The Journal The Authority on Global Business in Japan

Every other year, the nations of the world come together in competitive pageantry to share their patriotism and sporting prowess. The Olympic and Paralympic Games represent a wonderful moment of global unity and the limelight shines intensely on the host city. But, along with this short-lived spectacle come steep costs.

Budget control for the Games is a constant struggle. Balancing the scales of investment and long-term benefit is challenging, and Tokyo has already hit hurdles.

Lessons can be learned from past efforts. The legacy of the Rio de Janeiro 2016 Olympic and Paralympic Games lies in tatters. Facilities are already disintegrating and the cost of hosting has proven a huge burden on an already fractured economy.

The London 2012 Olympic and Paralympic Games, on the other hand, saw the gentrification of the east side of the city, an area that was once underdeveloped and falling behind the bustling and modern city center. The construction of Westfield Stratford City, a shopping center that sits adjacent to the Queen Elizabeth Olympic Park, as well as a new technology hub, university facilities, and apartment buildings, has helped rejuvenate the Stratford area.

With such a contrast in results for two recent hosts, what does the future hold for Tokyo?

URBAN UPGRADE
The venues being prepared for the Tokyo 2020 Olympic and Paralympic Games mostly fall within two areas: the Heritage Zone, where the iconic facilities used for the 1964 Summer Olympics are located, and the Tokyo Bay Zone, which the city sees as a model for innovative urban development. In the middle of this will sit the Olympic Village.

According to Tokyo 2020 spokesperson Masa Takaya, there will be wider benefits from the construction of the Olympic venues. “The citizens of Tokyo and Japan will benefit from significant environmental and infrastructure improvements, such as new green spaces as well as sports and education facilities centered on the revitalized Tokyo Bay area that create a zone with strong appeal for Tokyo’s future development.”

There are eight new permanent venues being built, a majority of which are located in the Tokyo Bay Zone. After the Games, these will be used for staging major sporting events, exhibitions, and other leisure activities. “The village will become a showpiece for sustainable urban living for many years to come, with stunning views across the Tokyo waterfront,” Takaya added.

So, it would seem there is a well-thought-out plan for both urban redevelopment and the protection of historic sites—unlike Beijing’s razing of neighborhoods dating back to the Ming Dynasty to make way for redevelopment before the Beijing 2008 Olympic and Paralympic Games. Despite the plan, accessibility issues and a less-than-ideal location limit the options for redevelopment.

Speaking to The ACCJ Journal about this, Pacifica Capital K.K. President and CEO Seth Sulkin said, “They are not really ideal commercial locations, which is of course why the Olympic Village is designed for residential use after the Olympics; that makes perfect sense.”

In fact, Sulkin, who is co-chair of the American Chamber of Commerce in Japan Real Estate Committee, sees little chance of a new commercial zone forming as a legacy of the Games. As an example of past projects that met their demise mostly due to accessibility, he cites Harumi Island Triton Square in Chuo Ward. This major mixed-used development is nearly 25 years old, but failed to take off due to poor access and distant subway stations. Today it has significant vacancies in large-scale office buildings and a deteriorating retail component.

“In Japan, or in Tokyo specifically, it’s quite difficult to build a new commercial zone,” he added. “The only way to do it, really, is to make it incredibly convenient—and that’s next to impossible.”

Masayuki Watanabe, unit leader of the Corporate Commu­nications Department at Mitsubishi Estate Co., Ltd., agrees that access is key. “We also believe that the transportation network is one of the important factors. However, the Olympics is not the goal. The Olympic Village will be built in a convenient location close to the heart of Tokyo, and it is important that the Olympic facilities be converted into a complex of housing, commercial space, and educational space where people gather and meet. It can become one of Tokyo’s great assets.”

In the Tokyo Bay area, one issue is that reclaimed land has been formed as separated parcels—much like fingers—making it difficult to create connections across each without the con­struction of bridges. “In Japan, everything is orientated towards the center, but the lateral connections are weak,” Sulkin said.

Despite these issues, the primary aim of the development in and around the Tokyo Bay area by private companies, accord­ing to Watanabe, is to use the passion of the Tokyo Games to create spaces where people come together and have a good time.

ADDED VALUE
Playing host to the Olympic and Paralympic Games is not only a chance for nations to show off their culture and society on the world stage, but is also widely seen as a path to long-term economic opportunities.

Japan’s major barriers include a declining population and shrinking workforce, and the Olympics offer only positive prospects in that respect. Real estate depends on people, and Sulkin points out that real estate values would dive without inbound visitors.

“If you’re not talking about the areas specific to the Olympics, in general I would say it is good for Tokyo and good for Japan, because it will raise Japan’s profile even further and will help continue to facilitate growth and inbound visitors.”

Masakatsu Yamamoto, marketing and communications manager for Mori Building Co., Ltd., agrees that the Games will help reinvigorate the city’s growth potential.

“The 2020 Tokyo Olympic and Paralympic Games can be a trigger for urban redevelopment in Tokyo to unlock its potential to be one of the most magnetic cities in the world,” he said. Yamamoto also highlighted the increased promotion of next-generation technologies in the lead-up to 2020.

The growth of inbound tourism will no doubt benefit hotels and retail, but Sulkin does not see any significant impact on the real estate market—and any effects will be limited to the Tokyo Bay area.

“The benefits to the real estate market will be indirect in that I don’t expect development for the Olympics to directly increase prices of real estate,” he said. “This is because the impact will be limited to the Tokyo Bay area, and I still think that this is not a place that most developers want to operate. I don’t see the development there as having much of an impact on the rest of Tokyo.”

But the wider impact of the Olympics on development is palpable. Yusuke Ota, a managing director and head of the Tokyo 2020 Olympic/Paralympic Promotion Division at Lixil Corporation, which makes building materials and housing equipment, highlighted the benefits brought by the 1964 Olympics.

“Japan underwent significant change after the Tokyo Olympics in 1964. This change not only impacted the development of housing products—from toilets and baths to kitchens and windows—but commercial and public spaces, too.

“Things were becoming more convenient and comfortable. Fifty years on, and we are now again undergoing change. We are becoming a more diverse society. There is greater variety in how we work, our hobbies, interests, and who we are as a people.”

OUTSIDE IN
In Tokyo, stabilized property supply and low yields are making it difficult to buy, with competition reaching new heights. “We don’t really need more demand for real estate, we need more assets to come to market,” Sulkin said.

Looking at domestic and overseas investment, he sees a severe discrepancy in supply and demand. “There’s already too much money seeking too few assets, so basically the entire world wants to buy Japanese property right now and there’s not enough of it available for sale.”

Mitsubishi Estate is one developer working on the projects in the Tokyo Bay area. “As a member of special building contractors of the Olympic Village, with Mitsui Fudosan as its representative company, Mitsubishi Estate Group is working on maintenance of the athletes’ village and improvement of housing and commercial facilities,” Watanabe said.

On this front, there is much that Tokyo can learn from London’s 2012 experience.

“The areas that they chose had much better transportation access, and so effectively what they did is they used the Olympics to force the development of areas that were not inconvenient—but simply underdeveloped,” Sulkin said. “But what Japan often does is use certain events or government subsidies to force development in areas where nobody wants to go, and for good reason.”

While this may be the case, Yamamoto emphasized that 2020 must be used as a springboard for Tokyo’s future. In fact, the Global Power City Index revealed that London succeeded in improving its magnetic power by hosting the 2012 Games.

“Since 2005, when London was designated as a host city, they invested not only in urban infrastructure and buildings but also on the software side—such things as cultural promotion, tourism promotion, international conventions, and global branding of the whole UK,” he explained.

“We believe that Tokyo should learn from London, and we should have the London-style Olympic and Paralympic Games in order to continuously strengthen the magnetic power of Tokyo.”

Takaya also noted the success of London. “What we saw in London is what happens when a fully developed city hosts the Games. We believe that sports have the power to change the world and our future, and we want to inspire the youth of Tokyo—a city that has long captured the imagination of young people.”

FINISH LINE
And as people’s values and behaviors change, their city must change as well. Ota said this even includes more “universal design” and products that are easy, intuitive, and safe to use. “Whether in hotels, hospitals, or public restrooms, universal design is taking on a more important and valued role.”

Takaya highlighted this, too. “We also want to capitalize on the hosting of the Paralympic Games to showcase a city that is accessible to everyone as a result of universal design, and to reinforce Tokyo’s reputation as one of the world’s most accessible cities.”

In fact, the Organising Committee has launched the Tokyo 2020 Action & Legacy Plan, which includes five pillars: Sport and Health; Urban Planning and Sustainability; Culture and Education; Economy and Technology; and Recovery (from The Great East Japan Earthquake and Tsunami of March 11, 2011).

Takaya explained that the plan promotes a series of nationwide events and projects with “the ultimate objective of achieving lasting post-Games ‘legacies’.” One of these projects is the collection of precious metals from discarded or obsolete electronic devices to produce the medals presented to event winners.

However, it seems that the Tokyo Metropolitan Government’s plans to develop the Tokyo Bay area lacks a long-term plan to build infrastructure, missing the opportunity to create an attractive commercial and residential development.

“I recognize that the Tokyo Metropolitan Government and the central government are financially constrained, but you simply cannot develop a new zone without spending money on infrastructure,” Sulkin said.

The hotel industry, on the other hand, will benefit greatly from the influx of tourists. The only barrier that Sulkin sees for urban development is Japanese lease law. There are both traditional and fixed-term leases, but most are traditional. Traditional leases mean that there is no way to evict tenants without paying them. “As a result, you have tons and tons of old tiny buildings, where the tenants just don’t want to leave and the owners don’t want to pay them enough to get them to leave.” Even with the introduction of the fixed-term lease law, the old one was still maintained.

Despite all of this, Watanabe is positive. “The Tokyo Bay area will have a great focus due to its proximity to the Olympic venues. We believe the area will be recognized again, and we expect that Tokyo Bay will have a great opportunity to improve and flourish after the Olympic Games.”

Maxine Cheyney is a staff writer at Custom Media for The ACCJ Journal.
We expect that Tokyo Bay will have a great opportunity to improve and flourish after the Olympic Games.