Illustration by Louise Rouse
What do religion and self-storage have in common? For one, they both help people deal with the excess baggage from their daily life. For the purposes of this column and Japan’s real estate market, however, both are taking over more and more properties in surprisingly good central Tokyo locations with no other uses.Religions,like schools in Japan, are not taxed on their core activities, helping some of the big ones build up surprisingly large cash piles that they have turned into real estate ownership. Witness the fashion school Mode Gakuen’s buildings in Shinjuku and Nagoya to see what money can do – they are two of the most spectacular examples of commercial architecture in Japan.
From personal experience, I spent years trying and failing to acquire the former flagship of the Iwataya Department Store in Fukuoka from Tsuzuki Gakuen, a nationwide operator of specialty schools and one of the most difficult organizations I have ever had to deal with.
My real estate experience with religious organizations is mostly limited to hiring priests to perform ceremonies at the start and completion of construction projects. I did actively pursue a development project in Harajuku several years ago that required the cooperation of a religious organization with significant property holdings in the area. But I ultimately gave up because I felt it would be impossible to obtain the necessary easement from the group. (For those of you with a greater interest in how Japanese religious organizations cope with these kinds of temporal affairs, I highly recommend the movie Marusa no Onna 2).
Seth Sulkin is the President and CEO of Pacifica Capital K.K., a Tokyo-based real estate asset manager specializing in commercial properties.
In the post-Lehman world of defaulted loans on B class and C class office buildings with low occupancy and vacant land resulting from abandoned dreams of development, religious organizations and self-storage have stepped in to help take up some of the slack. In Tameike, a central business district, “Happy Science” signs have started turning up on small, older office buildings. Happy Science is the English name for a so-called new religion called kofuku no kagaku that also set up a political party which competed in the last election and has built two eye-catching (or eye-hurting, depending on your perspective) temples in Takanawa.
Around the corner from my office in Akasaka Mitsuke, a large chunk of vacant land resulting from a failed jiage that helped bring down Joint Corporation was recently sold to a religious organization after sitting vacant for several years.
In crowded, expensive Tokyo, where people live in tiny rabbit hutches paying exorbitant rent, the concept of self-storage may seem like a natural. However, prior to the financial crisis, self-storage was quite hard to find in central areas due to the extraordinary cost of land and rent. Since many central Tokyo residents do not have cars, finding self-storage within short walking distance of home is a prerequisite, so the financial crisis has been a boon for expansion, as vacancy rates have soared and property prices have plummeted.
Owners and creditors of tired-looking office buildings have welcomed self-storage operators with open arms. Some of the more aggressive operators have bought old, vacant office buildings and converted them to storage facilities. Landlords with persistent vacancies have agreed to lease one or more floors to storage operators, something they would never have considered a few years ago. Some building owners under less pressure to sell have even started their own storage businesses to fill vacancies in their portfolios.
Religious organizations and schools are already beginning to suffer from the falling population, so the well-funded groups will continue seeking to offset the weakness in their core activities by investing in real estate. As railways and other mature industries follow the same strategy, there could be some very interesting competition to buy properties – from a cultural perspective – going forward.
