As we enter 2023, ESG continues to be a strong point of focus and driving force in the Japanese real estate market, with member driven events last year and upcoming this year, ULI Japan is drilling down for a deeper understanding of today and achievement of measurable progress forward.  

The environment and proptech are the core topics of an upcoming event series, that kicks off in March and provides a deep dive look at proptech and ESG here in Japan.  

From design to data capture and profitability, ESG poses several challenges in the market for everyone from developer to investors, and buyers alike.  

ULI Japan members on the development side have spoken to the difficulty navigating the present complexity with strong consumer demand for ESG environmentally certified buildings countered by renters being unwilling to pay more for these kinds of spaces. As one member put it, “we have not found a way to make money with ESG friendly buildings. Renters are demanding it but are not willing to pay more.” Striking the balance between profitability and ESG compliance will likely be one of the defining features of ESG in the real estate market over the next year, as more companies shift to satisfy consumer demand. Japan has somewhat lagged Europe and the US in terms of uptake of ESG, but companies here are now moving to embrace ESG, while meeting the challenges it poses with novel solutions.  

Data capture and data usage have become increasingly important, with perhaps the defining two questions of companies seriously undertaking steps toward ESG being “How to capture the data needed to comply with ESG, and how effectively to use that data?” This requires systems to both capture and record data, and the ability to make meaning of it and then put it into action.  

Still, despite the challenges, there are many exciting opportunities that have left many members with an optimistic outlook. The emergence of proptech and companies utilizing it is an exciting genesis of the market. Proptech, short for ‘property technology’, has seen companies working to blend traditional real estate and technology to optimize the buying, selling, research, marketing, and management of a property.  

On the flip side, there are also many completed and ongoing exciting architectural projects: with designers building for environmental resiliency in the face of natural disasters and climate change, as well as being built to optimize human health and safety. In Japan, natural disasters are common, with the ever-present threat of earthquakes, flooding, and increasingly, heat, all posing risks to property and human health in Tokyo and beyond. New buildings are being designed to account for these risks, as well as increasingly include features such as passive ventilation in case of power outages, and disease prevention measures such as face recognition entrances and elevators for non-touch access, automated cleaning of escalators, and so on.  

Developers and property managers are also increasingly looking for ways to make their offices more appealing to workers who are reluctant to give up working from home for long commutes to the office. Some new constructions in Tokyo include features such as gyms for employees, an adjacent pre and elementary school for employees’ children, robots capable of bringing meal order deliveries directly to your office floor, and bright airy spaces with top class air filtration systems.  

It will be interesting to see results of the next dawn for proptech and ESG.

Emerging Trends in Real Estate® Japan Launch 2023