Unlocking the future of Japanese real rstate: GA Technologies' journey through digital transformation and global expansion

We would like to start by discussing Japan’s aging population. This pressing issue is currently creating two major problems, a labor crisis and a shrinking domestic market to sell products and services to. What do you feel are the challenges and opportunities that Japan’s demographic shift is bringing to GA technologies?

The real estate industry in general is an aging one in Japan, even when compared to some other industries. The executives at many real estate firms are almost all over the age of 50, with some in their 60s, 70s, or even older. Then you have a shocking statistic that approximately 85% of real estate companies in Japan employ less than 5 employees. Most of the companies are SMEs, and it is creating a pressing need for digitalization. Before COVID-19 a lot of these elderly executives were staunchly against digitalization, but now after the COVID-19 pandemic, they understand how vital it is to their company’s operations. Nowadays we see more firms in real estate becoming more proactive towards digitalization.

The Japanese real estate market is currently worth around JPY 40 trillion, so the understanding is that there are still a lot of opportunities. Traditionally it is one of the most stable and profitable markets, but it is an industry that still relies heavily on analog documents and processes. How is DX disrupting this industry and these traditional analog processes?

In the real estate industry, we can identify five key categories: investments, housing, rentals, management, and development. When we consider the aspect of development, there is potential for digitalization through the use of VR technology. However, it's important to acknowledge that achieving full digitalization in this field presents significant challenges.

Turning to the category of housing, which pertains to the physical dwellings where people reside, digitalization faces hurdles due to the preference of potential buyers to physically inspect properties before making a purchase. While certain aspects of housing transactions can be facilitated online, there are inherent limitations.

Conversely, when we shift our focus to rental, management, and investment aspects of the real estate industry, these areas align well with digitalization. In fact, we firmly believe that these facets can be effectively and efficiently conducted entirely online.

We are really only at the beginning of digital technologies being utilized in more traditional industries. How do you believe real estate will have transformed ten years from now with further utilization of DX? What will be the key difference between then and now?

If I start with rentals, there are 3 million applications and transactions made in this industry, and around a million of those already go through GA technologies group, so at this point, we are already seeing considerable digitalization. Unfortunately, right now the final transaction still needs to be done manually, but a legal amendment was made in May 2022 which allows the digitalization of legal transactions. Right now these digital transactions are at around 100,000 but we are predicting that the numbers will increase to the point where in ten years everything will be done digitally.

Nowadays when you want to sign up to rent a house you need to go to a physical location and fill out paperwork. I think that in ten years this will be entirely replaced and tenants will need to simply go to the location which they want to rent without the need to see a broker. I think this kind of seamless service will be a necessity.

When we see properties online right now there is an element of uncertainty as to whether the broker has updated the listing or not. Basically, you don’t know if the property is available or not without speaking with the broker. It isn’t like hotel services like TripAdvisor unfortunately, because there is a need for some time before transactions are reflected through the online listing. I think that in ten years this whole process will be streamlined and completely online allowing customers to see real-time availability.

If you look at the Suica Card system, although you can use it to ride the train easily, still many people refuse and instead buy separate train tickets. The same sort of resistance is present in the real estate industry.

Japan is a bit of a paradox, and when foreigners visit the country, they expect a highly technological place, with many thinking that because it is the land of Sony and Nintendo everything must be cutting edge. Yet, when you come here as a foreigner you are surprised by the low level of digital penetration. How do you explain this paradox? How is it that a country so advanced and technologically capable is so behind when it comes to the digitalization of its service sector?

The first factor would be the developers, and there is a strong group of developers with the brokers just below. Then you have family companies that do the rental or management for those houses. If everything is done in the same group then there are very strong connections established. This means that it is hard for anyone to come and change how things are done. In comparison with the US, developers and brokers are different companies so it means that it is much easier for newcomers to come in and change things.

The second factor is the fact that there are too many small companies in this industry. If there are only 5 employees in a company it makes little sense to digitialize. Everything can be done on paper and the workload is such a small scale. Additionally, M&As are not as active as they are in the US.

If we shift back to your previous question for a moment I would like to talk about where I see investment going in ten years. I think we will reach a point where we can experience investments in a similar way to how we shop on Amazon. If we could combine housing investments with non-fungible tokens (NFT) it would mean that official registration could be done on the blockchain, creating a situation where everything is digital and trackable.

A lot of foreigners are interested in this market. Between 2012 and 2019 20% of investors were from foreign companies, and over the last couple of years it has increased even further to reach 30%. How is DX in general helping facilitate investment for foreign entities?

The level of knowledge in the housing market is not shared between brokers and investors, and there is a big difference between how much information each side has. Another factor is the inconvenience of getting additional information. If we could digitalize those parts it would be much easier for foreigners to get access to more information on the housing market.

Your company was established in 2013 and you’ve had one of the most exponential increases in growth we’ve ever seen. Within the last decade, you’ve managed to achieve revenue above JPY 100 billion and an expansion in your innovative real estate investment and managing services. How can you explain this explosive growth over the past ten years? How have you jumped from 3 employees to over 1,000?

Personally, I think that 2013 was a good year to start the company. We were seeing the second wave of digitalization globally, with the first wave coming around 1995. At that time in the 1990s everything started to become online but still people had to go to stores to physically buy things. Nowadays many firms have shifted to the Amazon business model, essentially becoming a one-stop shop online. Distribution isn’t taken care of by stores, rather it is handled by third-party service providers. This sort of business model is available now because of this second digitalization wave.

I think another factor for our success is that we have what I would describe as high vision. By combining high technology and innovation we strived to impress people and always were looking to become the number one company in the field. In order to achieve these lofty ambitions we established the right organization to realize those dreams. We went public five years ago and within those five years, we have acquired 10 companies (in July 2023). As you can see, we are very ambitious.

You mentioned acquisitions there, and we saw in our research that you’ve shown interest in acquiring companies from foreign countries such as your acquisition of Dear Life Corporation ltd. in May 2022. What was the motivation behind the acquisition of Dear Life Corporation?    

Since our ambition is to be the world’s number-one company in the field, the only option is to start going global. Looking at real estate as a global industry, because of the way transactions are conducted businesses need to be localized. This is why we chose M&As as our route to becoming a more global company. Basically, we want to leverage and use the strengths of local companies to increase our presence in various markets worldwide.

You’ve invested in markets such as China, Thailand, and Hawaii. Are there any other locations where you would like to go and expand your business in the short term? Are you interested in any partnerships or joint ventures with companies in foreign markets? 

The approach may vary based on the specific market, with distinct strategies applicable to developed and developing nations. In the case of expanding into developing countries, we can draw from our experiences in the Japanese market, which could be relevant to regions in Southeast Asia, for instance. Conversely, when targeting developed countries such as the United States or Europe, we must carefully consider the products and business models we employ, as these markets may be more advanced than Japan. In such instances, investments and mergers and acquisitions (M&As) become pivotal elements.

Are there any specific countries that you would like to expand into next?

We will start with Southeast Asian countries since their proximity to Japan makes them ideal targets for expansion.

We saw that recently you’ve acquired Spica Consulting, a brokerage service for M&A activities and operations. Why did you decide to expand into the field of M&As and how does your background in real estate give you a competitive advantage in this field?

When we think about the real estate industry we understand that it is a combination of digital and analog. Not everything can be completed digitally, and honestly, it is the same with M&As. Amazon is not selling companies and it is not selling real estate. Those two fields both warrant high prices and both contain only a single product. In fact, the price is different for every single product and everything is one-of-a-kind. Interestingly we have the same business model for both real estate and companies.

What is next for GA technologies? What will the next ten years hold for your company?

When we examine global companies in the United States, we observe their ability to achieve international success within a timeframe of approximately 20-25 years from their inception. Given our identity as a Japanese company and the inherent challenges posed by factors such as geographical location and language barriers, we anticipate that we may require an additional decade to attain a position of global prominence. Our aspiration is to become a globally successful enterprise within approximately 30 years of our establishment. To realize this objective, we believe it is imperative to first establish ourselves as a leading company within our field domestically. Subsequently, we intend to expand our presence by establishing additional strategic bases to enhance our global prospects.