Roppongi 6-Chome Redevelopment Project
Panel Discussion
Center for Global Communications
May 25, 1999
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Panelists:
Kazuhiko YAMAMOTO (Mori Building Co. Ltd.)
Keiko OTSUKI (Morgan Stanley Dean Witter)
June BOWSER HENTONA (GMAC Commercial Mortgage Japan)
Yukio FURUTA (Ikoma CB Richard Ellis)
Yoichi HOMMA (Ikoma CB Richard Ellis)
Adam PEAKE (GLOCOM)
Takahiro MIYAO (GLOCOM)
Moderator:
Daniel DOLAN (GLOCOM)
Other participants:
Junko HABU (Mori Building Co. Ltd.)
Yukiko HARADA (Mori Building Co. Ltd.)
Yuki TANIKAWA (Mori Building Co. Ltd.)
Emi SUGIMOTO (Mori Building Co. Ltd.)
Noriaki FUKUI (Fukui & Co.)
Description:
Views from Japan invited guests from Mori Building Co. to discuss the
redevelopment of Roppongi's 6th district. Four questions were discussed:
- By what criteria should we evaluate this project?
- Will competition by other large projects underway in Tokyo increase
the financial risk to the Mori project?
- Is there an alternative to this project's high-rise scheme for creating
green and citizen-friendly spaces in Tokyo?
- This project seems to be in agreement with the idea that what Tokyo
needs is more concentration of activity in the city core, rather than less.
Is this the best way to improve conditions?
The meeting opened with a presentation by Kazuhiko Yamamoto,
Executive Director, Mori Building Co.
(Text
of Mr. Yamamoto's presentation of the 6 Chome project.)
Summary of the Discussion
Dolan: We have heard the main concept of the 6-6 redevelopment
from Mr. Yamamoto, that is, to redevelop the area in a high-rise fashion
so that there will be more open space to create an environment that is
more livable for everyone. Now the question is how to evaluate this project.
Homma: There are of course many great things about living in
Japan, but a bad thing about living in Tokyo is long commuting time along
with the bad living environment. So it will be nice to live in this kind
of redeveloped area closer to the work place. It is shocking to learn that
inside the Yamanote line, some of the world's most expensive real estate,
the average number of floors per building is only 2.6 or 2.7. Since the
density is too low in central Tokyo, we must redevelop the currently underutilized
land and this is one of the rare cases, probably with the exception of
ARK Hills, where we will feel it is very easy to live and work in Tokyo.
Otsuki: This project looks very nice and attractive, as more
space is created for offices, residents, as well as green areas. But the
question is who can afford to live there by paying very high rents or very
high purchase prices. What kind of people are expected to live in this
redeveloped area?
Yamamoto: There will be about 850 residential units to be built,
and 200 will be devoted to the current residents. Another 200 will be "affordable"
public type housing in accordance with the guidance by Minato Ward, and
the remaining 450 something will be for high income people, say, international
business people.
Peake: How many residents are there currently in the area and
how many will be staying after the redevelopment?
Yamamoto: There are currently about 400 units in the development
area, about 200 will be housed on the redeveloped site, and the other 200
have chosen to move elsewhere. So the development will provide a net gain
of over 400 units.
Dolan: We already see shops and residential blocks beginning
to empty and close down. When will construction begin?
Yamamoto: Construction, demolition, etc., should start in early
2000.
Dolan: This kind of big project is always economically risky.
In addition, other areas such as Marunouchi and Shinagawa are being redeveloped
at the same time. Would such competition make this project even riskier?
Yamamoto: While such redevelopment projects as Shinagawa and
Shiodome have some advantage in terms of mass transportation access, our
6-6 project will offer good conditions for living and work. So there is
a tradeoff between transportation access and the quality of life, and I
believe the time has come for many people to prefer the quality of life.
With regard to possible oversupply, I think there will be strong need and
sufficient demand for the safe and nice environment for living and work,
which we will provide. Of course the new #12 subway line will stop in Roppongi,
so the area will have much better public transport access in the near future.
Bowser: It seems that Mori Building's activities are concentrated
in central Tokyo in areas such as Roppongi, Toranomon, Kamiyacho, etc.
What was the initiative to start this project here in Roppongi? Is it because
TV Asahi is to build a network station? Where did Mr. Mori get the idea
for this project?
Yamamoto: As you know, we have TV Asahi studio and headquarters
in ARK Hills. Back in 1982 when we were still planning the ARK Hills development,
we made a deal with TV Asahi that in exchange for housing its studio in
ARK Hills, Mori Building could redevelop the old TV Asahi studio area.
Furuta: I would like to ask a financial question. It took more
than fifteen years to assemble all the sites in the ARK Hills development
and it has taken about ten years or more to assemble the sites here in
the 6-6 project. So, even though you say that creating some nice environment
is important, I wonder what kind of financial prospects you have for this
project.
Yamamoto: Regarding financial aspects, we acquired land from
TV Asahi before land prices went up sharply in the "bubble" period. And
many residents agreed to swap their land for floor space. Also we are taking
advantage of low construction costs and low interest rates. So we will
be able to offer reasonable prices and be successful in this project.
Miyao: You just mentioned the cost side, but another important
factor is the demand side. You said there will be about 450 residential
units for high-income people. So, the question is how to translate the
good environment for living and work into new, high-income generating activities.
The key is to produce new, creative businesses in the area. I don't think
the current business activities, heavily relying on traditional TV broadcasting,
would produce a sufficient number of high-income professionals to create
enough demand for so many expensive residential units. How do you think
about that?
Yamamoto: What we are trying to do is to provide a good environment
for new business people in the information and culture-oriented fields.
Also our office space will be large enough to attract big financial institutions.
Dolan: Now we will discuss how to do this kind of big redevelopment
project. While this kind of high-rise redevelopment might be good to create
open space for green areas and parks is this the only option, or is there
any better alternative?
Homma: Well, land values are so high in the central part of Tokyo
that you must utilize it efficiently, that is, demand is strong for high-rise
development. Maybe, in some suburban area, people may prefer more relaxed,
lower density living. In this connection I wish to raise one important
issue, that is, the very negative effect heavy inheritance tax has had
on land ownership and land use in Japan. Since inheritance tax is too heavy,
people inheriting land often have to sell off a section to pay the tax.
The result is that plots of land have been cut up into smaller and smaller
pieces and this has lead to small, very dense land use patterns. Something
should be done about this tax problem.
Yamamoto: I feel in general land taxes are too high in Japan.
Also the tax structure is such that it encourages division of land pieces,
since smaller lots are favorably treated in terms of the inheritance tax
as well as property taxes.
Otsuki: We can look at this kind of high-rise redevelopment from
a somewhat different angle, that is, in central Tokyo there are surprisingly
large numbers of old single-detached homes which are quite dangerous in
terms of fire and earthquake hazard. So this kind of new high-rise redevelopment
with a lot of open space should be viewed as desirable for the sake of
safety.
Furuta: While a developer is assembling the sites, some land
owners and brokers may make a lot of "noise." They would think that causing
disturbances might jack up the prices they could get. I think Mori Building
has a lot of experience and knows how to solve such kind of difficulties.
I would like to know what sort of idea Mori Building has in assembling
sites for redevelopment.
Yamamoto: First, it is our employees who do assembly. Through
our employees we can build mutual trust with residents. Also our activities
are concentrated geographically, so it is relatively easy to build the
sense of trust. We have being doing this for long time, so that is our
strength.
Dolan: There have been discussions going on as to whether various
activities currently in Tokyo should be dispersed or be further encouraged
inside Tokyo. Apparently, Mori Building seems to be emphasizing concentration
rather than dispersion.
Bowser: One might say that it's not a good idea to put all your
eggs in one basket. So there should be concern about too much concentration
in central Tokyo. But on the other hand, it may not matter much after all,
since big earthquakes can hit anywhere in Japan. Until it happened, no
one imagined such a big earthquake could hit Kobe.
Yamamoto: In this age of information and globalization, major
cities are competing with each other to attract good resources and talented
people. So, it is important to make Tokyo an attractive place for the sake
of revitalizing the Japanese economy as a whole. It would be absurd to
weaken the attractiveness of Tokyo by forcing various activities to move
out of Tokyo.
Otsuki: From the global viewpoint, Tokyo is a financial center
along with New York and London, and in order for Tokyo to survive in the
future, we need more concentration of business activities so that face-to-face
interactions and negotiations can be conducted more easily. This is true
even when we have more alternative means of communications and information
exchange such as the Internet. Just like New York and London, Tokyo needs
an efficient financial district with a good environment for work.
Miyao: I must raise the issue of regulations. It does not matter
what kind of redevelopment is being undertaken, since that is a matter
of business decisions. What does matter is governmental regulations, which
tend to prevent good business decisions from being made. The question is
why the government regulates. One might say that residents demand regulations,
but after all residents have their own interests so they should agree with
good development. The government, on the other hand, often sticks to unreasonable
regulations no matter what. It is really absurd to see this kind of good
redevelopment taking more than ten years to materialize, at least partly
because of regulations.
Homma: I agree. Urban developments such as this 6-6 redevelopment
do not have to be so expensive or take so much time to complete. And it's
all because of regulations. But it would take so much political fuss to
change all regulations, so I would suggest we make a special economic zone
in a limited area where we can experiment by having residents vote for
regulations or non-regulations, which do not necessarily comply with existing
urban development codes in general.
Bowser: Tokyo is one of the few cities in the world able to compete
with New York or London. I do not think that every city in Japan should
be or can be like Tokyo. In order to stimulate regional economies, one
way of doing that may be to adopt a special economic zone concept in local
cities, and this is already being done. Another point is that many policies
in Japan tend to be outdated and need to be revamped.
Dolan: We can e-mail the website of this discussion to Japanese
government officials so that hopefully they can hear our views. Thank you
very much for your participation. We want to invite all of you again in
2000 to look out of our windows to watch the project unfold right here
from our offices. (Laugh)
Informal comments
Habu: I wish to see this kind of redevelopment reflect people's
values in the future, such as having ample space for living with a lot
of green areas, and also more space for diverse activities including cultural
ones. For example, hotels should be able to accommodate more casual party
type activities so that we can enjoy ourselves.
Harada: I am in charge of the art museum in the 6-6 redevelopment.
I think Tokyo lacks the kind of "cultural face" that we associate with
New York, Paris, or London. So we wish to develop a new concept of art
museum, not an imported one, but one in our plan. There will be an observation
deck on the top floor of the office tower and the art museum will be a
part of it.
Peake: Will you attempt to connect the art museum with the outside
world? My reason for asking is that earlier we heard that you want the
redevelopment to be a center for new-media and information type businesses,
and the museum and art complex seem to be an opportunity to be the focal
point of this. I wonder if you intend to connect this fine museum to the
rest of the world in a full multi-media format?
Harada: Yes we do have a plan to connect this art museum with
the outside world, as you suggest.
Related Information:
Information about the Roppongi 6 Chome Redevelopment Project is available
from Mori Corporation.
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