Mori Building chief serious about creating a better Tokyo

Making Tokyo a more attractive and competitive metropolis sounds more like a policy than a business strategy.

But it makes total sense to Mori Building Co., and it’s something the Tokyo-based urban developer takes seriously.

“Competition among global cities is becoming more important than that among countries. Mori Building has been stressing this for more than 20 years, and it seems like in the past few years more people are starting to believe it,” said Mori Building CEO Shingo Tsuji in a recent interview with The Japan Times.

“If Tokyo falls behind its rivals in competition, its economy will shrink,” and this will eventually weaken Japan’s economic growth, Tsuji said.

Known as the developer of several landmark high-rise complexes in the capital, such as Roppongi Hills and Toranomon Hills, Mori Building believes a Tokyo in decline would pose a huge blow not only to Japan but the company itself.

Tsuji said Tokyo should aim to become the world’s No. 1 city to improve its competitiveness and surpass rivals like London and New York.

In line with this, Mori Building will further develop residential, office and commercial complexes with theaters, art museums, shopping malls and parks that will address some of Tokyo’s weaknesses and create living environments that are suitable to both Japanese and non-Japanese, Tsuji said.

“In terms of business, if Tokyo’s presence declines and if it becomes (just) one of many regional cities in the world, Mori Building will decline, too, because we have many assets in Tokyo,” he added.

Moving its assets to other internationally competitive cities is one possible strategic choice as a business, yet Mori Building believes Tokyo has much more growth potential than the others, Tsuji said.

“We also have a sense of crisis . . . as Japan’s population is declining, we have to think about what to do to improve the economy. The only way is to get more people coming.”

For these reasons, Tokyo needs to be more attractive in ways that encourage more global firms to build their Asian headquarters in the capital and attract more foreign workers, he said.

“Let’s say Singapore is the number one city in Asia — companies would move their Asian headquarters there. If that happened, people wouldn’t come to Tokyo. They would move out of Tokyo. That’s why the city-level competition is important,” he said.

According to Tsuji, cities need magnetism in pretty much every aspect.

Cities have various characteristics — corporate, residential, cultural and environmental — and “it’s tough to keep up with the competition if they only have one strong point,” said Tsuji.

For instance, one city may provide a comfortable and convenient living environment but will remain unable to win if it’s not business-friendly.

This theory applies as much to Tokyo as to anywhere.

Every year, the Mori Memorial Foundation’s Institute for Urban Strategies compiles a ranking of municipal competitiveness called the Global Power City Index. Tokyo was ranked third this year behind London and New York.

The ranking is based on six criteria: economy, environment, livability, research and development, cultural interaction and accessibility.

Tokyo’s weaknesses include some less business-friendly aspects, including a high corporate tax rate and a complicated process for starting companies, but it also falls behind London and New York for cultural interactions due to the lack of art facilities and luxury hotels.

Tsuji said Tokyo should aim to be number one. And that’s where Mori Building sees business opportunities.

“I think our style is quite straightforward. We think about what to do to win the city-level competition. While we develop what’s necessary to do that, such as urban infrastructure and space, we also make proposals to policymakers,” he said.

And that’s how the firm has become one of the major developers. Mori Building’s earnings in the past several years have been quite stable. Sales hovered between ¥248 billion and ¥258 billion from fiscal 2012 to fiscal 2016, while operating profit jumped from ¥42 billion to ¥58.8 billion.

The majority of the operating profit comes from its leasing business, which includes residences and offices.

Tsuji stressed that Mori Building has never done a simple condo-development and sales project, saying its complexes are packages of residential and office space, shops, hotels and art facilities.

For example, its Roppongi Hills complex mitigates some of Tokyo’s weak points with the upscale Grand Hyatt hotel and a museum in the higher floors of a 54-story tower.

The firm is also strengthening its Toranomon Hills complex to turn it into an international business center, while its Azabudai project scheduled to open in 2022 includes an international school.

Mori Building’s urban development is based on a concept in architecture called the “vertical garden city” that was strongly promoted by Minoru Mori, Tsuji’s predecessor and a member of the founding family.

The concept refers a compact city in which everything ranging from residences, offices, shopping and cultural facilities is packed into a small area with high-rise towers to increase space going upward.

“Urban planning policy in the past separated living, working and shopping functions by areas . . . if you look at business areas like Marunouchi, they only have offices. Shopping districts like Ginza and Shibuya only have shops,” while condos and houses are concentrated in the outskirts of Tokyo, said Tsuji.

But Mori, who passed away in 2012, said this pattern didn’t work well.

For many working Japanese, owning a house with a garden represented status, so that’s what they sought to do so in the suburbs. As a result, they had to bear hour-long train commutes that curtailed their free time and stressed them out, Mori said in “Hills, Chōsen suru Toshi” (“Hills, City That Challenges”).

When Mori Building started its business back in 1955, it rented office buildings to businesses. The structures are known as “number buildings,” since they are named with a number. They are mainly seen around Tokyo’s Toranomon area.

But a major shift came in 1986 when it opened Ark Hills, a community of residences, offices, shops and cultural facilities in the Akasaka district. The complex attracted many overseas firms, which made Mori realize the importance of developing a globally enchanting, compact city. Mori says in the book that his concept of a vertical garden city was inspired by the Swiss-born French architect Le Corbusier.

Tsuji has inherited Mori’s idea, saying the vertical garden city continues to be the core of its urban development philosophy.

Yet some may question whether such concepts will persist as people’s working styles change. For instance, more companies are expected to promote telecommuting, reducing the need for large office spaces like Roppongi Hills and the need to live close to one’s office.

“We do think that people’s working styles will change . . . but it’s not as though everyone will start working at home all of a sudden. Also, jobs that require face-to-face meetings won’t disappear,” Tsuji said.

While strengthening Tokyo is critical for Japan, the country also faces the tough task of revitalizing economies in other regional areas despite a declining population.

Tsuji said Tokyo and other cities can thrive together. “Some people often talk about Tokyo’s growth and the demise of regional areas like a package deal, but I’m saying that’s not the case,” he said.

Whether Tokyo becomes more or less competitive, regional cities that don’t make enough effort to change will fall into decline, he said.

In fact, such cities now have opportunities to increase their presence. Japan has seen a surge in tourism in recent years.

“Regional cities have many attractive aspects, so they need to think about how they can promote them,” Tsuji said, adding that unique local industries such as sake brewing can be turned into economic engines.

This series presents exclusive interviews with top business leaders and executives.

Key events for Tsuji

1985: Graduates from Yokohama National University graduate school.

1985: Joins Mori Building Co.

2003: Mori Building begins operation of Roppongi Hills.

2006: Becomes board member at Mori Building and head of Roppongi Hills management office.

2009: Becomes Mori Building vice president.

2011: Becomes Mori Building president and CEO.

2014: Mori Building begins operation of Toranomon Hills.