Founded over 110 years ago, Nikken Sekkei has expanded to provide a wide array of consulting and planning-related activities, and has completed more than 25,000 projects across Japan and over 40 countries internationally. President and CEO Tadao Kamei offers his views on the construction sector and ways to create a sustainable future, along with the impact of Abenomics, the challenges that face the industry, and key opportunities for overseas investors. We also discuss Japan’s future in an ever increasingly globalized world and what is required to improve the general business landscape.
How do you see the marketability of Japanese companies in the US and on the world stage?
I think Japan should focus on selling services rather than products. Our field – construction and architectural design – is also a service industry. The construction industry is also a very domestic. I’m hoping Prime Minister Abe will propose a convincing plan to export these kinds of industry and expertise.
Where do you see the strongest growth potential for Nikken Sekkei, and what are your key focus areas?
In the present circumstances, our international operations make up only 15% of Nikken Sekkei’s total business. About half of our international projects are conducted with China. The rest is with Middle East, CIS or ASEAN. In near future, we would like to increase our participation to the business in Europe and the US. We are aware that we need to further develop our collaborations and networks in this regard, in order to increase international cases. We are working on this at the moment.
As a Japanese firm, how does Nikken Sekkei position itself for global tenders? What are your competitive advantages and unique selling points?
Japanese general contractors have very high technologies, but less competitiveness as the industry is under a hierarchical monopoly. It is closed internationally and their operations are quite domestic and subject to the Galapagos effect, which is a barrier to entry for foreigners.
Nikken Sekkei itself has several serious selling points. First, we offer a vast array of sustainable and innovative technology.
Second, we have an excellent knowledge base and solid expertise of earthquake phenomena and seismic isolator technologies.
Third is the fact that we propose mixed-use development, such as transit-oriented development (TOD). We have developed the Shibuya Hikarie station, the Yaesu area of Tokyo Station, and Queen’s Square in Yokohama. These are great examples of TOD. There is now a strong demand for TOD in China or Russia, and we are well positioned on this segment.
Lastly, I’d like to point out to our ‘Japanese touch’ and elaborate designs, which are always very detailed and precise.
How do your various international projects such as the Tadawul stock exchange building in Riyadh help promote the Japanese image on a global basis?
Tadawul Tower is one of our new urban development projects. Participating in this kind of international project really helps us enhance our global reach, image and influence. We would like to participate in more international projects although there are a lot of invitations from all over the world. It is very crucial for us to select a project that also fits within our four values that I mentioned. Such kind of international participation seriously helps promote my company and the Japanese image.
Nikken Sekkei recently announced a business alliance with The Buchan Group from Australia. How does this relationship provide the platform for further international expansion?
Indeed. The Buchan Group is very famous for its commercial, residential and entertainment property developments. We, on the other hand, are more specialized in the design of office buildings, mixed-use development and so on. So we complement each other very well with our various strengths and expertise. Moreover, the Buchan Group has several international branches in China, Dubai or London. We have offices in Shanghai, Dubai and other locations. Together, we can widen our network. We can also exchange our human resources and deepen our know-how in international business. Lastly, as it happens, it is very beneficial for both of us to have a network thorough the pan-Pacific zone, with the Trans-Pacific Partnership that has been initially approved.
Japan has lost its high-end super ‘tech’ image of the 80’s & 90’s and is now looked at as a country somewhat in decline – to what extent do you think that a company such as yours with its modern approach and variety of avant-garde concepts provides a window into what Japan is really capable of today and in the future?
During the bubble economy between 1980s-90s, a lot of construction was taking place. However, many of these projects failed to leave any social values or social contribution behind. Although the economy is rather slow at this moment, I think it is time to rethink and focus further on our social infrastructure and on contribution that we want to leave behind, which will be the most valuable for the society.
Within the urban development field, there are the “figure” and the “ground”. The building is the figure and the ground is the environment, the public space and the background. The ground is becoming more and more important now. We at Nikken Sekkei would like to focus on these boundary areas in society and create jobs in this sector.
Last year, we published a pamphlet called “Post 2020 Grand Design” as our in-house journal and held a workshop to create a better environment for Tokyo. There are five commitments in this journal that I want to point out: 1. Create platforms for diverse communities; 2. Transmit the Japanese model of sustainability; 3. Empower the tourism sector with original Japanese style; 4. Enrich the experience of transportation; and 5. Create a valuable public space. We hold a workshop every three months to fulfill these five qualities, inviting people from not only architecture firms but also the railway companies, banks and government offices.
The image foreigners have of Japan is often that of a complicated and opaque market, is the issue simply a question of a lack of quality communication about Japan?
I think it is not working because of how the government presents Japan as a nation. It should be clearer to understand and that goes for both foreigners and even Japanese people. First of all, the government should get more approval from Japanese citizens before sending the message abroad. If we could succeed to remove the closed feeling of the nation, people would understand more about Japan.
In comparison, Shanghai seems to be relatively more open-minded for new business from abroad. Singapore is also ranked as the #1 easiest place to open up a new business. Japan ranks 29th in the World Bank Group’s ease of doing business report.
There was once an investor from Hong Kong, who bought a large piece of real estate in Tokyo and we cooperated to design the project. When he was in Japan, he was surprised by how long it takes for construction to start since it takes time to obtain building permission in Japan. According to him, in the case of Hong Kong, the start of construction takes little time because all the relevant authorities who have the right of the permission hold a meeting where they discuss issues, and by the time of the next meeting, all of those problems are solved. All the big projects follow this approach.
However in the case of Tokyo, it functions as in a monopoly game. You have to get stamps every time and go back and forth in the application process. Even for us, it does take very long time to get through it. It must be utterly inconvenient for foreign investors. As I said earlier, speed is definitely a key factor Japan needs to work on, to attract more foreign investors.
How does Japan compare as the go-to investment destination against its peers in Asia such as China or Singapore, and to what extent are the opportunities here more attractive?
There has been a decline of investments from abroad since 2008 and the Lehman Brothers collapse. To look at the situation now, I think that speed can be a key element to develop and improve on, in order to attract foreign investments. In Japan, it takes too long to approve a license or deregulate the law. The corporations also need to adopt a more open-minded attitude towards outsiders. Also, in the Japanese real-estate sector, most of foreign investors tend to invest in completed buildings for the purpose of selling it at a later occasion. It would be better if we could cooperate with foreign partners from the planning process onwards.
That being said, I think Japan and Tokyo boast a lot of advantages. In Tokyo the transportation system is very efficient and very well organized with trains and the metro. We do face natural risks such as earthquakes and tsunamis, but overall, Japan is a very safe place – with a lesser possibility of terrorism and terror attacks. In addition, we have a very service-oriented culture, even if the language barrier remains with foreigners. So overall I think that Japan offers a very comfortable, safe, clean and advanced environment.
The Japanese construction market makes up approximately 10% of GDP and, by number of employed persons, is one of the country’s principal industries. Brisk demand continues to push up costs to a near 20-year high, causing some companies to become slightly reluctant to further invest in construction and real estate. How would you evaluate the Japanese real estate sector today?
The real estate industry has recently registered a slight decline in the demand for residential property, while the demand for commercial property – such as skyscrapers for business office and luxury condominiums – continues to generate solid sales in the central Tokyo area.
Supply of residential units is also on a slow decline ever since the peak in 2013, after Lehman Brother’s bankruptcy and the consequential shock in 2008, but luxury condominiums in central Tokyo continue to achieve strong sales. These tend to be purchased increasingly by an affluent minority for inheritance or tax-saving purposes, as well as by foreign investors – mainly from China – as a speculative investment in view of the 2020 Tokyo Olympic Games, and helped by the depreciated yen.
The sales of condominiums in the suburbs of Tokyo on the other hand appear to be sluggish. This can be explained by a number of factors, including the increasing consumption tax rate and higher sales price, led by rising construction and land prices.
There is a strong desire to develop as deregulations in town planning continue, such as the “Act on Special Measures concerning Urban Reconstruction”. Yet developers are reluctant to commence construction of office buildings in the center due to oversupply.
What we see as well is an increasing trend of real estate investments from sovereign wealth funds (mainly from Singapore and others). Supplies of logistics and commercial properties by securitization are expected to increase for some time. The number of hotels is also rocketing, in response to the increasing influx of foreign tourists. There are many new projects or new hotel developments as well as refurbishment of existing buildings.
Along with increasing foreign investment to Japan, the demand for residential units for managers of global companies are forecast to increase – our firm Nikken Sekkei is to make new propositions in this sector.
In the greater Tokyo area, Nikken Sekkei is to make a proposition to promote a shift towards compact cities in consideration of the receding population, due to low birth rates and an ageing society.
Nikken Sekkei is proud of its high-quality design products. Along with increasing in-bound foreign real estate investment comes a need for higher-quality construction, designs and concepts. Nikken Sekkei is also to offer proposals for real estate-oriented town and building development as well as project management.
Greenery plays a vital role in a city’s environmental health – your project ‘Iidamachi’ (I Garden Air) promotes sustainable and attractive environments. What demand is there for such ‘green’ projects across Japan?
When it comes to urban development sustainability is vital. In Japan we have seen quite a few projects of “Smart Cities” that use smart grid technology to minimize the energy consumption of the whole city area. For example, Kashiwano-ha in Chiba Prefecture along the Tsukuba-Express line is a model of a “Smart City”. It was developed by Mitsui Real Estate Development. Nikken Sekkei participated in this project as a consultant of policy development for BCP (Business Continuity Plan). The inspection team, mainly from China or Middle East, came to visit the town, as these kinds of technologies are very attractive for them, as they are trying to improve their energy savings and use of renewables.
How would you evaluate your input and legacy left behind?
The word “sustainability” has recently become a buzzword in urban development. However, the word is not new for us. This has always been our basic approach. We are architects from Japan, working in a Japanese company, and Japanese design always coexists with the environment.
Our vision at Nikken Sekkei revolves around the concept of “cutting-edge socio-environmental design”. Our approach is to leave behind a social heritage that lasts and sustains for a long time in society. Our slogan is “contributing to the society with valuable work” – first to the society, then to individuals, and lastly to the company.
Your work as a successful architect has led you to win a number of awards and work with a wide variety of companies such as Mitsui Fudosan & Japan East Railways, but I’m interested to know how you would define your architectural style, what and who has influenced you?
It is very hard to explain with a word. In the beginning, I was interested in the landscape design as well as the architectural design. In the definition of “figure and ground”, the landscape is more likely to be included in the “background”. I have always had the intention to cover both sides of design in my career. Perhaps, it is very interesting to create “sculpture-like” architecture. However, you have to organize the background first to make the main object shine in the environment. Talking about Japanese cities, the background is still untidy and confusing.
What message would you like to address to the US audience?
We, at Nikken Sekkei, would like to contribute to the American society with our know-how in near future. I have personally lived in the United States, and therefore I am looking forward to further participating in some projects in the US in the near future. When I was living in the United States, first as a student and then while working at a design firm, I had opportunities to come in touch with America’s wonderful architecture and cutting-edge technologies. I would also like to make the best of such experiences as well.