Feature: New offices replace Japan's old

By SHIHOKO GOTO, UPI Senior Business Correspondent  |  Jan. 27, 2003 at 11:26 AM
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TOKYO, Jan. 27 (UPI) -- It's the hottest place in town. Since it opened last September, more than 10 million have visited the Marunouchi Building, located in front of Tokyo station, at the heart of the city's business district. Lines still form to get into the building, and trying to get a reservation at one of the restaurants on the top floor is next to impossible.

But were it not for the novelty factor, the 36-floor building, known fondly as the "Maru-Biru", is fairly unremarkable. A product of construction company Mitsubishi Real Estate.

"It's all about marketing," said one Japanese design architect. "It's boring."

To be sure, it's not the tallest building in Tokyo. That title still belongs to the Sunshine building in Ikebukuro, with its 60 floors of retail and amusement space, including an aquarium. And the conservative design blends in with the surrounding office buildings, and is a far cry from structures such as the Guggenheim museum in Bilbao, Spain, designed by California architect Frank Gehry. Moreover, the restaurants and retailers within the building are rather dull, too, with even the most expensive Japanese and Italian restaurants merely being offshoots of fancy eateries that are based elsewhere in the megapolis.

All this, however, doesn't stop the visitors for coming in.

"I just wanted to see what it was like," said Junko Watanabe, an officer worker who lives about an hour's train ride away from the Maru-Biru. "It's getting so much attention, I felt I wanted to see for myself."

According to the JMR Lifestyle Research Institute, more than 31 percent of those who visited the building are women in their 30s, and more than 42 percent of those women said they had more than $427 (50,000 yen) in "fun money" to spare each month. But before luxury goods manufacturers and gourmet restauranteurs get too excited about tapping into that market, it's worth noting that the phenomenon of one building becoming a destination spot one season, then quickly fading away in allure is only too common amongst the fickle residents of Tokyo.

For instance, research group JMR found that while over 81 percent of people polled have been to the Sunshine building since it was completed in the late 1980s, only 22 percent have been there over the past three months. Likewise, whilst the 109 building in Shibuya was once the coolest place to see and be seen, with 77 percent having been there at least once, only 13 percent have been there in recent months.

The researchers conclude that the same fate of steady popularity decline awaits the Maru-Biru.

But that shouldn't concern the developers of the building, who can rest assured that the bulk of their income, which comes from having business tenants totaling just over 50, including IBM Consulting, a number of Mitsubishi affiliates, as well as Harvard Business School, Tokyo University's graduate school of economics department, and Stockholm University's European Institute of Japanese studies.

In fact, the Maru-Biru no longer has vacancies for office space, despite its sizeable price tag.

But as Tokyo continues to see an increase in empty office spaces, the trend is for the older buildings to be abandoned in favor of the newer, more convenient ones such as the impressive Maru-Biru. And the abandonment of old buildings for newer ones, leaving the shabbier structures to get even more worn down, is a trend that worries many real estate analysts.

Real estates call the phenomenon the 2003 problem, as the number of available office space in undesirable buildings is projected to continue rising. The Ikoma Data Service System found that the amount of empty office space within the greater Tokyo area reached 6.1 percent for the fourth quarter of 2002, increasing by 1.8 percentage points from a year ago. It also marked the highest level of vacancy since September 1999.

Yet, the rate is expected only to increase, as the city expects another 180,000-square meters in office space to be available before the end of the year. In particular, the completion in spring of Roppongi Hills complex, the Shinagawa East Tower, and I-Garden are all expected to attract blue-chip companies both from within Japan and overseas, which are looking for functional and aesthetically pleasing office space in the heart of the city.

Some developers have taken advantage of the abandonment of older buildings, buying them up and renovating them for a profit. But given that Japan's economy continues to be in the doldrums, the number of office space to be available is anticipated to outpace the rate of renovation considerably. That, in turn, could spur another decline in real estate value except in the most central and convenient of urban areas.

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