Wednesday, Jun 26, 2019
Real Estate | Asia-Pacific | Japan

Japan

Marimo: bringing high-quality Japanese condos to the Asian market


4 weeks ago

Mr. Makoto Fukagawa, President of MARIMO GROUP
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Mr. Makoto Fukagawa

President of MARIMO GROUP

One of Japan’s leading condominium developers, Marimo is delivering affluent and comfortable living to clients in China and Malaysia looking for high-end properties with the ‘Made by Japan’ seal of quality. The Worldfolio sits down with its president Makoto Fukagawa to discuss Marimo’s business and projects both in Japan and abroad.

 

Japan has a negative demographic line and an ageing population and this has had a serious impact on the Japanese real estate market. New building construction has slowed down. However, the demand for renovation and reform has increased. What has been the impact of Japan's shrinking population on your domestic business?

Here at Marimo, we recognize all of the social problems that are happening domestically and, of course, the shrinking demography is one of them. This is one of the most drastic situations that has been developing in Japan over the last 100 years. It doesn't only affect real estate companies, but all types of businesses and it truly is a national problem.

We're trying to cope with huge demographic changes. After World War II, there was a huge boost in the overall population of Japan. This “Baby Boom” led to a dramatic increase in the population and the number of newborns peaked at approximately 2.7 million annually. Today, however, we can see that this trend has taken a U-Turn and we have a totally different situation.

Due to the drastic decrease in population, real estate developers have had to construct housing that satisfies the needs of an elderly society. From 1960-1970, during the period of economic growth, there were around 100 million people in Japan. Now that the birth rate is almost half of what we had in the past, we are constructing less housing. Due to the economic crisis of the early 2000s, many companies in our industry went bankrupt. We overcame and survived this period by working together and committing ourselves to solving and overcoming social problems.

But when looking at micro-economic factors, the demand is still out there and people want to live in comfortable and safe places. As long as people live in Japan, the demand will never decrease to 0 and there will always be a necessity to build new houses and assure a high level of comfort. At Marimo, we always aim to provide 1,000 units per year. We set such a limit because as long as we make 1,000 units every year, our business remains sustainable. The fact that we are able to achieve those criteria is proof that the domestic market still has many opportunities to offer.

Just to give you an illustration as to what is happening with the shrinking population. I myself am one of four brothers in my family. Families of my generation had two or three children on average, but in the current generation, Japanese households tend to have one or two children.

Naturally, demographic change alters demand. Twenty-five years ago, we were building condominiums for young people and people in their 30s. Nowadays, the market demands infrastructure that can accommodate the needs of elderly citizens. Most new households are built for people who are retired. Population can be viewed as a pyramid. However, in Japan, at the top of our pyramid, almost 30 percent of the people currently living in Japan are over 65 years old.

You can imagine that in 30 years, most of them will be gone. In consideration of these combined factors, we decided to expand our business overseas. What might occur in the future is an increased necessity to build new housing for an inbound population coming from overseas. For example, foreigners choosing to settle in Japan is an increasing trend and we are trying to promote and advertise our condominiums to that market.

 

The global construction industry is projected to grow at an average rate of 3% per year, while the emerging markets of the Asian region are expected to rise by 7% per year mainly due to transport infrastructure and energy industries. Which markets are to be prioritized and why?

Following the economic crisis, we decided to expand our business abroad, and we now have Malaysian and Chinese projects. I mentioned previously that there are four children in my family; the eldest brother took over the project in Malaysia and with a minor investment our Malaysian project turned into a lucrative business for Marimo. China seems to be the most delicious piece of the pie and we are looking forward to further expanding our Chinese projects.

 

Marimo started in 1970as a design and architectural firm but since then has evolved and now you engage in a range of services from project planning to project supervision for real estate. Could you chronologically give us a quick review of the services you provide and how does Marimo benefit from such a diversified portfolio?

We established the company in 1970 and started off as a design and architectural firm. Marimo is a family business and the founder of the company is my father. I took over my father's business and through various approaches overcame the difficult economic periods including the burst of the bubble economy and the Lehman Shock.

This year marks our company's 49th anniversary. Practically, we can divide the company's history into 10 year periods. For the first 10 years, we were solely providing design and architectural services. Ten years later, we shifted to condominium development. We then promoted nationwide condominium development business for the next 10 years, and after the Lehman Shock, we made a leap forward to become a comprehensive real estate developer, whilst continuing our condominium business.

The 10 years after the Lehman Shock were crucial for the company. To me, it was evident that we couldn’t just focus on building condominiums. We had to increase our range of services and our portfolio. We started off with the criteria of creating condominium projects with 1,000-unit minimum a year. Right from the start, we have maintained annual sales of 40 billion yen. We also increased our business portfolio, expanding to businesses in urban redevelopment, domestic rental apartments and profitable real estate creation.

We then turned towards localizing our activities in foreign countries as I mentioned previously. We're now doing business in Malaysia and China, with a minor investment from the parent company to the Malaysian project. China is the biggest market for us now, and in 2015, we successfully completed a project of 853 units for 12 buildings in Jiangsu Province, Suzhou. We are proud to say that our second project has also sold out even before construction is finished. We'll be expanding our business in China and the total sales have become approximately 30 billion yen.

Our concept is to offer high-quality condominiums. Japanese housing is recognized for its high quality and splendour. This “superb” reputation is a key selling point and it is recognized in Japan and abroad. Of course, due to the shrinking population, there aren’t as many families purchasing new houses in Japan. But in overseas locations, especially in China where so much potential demand exists, our objective is to export that level of Japanese quality and realize it there.

 

In your first Chinese project (2013), all your condominiums were sold before handover. Once the move-in occurred, all of your clients were satisfied. What have you learnt from the first project that could continue to satisfy the demand of the Chinese purchasers? And how does this first experience contribute to the success of your second Chinese project?

For our second project, we are building1260 units across 19 buildings. While the construction is still in progress, the sales are completed. As for the question, we actually learnt a lot from our past experience in Japan, especially in connection with the “o-furo”. As you know, bathrooms are usually combined with toilets. In Japan, however, they are separated because Japanese people don't want the smell of the toilet to come into the bathroom. We were trying to incorporate the Japanese concept of condominiums into our Chinese project, but we realised that we had to appeal to the locals. This is not so much of an issue in China as people don't mind having the bathroom and toilet combined. At Marimo, we’re always trying to reflect the actual needs of the people in our condominiums.

We also changed the design between the first and the second project because there was a need to add a sense of 'gorgeousness' to the housing. In fact, some clients preferred a more luxurious and a more European style. For example, the concept of Italian cars which gives a sense of luxury is something that we would like to incorporate into our projects.

 

In the coming years, are you planning on targeting other markets?

While exploring the possibility of expanding to Southeast Asian countries, we prioritize the expansion of our existing projects and our new businesses in the domestic market.

 

What are your goals for the future and how would you like to see your company develop?

At this point, I'm not thinking about expansion. Of course, I would like to but it's not our top priority. The top priority at the moment is to focus on existing projects, keeping them at the high-quality level that they've achieved up to now. Overall, the most important feature is the atmosphere of the company. We would like to maintain an environment where all employees feel satisfied and happy to work at Marimo. Furthermore, we would like them to feel gratitude and a sense of loyalty to the company. Creating such an atmosphere is the most important thing to us. While sales are important, the motivation of our employees to happily come to work every day should exceed everything.

 


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