Cities Research Center, Tokyo on the World Stage

Transcription

1 Cities Research Center, 2014 Tokyo on the World Stage

2 2 Tokyo on the World Stage Contents Tokyo on the World Stage 3 City Performance Indices 4 The Shape of Competitiveness 12 Real Estate Capital Flows 15 Future Tokyo The Resurgent City 21 Appendix 26

3 JLL 3 Tokyo on the World Stage A new commercial geography of cities Tokyo is a clear Super City as the world s largest urban economy. Momentum is steadily building and the city has a newfound energy, aided by Abenomics policies and lifted by securing the 2020 Olympic Games. But growth, while important, is only part of what makes a modern city successful. Competitiveness revolves around a new language of attributes such as liveability, transparency, resilience and global fluency. Add to this unprecedented social change and the demand for smart cities, and it is clear that the urban agenda has radically changed. Against this backdrop, the evolution of Tokyo and its real estate market over the next decade holds an intriguing mixture of vast promise and perplexing challenge. Not only are the Olympics set to give a huge boost to the city and its international reputation, but to meet its own aspirations of improving its world position, Tokyo may have to absorb a number of significant changes to its fabric and lifestyle, and even to its personality. This briefing note assesses Tokyo s competitiveness as a city on the world stage from several perspectives: I. How does Tokyo perform on the growing portfolio of city competitiveness indices? II. III. IV. How does Tokyo s competitive profile compare against its peer group specifically the other Super Cities - Paris, London and New York; and its regional peers Beijing, Hong Kong, Shanghai, Seoul, Singapore and Sydney? What are the different shapes of commercial competitiveness? What does the commercial real estate investment market tell us about city competitiveness? What will determine Tokyo s future global position and what roles can the real estate industry play as momentum continues to build over the remainder of the decade. The rise of the Super City We are in the midst of an unprecedented urban revolution. There are now in excess of 1,600 major cities 1 across the world housing 2.2 billion people all jostling for global attention and looking for a winning edge. Competition between cities for capital, corporations and talent has never been stronger. Over the last decade the combined forces of globalisation, urbanisation and modernisation have brought many previously unfamiliar cities onto the world stage and have also propelled four cities into the realm of Super City status Tokyo, New York, London and Paris an elite group that possesses a powerful combination of economic scale and influence, deep corporate bases, highly liquid real estate investment markets and large, diverse and high-quality commercial real estate stocks. These four cities wield significant economic might, particularly in the commercial real estate market, but they need to remain agile and innovative in order to retain their dominance in a world where global connectivity and technology is enabling smaller cities to gain rapid momentum and achieve a global position by developing environments conducive to inventive and creative activity.

4 4 Tokyo on the World Stage City Performance Indices Tokyo s unique economic scale Tokyo s global competitive position is fundamentally tied to its unique economic scale as the world s most populous city, with the largest economy and consumer market. Greater Tokyo s economy exceeds US$1.4 trillion 2 (as large as the economy of Spain) and, with nearly 38 million consumers, its domestic market far exceeds even that of New York, London and Paris. The city region is also home to more Forbes Global 2000 headquarters than any other city. Tokyo s Unrivalled Economic Status 3 Population Tokyo Jakarta Delhi Manila Seoul Shanghai Mexico City Sao Paulo Mumbai New York Beijing Cairo Dhaka Karachi Buenos Aires Kolkata Istanbul Los Angeles Chongqing Rio de Janeiro Millions GDP Tokyo New York Seoul Los Angeles London Paris Chicago Shanghai Moscow Beijing Houston Washington DC % Dallas Sao Paulo Mexico City San Francisco Osaka Buenos Aires Philadelphia Hong Kong US$ billions Headquarters Tokyo New York London Seoul Paris Hong Kong Beijing Chicago Taipei Houston Mumbai San Jose Toronto Osaka Sydney Dallas Stockholm Moscow Shanghai Washington DC Forbes 2000 HQs Source: JLL, UN, Oxford Economics, Forbes The world s largest commercial real estate market The overall pre-eminence of Tokyo is highlighted in JLL s 2014 Commercial Attraction Index, which measures a city s economic and real estate power and status, based on a basket of variables. 4 The Index is distinct in that it includes key real estate measures (namely investment volumes and commercial real estate stock), as well as socio-economic and business indicators such as economic output, population, corporate presence and air connectivity. Tokyo tops the Index, followed closely by the other three Super Cities. Several Asian cities such as Shanghai, Beijing, Hong Kong, Seoul and Singapore are now a permanent feature of the top ranks and provide stiff competition across a number of individual city attributes.

5 JLL 5 Tokyo at the Top of JLL s Commercial Attraction Index, Tokyo 2 New York 3 London 4 Paris 5 Los Angeles Population Economic Output Corporate Presence Connectivity Real Estate Stock Real Estate Investment 6 Seoul 7 Chicago 8 Shanghai 9 Beijing 10 Washington DC 11 Moscow 12 Hong Kong 13 Atlanta 14 Dallas 15 Singapore 16 Sao Paulo 17 San Francisco 18 Houston 19 Jakarta 20 Toronto Source: JLL, 2014

6 6 Tokyo on the World Stage Significant scale advantages Indices from other leading authorities on city competitiveness paint a similar picture of economic dominance and the city as a key location for strategic business activity, which is symptomatic of a reorientation of Tokyo s role in the global economy. Tokyo s performance in the Mori Memorial Foundation s prestigious Global Power City Index highlights its attraction in terms of market size, economic vitality and human capital. In the AT Kearney Global Cities Index, which measures global engagement, the city ranks fourth globally. The city also maintains significant scale advantages in the size and sophistication of its financial services sector, highlighted by its performance in the Z/Yen Global Financial Centres Index. Economic Size and Status Indices 5 Mori Memorial Foundation Global Power City 1 London 2 New York 3 Paris 4 Tokyo 5 Singapore 6 Seoul 7 Amsterdam 8 Berlin 9 Hong Kong 10 Vienna 11 Frankfurt 12 Zurich 13 Sydney 14 Beijing 15 Shanghai 16 Stockholm 17 Toronto 18 Copenhagen 19 Madrid 20 Los Angeles AT Kearney Global Cities 1 New York 2 London 3 Paris 4 Tokyo 5 Hong Kong 6 Los Angeles 7 Chicago 8 Beijing 9 Singapore 10 Washington DC 11 Brussels 12 Seoul 13 Toronto 14 Sydney 15 Madrid 16 Vienna 17 Moscow 18 Shanghai 19 Berlin 20 Buenos Aires Z/Yen Global Financial Centres 1 New York 2 London 3 Hong Kong 4 Singapore 5 San Francisco 6 Tokyo 7 Zurich 8 Seoul 9 Boston 10 Washington DC 11 Toronto 12 Chicago 13 Geneva 14 Vancouver 15 Luxembourg 16 Frankfurt 17 Dubai 18 Montreal 19 Abu Dhabi 20 Shanghai Source: Mori Memorial Foundation, AT Kearney, Z/Yen

7 JLL 7 Innovation, liveability and sustainability Nevertheless, the business of cities is about being competitive across an ever-growing agenda of indicators. The language of modern city competitiveness is changing and revolves around a broad range of attributes from liveability, sustainability and resilience, to transparency, talent and technological depth. Tokyo's Movement in Competitiveness Indices, v places 6 places 5 places 3 places $ INNOVATION COST BRAND GATEWAY FUNCTIONS Source: 2thinknow Innovation Cities; PwC Cities of Opportunity, ICCA Looking beyond the pure size measures highlights the underlying competitive advantages that Tokyo holds in relation to its innovation capabilities, creativity, liveability and sustainability credentials: Tokyo s high-technology, R&D and manufacturing specialisms are key sources of confidence and dynamism for the city. A large pool of technology-focused workers, combined with research-led universities, has translated into an overall commercial capability that is stronger than London and New York, as highlighted by its top position in the IESE Cities in Motion Index. 6 Globally, the city is widely recognised for its creativity in a recent survey by Adobe, 7 Tokyo was ranked as the World s Most Creative City, acknowledging its contribution and influence to global innovation and youth culture. Tokyo sits in 15th position in the 2thinknow Innovation Cities Index 8 which, we believe, reflects an issue in the translation of creativity into commerce. According to the OECD, 9 for example, Tokyo has by far the largest number of patent applications of any city worldwide, a key measure of a city s innovation potential. However, San Francisco, which has half the level of patents, far exceeds Tokyo in terms of tech start-ups.

8 8 Tokyo on the World Stage A superior infrastructure, enabled by the large investment capability of the city s Governor and Metropolitan Government are critical drivers of business productivity and help boost quality of life in the context of a strong life support infrastructure. Tokyo features in second position behind Copenhagen in Monocle s leading-edge Quality of Life Survey. 10 The Tokyo Metropolitan Government is a pioneer on environmental issues and has initiated policies on energy and climate change, which have steered the national agenda. Tokyo ranks second only to Singapore on the Siemens Asian Green City Index 11 as a result of such policies. Innovation, Liveability and Sustainability Indices 2thinknow Innovation Cities IESE Cities in Motion Monocle Quality of Life Siemens Asian Green City 1 San Francisco 1 Tokyo 1 Copenhagen 1 Singapore 2 New York 2 London 2 Tokyo 2 Tokyo 3 London 3 New York 3 Melbourne 3 Hong Kong 4 Boston 4 Zurich 4 Stockholm 4 Osaka 5 Paris 5 Paris 5 Helsinki 5 Seoul 6 Vienna 6 Geneva 6 Vienna 6 Taipei 7 Munich 7 Basel 7 Zurich 7 Yokohama 8 Amsterdam 8 Osaka 8 Munich 8 Bangkok 9 Copenhagen 9 Seoul 9 Kyoto 9 Beijing 10 Seattle 10 Oslo 10 Fukuoka 10 Delhi 11 Toronto 11 Philadelphia 11 Sydney 11 Guangzhou 12 Seoul 12 Los Angeles 12 Auckland 12 Jakarta 13 Berlin 13 Dallas 13 Hong Kong 13 Kuala Lumpur 14 Los Angeles 14 Copenhagen 14 Berlin 14 Nanjing 15 Tokyo 15 Eindhoven 15 Vancouver 15 Shanghai 16 Stockholm 16 Amsterdam 16 Singapore 16 Wuhan 17 Sydney 17 Sydney 17 Madrid 17 Bangalore 18 Hamburg 18 Stockholm 18 Paris 18 Hanoi 19 Lyon 19 Chicago 19 Amsterdam 19 Kolkata 20 Hong Kong 20 Baltimore 20 Hamburg 20 Manila Source: 2thinknow, IESE, Monocle, Siemens

9 JLL 9 Challenges being tackled The Indices also, however, bring to the surface areas where Tokyo is challenged. While it clearly excels in dimensions of scale and power, the city s position in several other areas is more ambiguous. The ease of conducting business compares less favourably with the other Super Cities, exacerbated by a weaker entrepreneurial environment. Tokyo s enduring infrastructure and technological strengths appear to need another cycle of updating to stay world-class; and the city s brand has weakened in some measures as other Asian cities offer compelling destination advantages. Nonetheless, a number of these challenges are already being addressed: Brand, image and influence: Tokyo has discovered a new confidence as a result of securing the XXXII Olympic Games. The city will be preparing for 2020 like no other, which will significantly boost Tokyo s international status and profile. Moreover, numerous governmental bodies and initiatives are contributing to the promotion of the Japanese brand internationally. Of particular note is the Cool Japan initiative, supported by Tokyo s city international promotion campaigns. This global influence will be further strengthened by the Tokyo Vision 2020 projects. Infrastructure: Infrastructure development in the build-up to the Olympics will provide legacy both through the provision of Olympic facilities and through the strengthening of Tokyo s transportation infrastructure. The planned transport projects will drive greater mobility within the city, and particularly to the Tokyo Bay Zone, home of the key Olympic facilities. Openness: A key vision of the Tokyo Metropolitan Government (TMG) is to: Transform Tokyo into a global business centre that attracts human resources, capital and information from around the world, to further enhance the city s vitality. Yoichi Masuzoe, Governor of Tokyo 12 To realise this ambition, the TMG aims to remove both hard and soft barriers to make Tokyo a barrier-free city. This covers a broad range of areas from the removal of language barriers, increasing ease of doing business with Tokyo s National Strategic Special Zone, through to the strengthening of the city s information and communications infrastructure. Tourism: Tokyo is witnessing a sharp increase in tourism, with foreign visitor numbers to Japan growing at an annualised rate of 26% to reach record levels. 13 A number of factors have come into play the relaxing of requirements for tourist visas issued to Chinese and ASEAN nationals, the streamlining of immigration procedures for overseas visitors, the expansion of low-cost carriers, improving tourism infrastructure and the depreciation of the yen against other major currencies. The government aims to double foreign visitors by 2020, with initiatives to create Integrated Resorts and to legalise casinos. Retail renaissance: Tokyo is a globally-renowned shopping city, with one of the largest concentrations of retail in the world. An improving economic environment, rising retail sales and increasing tourism have revived retailer interest in the city, with a number of retailers opening flagship stores.

10 10 Tokyo on the World Stage Dispelling the myths Tokyo s position on key city competitiveness indices also highlights some of the misconceptions of the city as a place to live and work. The city s ranking on several liveability indices proves that it is possible for citizens to have the benefits of a large megalopolis without many of the disadvantages of urban decay, crime and pollution: In terms of air pollution, for example - a pressing concern for most major Asian cities; and one that is affecting location choices of corporations and expats - Tokyo scores the lowest in the continent. The Greater Tokyo region also has population densities that are below its regional peers. A range of cost indices show that Tokyo is no longer among the most expensive locations to do business, illustrated by benchmark gross rental levels for prime office assets, which are now significantly below London and Hong Kong. Dispelling the Myths about Tokyo Least polluted city in Asia One of lowest population densities in Asia Tokyo 23 Osaka 27 Singapore 29 Jakarta 43 Manila 47 Chennai 48 Kuala Lumpur 49 Hong Kong 50 Bangkok 54 Seoul 64 Guangzhou 70 Shanghai 81 Bangalore 90 Tianjin 101 Chengdu 111 Beijing 121 Mumbai 132 Kolkata 148 Delhi 198 PM10 Concentration Source: World Heath Organisation Kuala Lumpur 3,400 Tokyo 4,400 Tianjin 5,000 Beijing 5,100 Guangzhou 5,300 Osaka 5,400 Bangkok 6,100 Shanghai 6,200 Chengdu 8,100 Bangalore 8,200 Jakarta 9,600 Chennai 9,700 Seoul 10,100 Singapore 10,500 Delhi 11,600 Kolkata 12,400 Manila 14,400 Hong Kong 25,700 Mumbai 32,300 Population/sq km Source: Demographica

11 JLL 11 Benchmark Prime Office Rents in Major World Cities US$ / sq ft / per year Tokyo (Otemachi / Marunouchi) Singapore (Raffles Place) Hong Kong (Central) London (West End) New York (Plaza District) Gross Rents, Q Source: JLL, 2014

12 12 Tokyo on the World Stage The Shape of Competitiveness Competition among cities to attract talent, trade and capital is fierce, but unlike the rigid hierarchy of the past, modern urbanism sees many different routes to success with diverse styles reflected in cities performing differentially in certain attributes but equally well overall. How well a city does across these indicators gives it a competitive shape as shown by the JLL City Competitiveness Cobwebs. For Tokyo and its peer cities, comparator indicators include not just size measures, but also those of connectivity, corporate presence, education and innovation as well as real estate activity so that, when transferred visually into a competitiveness cobweb, the shape of the cities comparative strengths becomes more obvious. The cobwebs illustrate the typical roundness of the four Super Cities, scoring well across a range of attributes which has enabled them to excel as large, economically-diverse and internationally-connected cities. London One of the world s most internationally-connected cities, with a strong educational base supporting its status as a global financial and services centre and an increasing reputation for innovation, complemented by a renowned cultural offering. New York A global commercial and cultural centre, with openness and international reach contributing to a wide diversity of talent and an impressive research base. Paris Deep R&D and technology expertise, strengths in education, and cultural vibrancy have been offset somewhat in recent years by slower growth and a less open business environment than some of its peer Super Cities. Tokyo - One of the world s largest corporate bases, financial markets and R&D centres, with world-class infrastructure and educational opportunities, compromised by relatively low levels of market transparency and openness, indicative of its lower scores on business-friendliness measures. Tokyo s regional peer cities are each travelling in specific directions, with differential strengths and weaknesses. In today s hierarchy, there are different routes to success: Shanghai An emerging contender for Super City status, Shanghai is mainland China s financial centre with robust connections to international markets and investment, although this position is hampered by low market transparency. Beijing A cultural and business destination with expanding banking services and growing educational possibilities as it seeks to become a services as well as policy and manufacturing hub. Hong Kong One of the world s largest financial centres with a diverse skills base and services economy, Hong Kong has also benefited from its openness and position as a gateway into the wider Chinese market. Seoul A strong corporate base with a heavy focus on research and technology has added to Seoul s status as one of the world s smartest cities. Singapore An emphasis on business-friendliness and its status as a regional hub, benefiting from increased capital flows to Asia, has propelled Singapore into a global financial centre and technology research centre. Sydney Its globally important financial centre and strong knowledge economy are complemented by internationally-recognised quality of life and high levels of market transparency.

13 JLL 13 City Competitiveness Cobwebs, 2014 Tokyo Connectivity Corporate Presence Population Patents Education City GDP Office Rental Change Real Estate Investment Volumes Investment Intensity Office Stock Real Estate Transparency New York Paris London Shanghai Beijing Hong Kong Seoul Singapore Sydney Source: JLL, See Appendix 14

14 14 Tokyo on the World Stage

15 JLL 15 Real Estate Capital Flows Size and scalability do matter The flows of capital into real estate are a key barometer of a city s health and its attraction as an international destination, not only for capital but for corporations and talent. Analysis of recent flows shows a pattern of domination of the world s major cities, with just 30 cities accounting for half of total global commercial real estate investment volumes. In Asia Pacific, the top seven cities (Tokyo, Hong Kong, Singapore, Seoul, Shanghai, Sydney and Beijing) represent close to 60% of regional investment volumes. 15 The weight and influence of the Super Cities is particularly apparent with London, New York, Tokyo and Paris responsible for nearly one-fifth of global investment volumes. From a real estate investment perspective, size certainly gives the choice, the liquidity and the variety of product... factors that are so important to any real estate investor, hence the overwhelming share of capital into the world s major business hubs. Top 30 Cities account for 50% of Investment into Commercial Real Estate US$ bn 1 London 97 2 New York 90 3 Tokyo 54 4 Paris 52 5 Los Angeles 37 6 Chicago 30 7 Washington DC 29 8 Hong Kong 27 9 Singapore Seoul 26 US$ bn 11 Shanghai San Francisco Boston Sydney Dallas Seattle Toronto Houston Stockholm Moscow 15 US$ bn 21 Munich San Jose Beijing Atlanta San Diego Frankfurt Denver Miami Phoenix Berlin 10 Super Cities Asia Pacific Peers Direct Commercial Property Investment, three-year total volumes, Q Q Source: JLL, 2014

16 16 Tokyo on the World Stage Tokyo has been less open to international capital However, a characteristic of global fluency is openness and global engagement and the attraction of crossborder real estate investment is one of the signs of global fluency. Significantly, the proportion of cross-border investment activity (i.e. deals where the purchaser is a non-domestic entity) in Tokyo is notably below the other three Super Cities. Tokyo has, as yet, certainly been less open to international money, highlighting significant potential for growth and for further engagement with the international investor community. Cross-Border Real Estate Investment Activity New York: US$90 bn London: US$97 bn Paris: US$52 bn 32% 68% 61% 39% 40% 60% Beijing: US$14 bn 30% 70% TOKYO: US$54 bn 12% 88% Seoul: US$26 bn 9% 91% Shanghai: US$25 bn Hong Kong: US$27 bn Sydney: US$22 bn 31% 69% 21% 79% 43% 57% Cross-Border Domestic Three years, Q Q Cross-Border denotes deals where purchasers are non-domestic Source: JLL, 2014

17 JLL 17 Latent potential of Tokyo s real estate market The latent potential in Tokyo s real estate market is well recognised by investors across the world and is highlighted in the results of the JLL City Investment Intensity Index. 16 This measures not just the volume of investment capital but the volume relative to economic size, i.e. investment intensity, which reveals that Tokyo is in 30th position. The reasons for this run from simple weight of domestic funding and demand through to real and perceived challenges of doing business in Japan; in particular the lower levels of real estate transparency compared to Tokyo s competitors. JLL City Investment Intensity Index Total Real Estate Investment as proportion of City GDP 1 Oslo 2 Munich 3 London 4 Stockholm 5 Copenhagen 6 Sydney 7 Warsaw 8 Frankfurt 9 Gothenburg 10 Paris 11 Taipei 12 Edinburgh 13 Singapore 14 San Fransicso 15 Hong Kong 16 Zurich 21 New York 30 Tokyo Three-year rolling total direct real estate investment volumes to Q Source: JLL, 2014

18 18 Tokyo on the World Stage Real Estate Transparency and City Investment Intensity 18% Oslo 16% 14% London Stockholm R = 0.48 City Investment Intensity 12% 10% 8% 6% 4% 2% 0% Copenhagen Frankfurt Warsaw Taipei Singapore Sydney Paris Toronto Zurich Hong Kong Washington DC Berlin New York TOKYO Amsterdam Shanghai Ho Chi Minh City Dublin Prague Moscow Helsinki Rome Seoul OSAKA Brussels Rio de Janeiro Beijing Madrid Macau Bangkok Kuala Lumpur Sao Paulo Istanbul Mumbai Dubai Doha Riyadh Jakarta Delhi Real Estate Transparency City Investment Intensity; three-year (rolling Q Q2 2014) total real estate investment volumes as proportion of city GDP. Real Estate Transparency at a National Level Source: JLL Global Real Estate Transparency Index, 2014; JLL City Investment Intensity Index, 2014

19 JLL 19 Tokyo s transparency challenges JLL s Global Real Estate Transparency Index 17 places Tokyo in 26th position globally, towards the lower end of the Transparent category, with levels similar to Kuala Lumpur, Budapest and Prague. This reflects Japan s traditional real estate practices and for Tokyo to fulfil the exacting modernisation tasks it has set itself, the city will require improvement in several key areas. Areas for Transparency Improvements Transactions Reporting $ Full disclosure from large real estate owners of transaction pricing, which can be fully accessed by the public Service Charges Greater visibility of service charges and building operating costs for occupiers to enhance business and building efficiency Market Tracking Industry tracking of market fundamentals data notably in the retail, industrial and hotels sectors Green Buildings Indices to measure the financial performance of green buildings Greater adoption of energy benchmarking systems for real estate Regulatory Oversight A real estate regulatory authority to oversee and fast-track improvements Source: JLL, 2014

20 20 Tokyo on the World Stage World s Most Transparent Real Estate Markets Category 2014 Composite Rank Market 2014 Composite Score Highly Transparent Transparent 1 London New York Sydney Auckland Paris Toronto Amsterdam Dublin Helsinki Zurich Stockholm Frankfurt Singapore Hong Kong Brussels Copenhagen Warsaw Madrid Oslo Johannesburg Vienna Milan Lisbon Prague Budapest Tokyo Kuala Lumpur Sao Paulo 2.44 Main commercial city in each country Source: JLL Global Real Estate Transparency Index, 2014

21 JLL 21 Future Tokyo The Resurgent City Tokyo s Vision to 2020 In order to maintain its top position, Tokyo will need to continually adapt to the future trends that are rippling across its landscapes particularly relating to smartness, business friendliness, sustainability, and physical and economic resilience; requirements well recognised in the Tokyo Metropolitan Government s 2020 Vision and Future City initiatives. Core themes for the revitalisation of the city are being implemented, partly through 12 key projects (see below) including retrofitting buildings, creating a smart city, upgrading infrastructure and creating power redundancy, as well as attracting Asian headquarters and major global sporting events and conferences. Tokyo's Vision 2020: 12 Key Projects 1 100% Completion of Seismic Retrofitting 2 Increasing Fire-Resistance of Districts with Close-Set Wooden Houses 3 Mutual Assistance for Disaster Mitigation 4 3 million kw Made-in-Tokyo Power Generation 5 Creating a Smart City 6 Building a Network of Water and Greenery 7 Bolstering the Land, Sea and Air Transport Network 8 Asian Headquarters in Tokyo 9 Bolstering Tokyo s Child Day-Care System 10 Active Participation in Society by Senior Citizens 11 Let Your Child Experience the World 12 Build Four Big Sports Clusters Source: Tokyo Metropolitan Government

22 22 Tokyo on the World Stage Special Economic Zones to enhance business competitiveness Various initiatives to improve Tokyo s business environment and increase the city s business openness are being developed as part of the national Special Economic Zones programmes. The benefits of the zones will include various incentives (e.g. taxes, subsidies), deregulation measures (e.g. faster immigration processes and reduction of investment procedures) and business and living support (such as information in multiple languages). National Strategic Special Zone The zone (which includes nine central wards in Tokyo) is intended to increase international competitiveness and create centres of economic activity to drive through structural reform of the economic system. It aims to create a new business base that attracts money, people and businesses globally and stimulates the growth of home-grown internationally competitive start-ups. It also addresses the Tokyo Metropolitan Government s vision of making Tokyo the most business-friendly environment in the world in the run-up to the 2020 Olympic Games. Special Zone for Asian Headquarters This zone (located in the central Tokyo and waterfront areas) aims to attract Asian regional headquarters and R&D centres, and by doing so to raise Tokyo s international competitiveness. The 2016 target is to have at least 500 foreign companies located in the zone, 50 of which are to be Asian regional headquarters or R&D centres. Future-proofing for success Future success is also about actively leveraging the speed of change, building and exploiting momentum, and being able to adapt to change. In order to capture cities that are successfully transforming, JLL has produced its City Momentum Index 18 which tracks the speed of change. Covering the Top 111 major established and emerging business hubs across the globe, the Index measures each city s short-term socio-economic and real estate momentum, and also combines measures of future-proofing whether a city has the essential ingredients to ensure longer-term sustainable momentum in terms of education, innovation and sustainability.

23 JLL 23 The city s newfound energy Tokyo sits comfortably among the top performers in JLL s City Momentum Index, grouped among the Resurgent Cities as a result of the city s newfound energy, which has been aided by Abenomics policies and boosted by securing the 2020 Olympics. Moreover, the city has many of the high-value incubators necessary for longer-term success factors such as a world-class higher education infrastructure, an outstanding research base and a strong innovation economy. JLL City Momentum Index Momentum Builds in Tokyo Short-term Momentum Incubator Cities Paris, Berlin, Chicago Amsterdam Copenhagen, Sydney High-Tech Hubs San Francisco, San Jose Austin, Boston, Seoul Toronto, Munich Global Gateways London, New York Hong Kong, Singapore Los Angeles BRIC Urbanisers Shanghai, Beijing Wuhan, Chengdu, Tianjin Shenzhen, Guangzhou Mumbai, Delhi Resurgent Cities Tokyo Dubai, Dublin Beyond the BRICs Lima, Jakarta, Bogota Manila, Bangkok Long- term Momentum Source: JLL, 2014

24 24 Tokyo on the World Stage An increasingly dynamic real estate market Tokyo s economic momentum is reflected in its real estate dynamics. Tokyo s office market is expected to record one of the fastest rates of value growth in 2015 (following a robust 2014), putting the city back on track to again compete with London and New York as the world s most active commercial real estate investment market. Projected Value Growth for Prime Offices in % % + 0-5% Rental Values Tokyo Beijing London*, New York*, San Francisco Sydney, Los Angeles, Chicago Hong Kong, Singapore Paris*, Madrid, Seoul Mumbai, Shanghai Frankfurt, Washington DC Capital Values Tokyo Beijing London*, New York*, San Francisco Sydney, Los Angeles, Chicago Madrid, Seoul Paris*, Washington DC Mumbai, Frankfurt Singapore, Shanghai, Hong Kong - 0-5% Sao Paulo Sao Paulo % Moscow Moscow *New York Midtown, London West End, Paris - CBD. Nominal rates in local currency Source: JLL, October 2014

25 JLL 25 The role of real estate in Tokyo s future success The future health of Tokyo relies on the city refreshing its global reputation and addressing the constraints on international business activity and the real estate industry has an essential role to play: by improving real estate transparency, an essential ingredient of a globally fluent city, which will support business efficiency and help attract global corporations; by creating the style of commercial real estate stock that will enable Tokyo to grow into its new skin and that reflects changing attitudes to work, even if this means short-term market disequilibrium; by doing more on the green building front, which not only makes sense environmentally, but will increasingly be a key selling point for investors and corporate occupiers; and by contributing to Tokyo s international profile and brand through state-of-the-art urban design and business practices. Tokyo the resurgent city Tokyo has created a new web of policies and approaches that recognise and seek to act where existing attributes require strengthening and where weak spots need addressing. The vibrancy of the city s real estate market will help push improvement and be a happy recipient of change. JLL looks forward to helping Tokyo achieve its global ambition.

26 26 Tokyo on the World Stage Appendix - Footnotes 1 UN, World Urbanization Prospects, Cities with over 300,000 population. 2 JLL s estimate of total GDP (in Purchasing Power Parity terms) for the Greater Tokyo area (as defined by the UN) with a population of 37.8 million people. 3 Data relates to the urban agglomeration of each city as defined by the UN or national statistical offices. 4 JLL s Commercial Attraction Index is based on the weighted score of six indicators population of a city s urban agglomeration, estimated GDP (PPP) of a city s urban agglomeration, a measure of a city s corporate presence (HQs and revenues of Forbes 2000), combined air passengers of a city s airports, current office stock estimates and commercial real estate investment volumes (over the past three years). 5 Mori Memorial Foundation Global Power City Index, October Institute for Urban Strategies of the Mori Memorial Foundation. Report covers 40 cities. AT Kearney Global Cities Index, Published by AT Kearney. The report covers 84 cities. Z/Yen Global Financial Centres Index, September Published by Long Finance within Z/Yen, under the Financial Centre Futures programmes sponsored by Qatar Financial Centre Authority and the City of London Corporation. Report covers 83 financial centres. 6 IESE Cities in Motion Index, Published by IESE Business School in partnership with Telefonica, BBVA, Ferrovial, Schneider Electric and Arqtel, and in collaboration with Smart City Expo World Congress. Report covers 135 cities. Measures the future sustainability of cities and their inhabitants. 7 The State of Create Report, Adobe, thinknow Innovation Cities Index, Published by 2thinknow, under the Innovation Cities Program. Report covers 445 cities. It measures the cities potential as an innovation economy (cultural assets, infrastructure and network connectivity). 9 OECD Metropolitan Database, whose patent data is primarily drawn from the EPO Worldwide Patent Statistical Database. 10 Monocle Quality of Life Survey, July/August Published by Monocle Magazine Issue 75, Volume 8. The report includes the Top 25 most liveable cities in the world. 11 Siemens Asian Green City Index, Spring Published by the Economist Intelligence Unit (EIU); sponsored by Siemens. Report covers 22 major Asian cities. 12 Governor of Tokyo, Yoichi Masuzoe s Policy Speech at the Second Regular Session of the Tokyo Metropolitan Assembly, Number of foreign visitors, year to August 2014 v Source: JNTO (Japan National Tourism Organization). 14 JLL City Competitiveness Cobwebs. The JLL City Cobwebs provide a visual representation of the economic and real estate climate across the Global Top 100 Cities. Each City Cobweb is created from the 11 sets of variables detailed below. The position of a city for each variable is based on the percentage of the maximum value for the Top 100 cities. Indicators: City GDP latest estimate of the total annual output (GDP) of a city s metropolitan area Office Rental Change latest annual percentage change in rents for prime office assets Real Estate Investment Volumes US$ value of direct commercial real estate investment over a three-year period Investment Intensity direct commercial real estate investment as a proportion of city GDP Office Stock volume in square metres of the total office stock of the city Real Estate Transparency score of the level of real estate transparency at a country level derived from JLL s Global Real Estate Transparency Index Education score based on the presence (number and quality) of top-ranked universities in a metropolitan area Patents latest annual number of PCT (Patent Cooperation Treaty) patent applications from a metropolitan area Corporate Presence score based on the presence (number and revenue) of the Forbes Global 2000 companies Connectivity total number of air passengers passing through a city s airports (Source: ACI) Population latest population of a city s metropolitan region 15 JLL monitors direct commercial real estate investment transactions over US$5 million in the offices, retail, industrial, hotels and mixed-use sectors. Development deals and residential are excluded. 16 JLL City Investment Intensity Index is derived from direct commercial real estate investment volumes (over a three-year period) as a proportion of the GDP (PPP) of a city s urban agglomeration. Tokyo s score is based on the Tokyo Metropolis. 17 JLL s Global Real Estate Transparency Index, 2014, measures five components of real estate transparency performance measurement, market fundamentals data, listed vehicles governance, legal and regulatory, and transaction processes. The Index covers 102 markets. A lower composite score indicates higher transparency. 18 JLL s City Momentum Index (2014) covers 111 cities. The Index is derived from the weighted score of socio-economic momentum (change in population, GDP, air connectivity, corporate HQs, FDI), real estate momentum (change in occupational demand, construction, price movement offices and retail, investment volumes, transparency) and long-term incubators (university excellence, tech start-ups, innovation capacity).

27 JLL 27 For more information on JLL s Cities Research, visit: Explore and Compare 300 Cities Our City Comparison Toolkit will help you visualize the position of individual cities and compare one city against another.

28 JLL Cities Research Contacts Rosemary Feenan Global Research, JLL Jeremy Kelly Global Research, JLL JLL Tokyo Contacts Toshinobu Kasai Managing Director/Country Head, Japan Takeshi Akagi Head of Research, Japan JLL Regional Headquarters Chicago 200 East Randolph Drive Chicago IL USA London 30 Warwick Street London W1B 5NH United Kingdom Singapore 9 Raffles Place #39-00 Republic Plaza Singapore Japan Offices Japan Headquarters 4F Prudential Tower Nagata-cho Chiyoda-ku Tokyo Japan Sanbancho Office 5F Seitoh Kaikan 5-7 Sanbancho Chiyoda-ku Tokyo Japan Kansai Branch 6F Honmachi Allgo Building Honmachi Chuo-ku Osaka Japan Fukuoka Office 2F Daihakata Building Hakata-ekimae Hakata-ku Fukuoka Japan COPYRIGHT JONES LANG LASALLE IP, INC This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements. Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely on the views expressed in this report