Tokyo Land Prices Now Outlandish
The National Land Agency’s annual survey of land prices underscored once again why foreign firms find that the cost of doing business in Japan often defies comprehension by executives at the home office.
Commercial land in Tokyo rose in value by an average of 19.6% last year, with one plot in Tokyo’s Ginza district valued as the most expensive in the country: 20.9 million yen ($119,443) for each square yard (nine square feet). Residential land in Sanbancho, on the opposite side of the Imperial Palace from the downtown business district, was valued at 6,321,000 yen ($36,120) a square yard.
The agency’s “posted values” are estimates compiled by real estate appraisers and are used as a fair market price when the government purchases land. However, they frequently fail to reflect the prices for which land is actually sold. Transactions for plots in the Ginza district have been reportedly carried out at more than 80 million yen ($457,143) a square yard.
Reflecting Tokyo’s emergence as a major world financial center, the biggest one-year increases in land value--more than 60%--were listed in the Nihonbashi section, where the Tokyo Stock Exchange is located. The agency cited an influx of foreign firms as one of the causes of the drastic rise. In two years, the value of land in this area doubled.
Worst May Be Yet to Come
One second-rate, eighth-floor office unit with 141 square yards of space (1,269 square feet) in Nihonbashi is now being advertised for rent at $3,263 a month, about a third of what must be paid to rent prime space in the Marunouchi business section.
Also, before you can move in, you must pay a deposit of $111,354, most of which is non-refundable.
The worst, however, is yet to come, the Land Agency fears. It projected that by the year 2000, at least 378 million square feet of new office space would be needed in Tokyo--the equivalent of 250 new 60-story buildings--with no hope of finding available land for them.
Residential land prices rose last year by only 2.2% as a national average, a phenomenon that the Construction Ministry attributed to the fact that Japan’s available living units now exceed the number of families. The ministry, however, pointed out that about 50% of Japan’s four-member families live in housing units with less than 648 square feet of interior space; 10% of them live in units of 378 square feet or less.
Posted values for both commercial and residential land throughout the country rose by only 2.6%, but the National Land Agency expressed fears that the skyrocketing value of commercial land might start affecting residential land. Last year was the first time in six years that the overall national rate of increase in land values failed to decline.
Alexander D. van Eyck, 44, a former MCI Communications executive, is the third president that Apple Computer Japan Inc. has had in less than three years, a fact that has made the firm appear “unstable,” he says. At a news conference he called to declare that Apple intends to turn over a new leaf in Japan, he said he personally intends “to stay here indefinitely to demonstrate that we at Apple Computer are committed to this market and that I am committed to this market.”
“I like Japan. I look upon Tokyo as my second home,” he added.
As if to prove his point, Van Eyck opened the news conference with a description--in what he called his “poor Japanese”--of his background, which included a three-year assignment here with his previous employer.
Van Eyck refused to disclose what results Apple had achieved here since it set up a subsidiary in June, 1983, but he did not dispute a Japanese reporter’s assertion that sales had been poor. He also admitted that Apple has created an “image of instability.”
“We had had an image of having an unstable organization in terms of management that we’ve had here. . . . Our distributors and dealers have felt rather uncomfortable. So I believe it is important now to smooth over this feeling of unstableness and reiterate as firmly as we can our commitment to them and our commitment to the Japanese market,” he said.
In 1983, Apple in the United States had not made a sufficient commitment in international markets, Van Eyck said. “It was a technology-driven company, concentrating very much on the United States and giving very little attention to markets in the Far East,” he added.
“Our policies were short term (in 1983), and we were managing on a short-term basis. To be a success in Japan, management along those lines cannot continue,” Van Eyck said.
New International Strategy
Asked why Apple took nearly three years to realize what nearly all American businessmen have widely recognized--that a long-term commitment is necessary to succeed in Japan--Fred Sherrer, sales and marketing director, replied: “The question hits the mark.”
Sherrer said Apple had merely followed the “easiest” course--of adapting its personal computers to fit the needs of languages using Roman characters while ignoring development of software for use in the countries of Asia that use Chinese characters.
Now, the firm has adopted a new strategy in which it aims to expand the proportion of its revenue from international operations to 35% from 22% “in the next few years,” Van Eyck said.
“Japan is the world’s second-largest personal computer market, and, to be a truly international company, we must make a success here,” he declared.
Apple, Van Eyck disclosed, will announce what he called “a localized Japanese product” in the “late spring or early summer” and focus new attention on selling computer systems instead of “stand-alone” personal computers that are incapable of communicating with other computers.
