environment technologies. As we mentioned in
Chapter 6 “Technology,” technology that reduces the amount of energy required such as natural ventilation,
natural lighting, and low-e multi-paned glass, technology that uses energy efficiently such as moderatetemperature air conditioning and thermal storage technology, and energy-generating technology such as
solar power generation have been developed. Highly energy-efficient real estate that combines thesetechnologies has emerged in recent years. ZEBs (net zero energy buildings) and ZEHs (net zero energy
houses) bring the net primary energy consumption of buildings to zero by reducing energy use throughenergy-saving technologies and generating the equal amount of energy that was used through energycreating technologies, while providing a comfortable room environment at the same time. The Basic Energy
Plan that was decided in a cabinet meeting in 2018 aims to realize ZEBs in new public buildings by 2020
and in the average number of new buildings by 2030. As R&D investment in the environment and energy
fields is continuing (37.7 billion yen in the fiscal 2019 budget), new technologies are expected to continue
to emerge in the future. It is expected that costs for addressing environmental issues, including measuresagainst global warming, will continue to drop due to energy-efficient lighting and air conditioning
technologies, renewable energy technology, power generation/storage/transmission technologies andgeneral-purpose technologies that connect these technologies with ICT (AI, IoT) to turn them into smart
technologies.

Topic Report: Real Trends of Real Estate 2020
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.
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TOPIC REPORT｜Xymax Real Estate Institute

11

Mega events

11.1 What are mega events?
The Tokyo Olympics held in 1964 and the Osaka Expo that followed in 1970 accelerated large-scale
infrastructure development and provided opportunities to show Japan’s recovery from the war to the world.
Such mega events have large socioeconomic impact and improve the appeal of the host city as well as its
international recognition.
This time, the Tokyo Olympics & Paralympics will be held in 2020 and the Osaka, Kansai Expo will
follow only five years later in 2025. In today’s Japan, where infrastructure is already in place, the positioningof these events differs from the time when they were held last time during the period of high economic
growth. However, they may trigger various changes in Japan, which may transform cities, urban
development, and the real estate market. In the following sections, we will examine the impact of the Tokyo
Olympics & Paralympics and the Osaka Expo on real estate.

11.2 Tokyo Olympics & Paralympics
The Tokyo Olympics & Paralympics will be held over a total of 30 days from July 24 to September 6, 2020.
More than 10 million people from Japan and abroad are expected to visit during the games. Various
estimates have been made on the effect of the games on the Japanese economy, but since the games will
be held over a limited number of days, their direct impact on the real estate market will be limited except
in accommodation facilities and commercial outlets. Many accommodation facilities (hotels in particular)
are scheduled to open around the time of the Olympics in 2020. Meanwhile, since hotels that are currently
operating already have high utilization rates, the Olympics may not have a great impact on utilization.
However, many inbound visitors to Japan are expected to stay in Japan after the games to visit other areas
or move their schedule of visiting Tokyo during the games to another period (demand replacement effect),

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

40

TOPIC REPORT｜Xymax Real Estate Institutewhich is expected to lead to an increase in sales at hotels as well as commercial facilities such as retailers
for tourists during the games and for a certain period afterward. With regard to housing, there is a projectcalled HARUMI FLAG in the Harumi area of Chuo ward, Tokyo where the Olympic village is located toprovide athlete’s residences as 23 new condominiums of a total of 5,632 units (of which 19 condominiums
of 4,145 units are for sale, not rent) by renovating them after the end of the Olympics. The initial sale thatstarted in early July 2019 was strong due to the good location and view as well as expectations of future
infrastructure development, even though the condominiums are scheduled to be handed over in March
2023. This project, which is one of the largest in central Tokyo, will have a certain impact on thecondominium market depending on future sales. In addition, although it is concerned that traffic
congestion during the games will impede distribution, the impact on distribution facilities is believed to besmall. The direct impact of the Olympics on offices is also expected to be small in terms of both demandand supply.
Ahead of the Olympics, the Tokyo 2020 NIPPON Festival will be held to present the Japanese culture to
the world. In addition to such promotional events held by the Japanese side, the information disseminatedthrough social media by tourists who visit Japan to watch the games and experience the tradition andculture of Japan is anticipated to spread Japan’s appeal to other countries, triggering more foreigners tovisit Japan. An increase in inbound visitors to Japan will internationalize people’s awareness while theParalympics is expected to deepen people’s understanding toward persons with disabilities, accelerating
multilingual, universal design, and barrier-free services as well as facilities and buildings. Furthermore, if
Tokyo becomes an environment-friendly city with advanced technologies such as robots andtelecommunication, it would further enhance the city’s appeal as an international tourism and global
business city.
The Tokyo Metropolitan Government and the central government are also calling for off-peak commuting
and mobile work to alleviate traffic congestion during the games. A total of more than 600,000 people fromapproximately 2,900 organizations participated in the Telework Days in 2019, which were carried out as atrial ahead of the games. These initiatives provide perfect opportunities to experience flexible workplace
and time enabled by work style reforms that are being promoted at companies, and are likely to deepen
people’s understanding of diverse ways of working and accelerate the penetration and utilization of
telework. The Tokyo Olympics & Paralympics may have an indirect impact on the real estate market by
triggering changes in the awareness of the Japanese people.

11.3 Osaka, Kansai Expo
In November 2018, it was decided that the Expo will be held in Osaka, Kansai in 2025. It will be held for
185 days from May 3 to November 3 and is expected to attract 28 million visitors from Japan and abroad.
Yumeshima of Konohana ward, Osaka is a large-scale reclaimed area where an urban development plan of
attracting an integrated resort (IR) and creating international conference halls and exhibition halls (MICE)
is being carried out as a new international tourism site in the Kansai region. In addition, the Osaka metro
Chuo Line is currently being extended and is scheduled to open in fiscal 2024. Under such circumstances,the decision to hold the 2025 Expo in Osaka has undoubtedly boosted the momentum toward realizing theurban development plan in Yumeshima.
The Osaka, Kansai Expo will display the world’s cutting-edge technologies and will also be a place ofpromotion for companies with leading-edge life science and biomedical technologies that are concentrated
in Osaka, Kansai. Foreign visitors to the Kansai region are already increasing significantly, and business
transactions are also expected to increase. The Expo will also provide an opportunity for young creators ofvarious fields to disseminate information to the world and for the business, historical, and cultural appealof Osaka and Kansai to spread, enhancing the recognition of the host city and region. Since the Expo’s
period is relatively long (185 days), a certain amount of customer traffic can be expected. Furthermore,
Yumeshima’s transformation into a novel, international tourism site with IR and MICE is expected to attract
customers on a continuous basis even after the Expo has ended and will bring about various effects fromoperating the facilities.

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

41

TOPIC REPORT｜Xymax Real Estate InstituteSome claim that such mega events will not have a large effect on Japan’s already mature society or thatthey will only lead to increased financial burden. However, as we have examined, hosting the events will
not only have direct economic effects but will also change people’s lifestyles and awareness, which are
expected to influence the direction of real estate.

Please contact below for inquiries on this report:
Xymax Real Estate Institutehttps://soken.xymax.co.jp

E-MAIL: info-rei@xymax.co.jp

Topic Report: Real Trends of Real Estate 2020
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 © 2019 Xymax Real Estate Institute Corporation. All rights reserved.

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