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Tokyo Real Estate & Proptech Observations

Geographical Influences on Tokyo Real Estate

I’ve been to Japan several times, and in my most recent trip, I spent a few days in Tokyo followed by a few days in Osaka. Despite having a larger population than NYC and Hong Kong, Tokyo is less dense because it sprawls across a much larger area. The Gini Coefficient isn’t as extreme as NYC or HK.

It’s also quite earthquake prone, so the buildings are generally shorter. And most buildings have been built in the last 40 years to conform with the latest safety codes. There is a tendency for people to knock down and redevelop buildings and homes right after they purchase.

Being a densely packed island with 125 million people, they have evolved exceptional levels efficiency. But after their period of hyper aggressive imperialism, they’ve been somewhat closed off. I’ll get into that later.

Japanese Culture and Behavior

Everything I noticed about the culture in Hong Kong was dialed up to 11 in Tokyo. Hong Kong was clean, but Tokyo was spotless. And everyone, no matter their job, exuded pride in their profession. I have been ripped off by cab drivers in many countries, but never in Japan. Over the course of one week, I heard a grand total of 1 car honk. The culture is deeply rooted in honor, respect, and politeness (I will not delver further into past historical transgressions when Japan pissed off all its Asian neighbors).

Some of this behavior stems from the Japanese language. It has polite forms with honorifics. And there is evidence in linguistic studies that show that language heavily influences behavior. Another big influence on the cleanliness of the city is the practice called “Osoji” (大掃除), or the big cleaning. Students spend a portion of their school day cleaning up their own classrooms. By ingraining this behavior into the youth, it becomes an instinctual habit in adulthood. You will be hard pressed to find public trash bins, because people carry their trash home.

There is much to admire about Japanese society. It’s developed a huge ‘fan base’, if you will, from not just Tokyo’s cyberpunk style, but also its cultural exports like anime, electronic devices, cars, and video games.

But there are dark sides. The society is very homogenous, and it’s an island both geographically and culturally. Underneath the excessive politeness is actually one of the most overtly racist societies on earth. There usually isn’t any hostile intent behind this behavior. The culture is so distinctive that if you didn’t grow up in it, you’re just not one of them. You just won’t get it, and you won’t be accepted.

How Culture Affects Tokyo Real Estate

Naturally the homogeneity and unique culture have a heavy influence on Tokyo Real Estate. There isn’t a strong investing culture in Japan. I got the general sense that the functionality of buildings is prioritized over their investment value. First, because the cap rates are incredibly low- around 1%. And second, heavy service culture leads to greater maintenance spending than in other cities. As a result foreign investment is very limited here. It may be for the best, as that often invites rampant speculation.

Many parts of Japan practice an extremely healthy lifestyle and have the highest concentration of centenarians in the world. The aging population is unfortunately leading to a number of abandoned houses in rural areas, especially as younger generations migrate to urban centers. This is creating a generational real estate problem that as of yet has no good solution.

On the more fun side of things, the pride that the people take in their work absolutely extends to construction quality. In higher end builds, have never seen such precision and clean lines anywhere else in the world.

Japan’s Proptech Scene

Japan was one of the world’s most technologically advanced cultures in the 80’s before spiraling into a decades long recession. While they are still an economic powerhouse with plenty of tech exports, the most amazing proptech really only caters to Japan’s domestic market. Conglomerates like Toto sell prefabricated bathrooms, and Muji builds entire minimalist houses using modular building techniques:

Japan also has domestic exclusives for their kitchen and bathroom appliances. Although many people around the world are fascinated by these designs and features, most luxury builds lean towards European (especially German) appliances. So conglomerates like Toto, Panasonic, and Hitachi have really struggled to expand beyond Japan’s shores.

Other areas of proptech suffer a similar fate of only catering to the domestic market. While there is a burgeoning proptech scene and two local proptech associations, it’s largely isolated from the global market.

Despite that, I have made connections to this market! If you’re a proptech founder struggling with traction and PMF, hire me as an advisor to broaden your perspective and learn from my global perspective.


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