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Vortex: Bringing Japanese property to new heights

Interview - December 17, 2019

Strong fundamentals, attractive returns, zero-percent interest rates, rising demand across the board from commercial and offices to hotels and residential, and the growing number of both tourists and expat residents are some of the factors behind the surge in Japan’s real estate industry. We speak with Fumihiko Miyazawa, President of Vortex, one of Japan’s leading firms in the office segment, about his company’s plans moving forward to exploit the booming industry.

 

FUMIHIKO MIYAZAWA, PRESIDENT OF VORTEX CO.,LTD.
FUMIHIKO MIYAZAWA | PRESIDENT OF VORTEX CO.,LTD.

The office market in Japan is extremely stable, we can see that both type A and type B are under the 1% of vacancy rate. Could you please give us an analysis of the office market and the trends that you foresee?

As you mentioned, when it comes to the office market here in Japan, it is extremely stable which makes it a very competitive market. Real estate companies are constantly looking for opportunities.

Moreover, what we have seen in recent years, is the constant necessity of buying and selling offices. It has been dictated by the absence of large-scale property of more than 10 billion Japanese yen. Those large-scale property barely exist and if they do, they are impossible to purchase for most companies due to their high cost.

The majority of real estate companies such as Vortex are focusing and dealing with office buildings that cost around 5 billion Japanese yen.  We are constantly buying and selling this kind of office building with the aim of maximizing our profits.

Furthermore, we have also seen the arrival of overseas companies, especially hedge funds from countries such as Singapore and Norway, amongst others. They are capable of buying any type of properties that they wish whether it is the large-scale properties or properties that we are buying. Those hedge funds are the key players that have greater assets to buy the properties.

 

We are seeing a rapid urbanization here in Japan, we are seeing more workers in Tokyo, however this phenomenon has spread all around the country, in Hokkaido, where more people are going to Sapporo and also in Kyushu with Fukuoka. Vortex being a total solution provider has satellite offices in different cities of Japan. Could you talk to us how this urbanization is affecting the business and your company in particular?

It’s all about supply and demand. Here in Tokyo we are lacking supply, today it is almost impossible for a company to find a great space to rent. For the past few years, Vortex has opened 9 satellites around the country. This is exactly what Japanese companies are looking for they are looking to expand their offices to original areas such as Nagoya, Osaka and Fukuoka.

Nowadays, even though almost every company is following this trend of going outside Tokyo, it is not that easy to find offices in these regional areas, because there is still an absence of supply.

In fact, Vortex faced this issue few years ago. We went to open a satellite office in Sapporo, it took us some time to actually open it, since it was hard to find a great property that would meet our demands.

In regional cities, the balance of demand-and-supply gets reversed easily, so we have to keep an eye on these market trends.

With that being said, we take account of our business development for the sectional ownership of office in these areas as long as there is “precious value”. As a matter of fact, we have already been driving the commercialization in Osaka and Fukuoka.

 

Could you tell us more about your Ginza Six project?

At Vortex, we are aiming to increase our portfolio with greater and large-scale property such as the Ginza Six project. Moreover, starting this year, we will start purchasing two properties of the same kind on a yearly basis.

Finally, we are also looking to increase our portfolio when it comes to high-end luxury properties. I personally think that the demand for those properties will increase in the upcoming years, and therefore, we will be able to maximize our profits.

The key point to highlight here is the precious value of this property. When you look at the Ginza area, it is really hard to find properties with the same size as Ginza Six. In this area, the standard floor area that has over 5,000 square meters is Ginza Six only. It is not an exaggeration to say that there will not be any development or construction of this kind of project in this area. We chose “precious value” on this point.

In addition, we successfully acquired this Ginza Six floors via our particular channel for property information. Due to our trustworthiness and proven track record on being specialized in the central business district of Tokyo, the opportunity to obtain this type of valuable property information has been increasing recently. In this way, our property information channel is one of Vortex’s strength.

 

Your main business is offices, you also diversified into hotels in Shibuya and Ueno. The hotel industry is experiencing tremendous growth, next year Japan is expecting 40 million tourists and by 2030 the government is aiming to reach 60 million tourists. Could you talk to us about the hotel industry in Japan and the role that it will play in the future of Vortex?

Targeting smaller sized lots and tight demand-and-supply were our core business strategy, and that was the mid-sized office.  In Japan, we expect 60 million tourists from overseas by 2030, and the demand-and-supply of the hotel business has been tightened. Therefore, now this market is one of our targets.

We entered this industry at the beginning of 2018 with a small-sized property. We wanted to get a first outlook of the market with small-sized property, as we believe we have time to grow in the future and develop larger sized hotels and commercialize them into sectional ownership.

 

What are the dreams that you aim to accomplish in 10 years’ time?

Our dream is very ambitious. We want to become a top-level company in the domestic market but also in the global market. Our goal is to be a leading company in this industry domestically where our words carry weight worldwide. We are going to prove by ourselves that our strategy can continue existing for a long time, and simultaneously introduce our vision to the world. In order to make it happen, we aim to reach JPY 1 trillion in sales in the next decade. This is our first step to accomplish the goal.

 

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